1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S). 344/2017 (Arising out of Special Leave Petition(C) No(s). 19367/2014) BALAKRISHNAN APPELLANT(S) VERSUS UNION OF INDIA & ORS RESPONDENT(S) JUDGMENT A.K.SIKRI, J. Leave granted. Heard matter finally at this stage with consent of parties as it was fixed for final disposal. question of law that is raised in this appeal and squarely arises for consideration is following: Whether, on facts and circumstances of case, High Court was justified in denying claim for exemption under Section 10(37) of Income Tax Act, 1961 to appellant? This question has arisen under following circumstances: Signature Not Verified appellant was owner of 27.70 Acres of land in Sy. No. Digitally signed by ASHWANI KUMAR Date: 2017.01.30 18.60 hectares 16:55:53 IST Reason: of paddy field in Block No. 17 of Attippra village in Thiruvananthapuram District comprised in Sy. No. 293/8. This was 2 agricultural land. appellant was using same to grow paddy. Government of Kerala sought to acquire aforesaid property of appellant for public purpose namely, '3 rd phase of development of Techno Park'. For this purpose, Notification under Section 4(1) of Land Acquisition Act, 1894 (hereinafter referred to as 'LA Act') was issued on 01.10.2005. opportunity was given to appellant to file his objections, if any, under Section 5A of LA Act. Record does not reveal as to whether such objections were filed or not. However admittedly, thereafter, declaration under Section 6 of LA Act was issued on 02.09.2006 wherein Government had declared that it was decided to acquire land for aforesaid purpose. After this acquisition, Land Acquisition Collector (Special Tahsildar), after following due procedure, even passed award on 15.02.2007. As per this award, compensation was fixed at Rs. 14,36,616/-. It appears that amount of compensation fixed by Land Acquisition Collector was not acceptable to appellant. At that stage, some negotiations started between parties on amount of compensation and ultimately it was agreed by Techno Park, for whom property in question was acquired, to pay sum of Rs. 38,42,489/-. After this amount was agreed upon between parties, appellant agreed to execute sale deed of property in question in favour of Techno Park. Such sale deed was executed on 08.05.2008 and duly registered with Sub-Registrar, Kazhakkootam. While disbursing aforesaid amount of sale 3 consideration, Techno Park deducted 10% of amount of TDS and it was later refunded to appellant herein by Income Tax Department taking view that no capital gain was payable on aforesaid amount received by appellant as same was exempted under Section 10(37) of Income Tax Act, 1961 (hereinafter referred to as 'the Act'). We would like to re-produce provisions of Section 10(37) of Act, which read as under: Section 10(37). in case of assessee, being individual or Hindu undivided family, any income chargeable under head Capital gains arising from transfer of agricultural land, where- (i) such land is situate in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2; (ii) such land, during period of two years immediately preceding date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or parent of his; (iii) such transfer is by way of compulsory acquisition under any law, or transfer consideration for which is determined or approved by Central Government or Reserve Bank of India; (iv) such income has arisen from compensation or consideration for such transfer received by such assessee on or after 1st day of April, 2004. Explanation For purposes of this clause, expression compensation or consideration - includes compensation or consideration enhanced or further enhanced by any court, tribunal or other authority. As it is clear from above, on transfer of agricultural land by way of compulsory acquisition under any law, no capital 4 gain tax is payable. It is clear from above that initial view of Income Tax Department, while refunding aforesaid TDS amount to appellant, was that land in question was compulsorily acquired under LA Act and, therefore, capital gain tax was payable. appellant filed income tax return for Assessment Year 2009-10 and income was also assessed accordingly. However, thereafter on 30.05.2012, notice was issued to appellant under Section 148 of Act whereby Income Tax Department decided to re-open assessment on ground that income which was assessable to income tax escaped assessment during year 2009-10. stand which was taken by Revenue in this notice was that amount of compensation/consideration received by appellant against aforesaid land was not result of compulsory acquisition and on contrary it was voluntary sale made by appellant to Techno Park and, therefore, provisions of Section 10(37) of Act were applicable. appellant objected to re-opening of said assessment by filing his reply dated 30.11.2012. However, respondent no. 2 namely, Joint Commissioner, Income Tax Range-I, Kawadiar, Thiruvananthapuram, took view that case did not come under compulsory acquisition and directed Assessing Officer to compute income accordingly. This direction dated 11.03.2013 of respondent no. 2 was challenged by appellant by filing Civil Writ Petition in High Court of Kerala. learned Single Judge, however, dismissed said writ petition vide judgment dated 11.07.2013 relying upon earlier judgment of same High 5 Court in case of Info Park Kerala vs. Assistant Commissioner of Income Tax (2008) 4 KLT 782. writ appeal preferred by appellant met same fate as it was dismissed affirming view of learned Single Judge. It is in aforesaid factual backdrop, this Court is to determine as to whether it can be treated that land of appellant was compulsorily acquired. From facts mentioned above, it becomes apparent that acquisition process was initiated by invoking provisions of LA Act by State Government. For this purpose, not only Notification under Section 4 was issued, it was followed by declaration under Section 6 and even Award under Section 9 of LA Act. With award acquisition under LA Act was completed. Only thing that remains thereafter was to pay compensation as fixed under award and take possession of land in question from appellant. No doubt, in case, compensation as fixed by Land Acquisition Collector was not acceptable to appellant, LA Act provides for making reference under Section 18 of Act to District Judge for determining compensation and to decide as to whether compensation fixed by Land Acquisition Collector was proper or not. However, matter thereafter is only for quantum of compensation which has nothing to do with acquisition. It is clear from above that insofar as acquisition is concerned, appellant had succumbed to action taken by Government in this behalf. His only objection was to market value of land 6 that was fixed as above. To reiterate his grievance, appellant could have either taken aforesaid adjudicatory route of seeking reference under Section 18 of LA Act leaving it to Court to determine market value. Instead, appellant negotiated with Techno Park and arrived at amicable settlement by agreeing to receive compensation in sum of Rs. 38,42,489/-. For this purpose, after entering into agreement, appellant agreed to execute sale deed as well which was necessary consequence and step which appellant had to take. In our view, insofar as acquisition of land is concerned, same was compulsorily acquired as entire procedure prescribed under LA Act was followed. settlement took place only qua amount of compensation which was to be received by appellant for land which had been acquired. It goes without saying that had steps not been taken by Government under Sections 4 & 6 followed by award under Section 9 of LA Act, appellant would not have agreed to divest land belonging to him to Techno Park. He was compelled to do so because of compulsory acquisition and to avoid litigation entered into negotiations and settled final compensation. Merely because compensation amount is agreed upon would not change character of acquisition from that of compulsory acquisition to voluntary sale. It may be mentioned that this is now procedure which is laid down even under Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 as per which 7 Collector can pass rehabilitation and resettlement award with consent of parties/land owners. Nonetheless, character of acquisition remains compulsory. This Court has doubts about correctness of judgment in case of Info Park Kerala vs. Assistant Commissioner of Income Tax (2008) 4 KLT 782. Court in said case took view that since title in property was passed by land owners on strength of sale deeds executed by them, it was not compulsory acquisition. We are not in agreement with aforesaid view. It is clear that but for Notification under Section 4 and Award under Section 9 of LA Act, appellant would not have entered into any negotiations for compensation of consideration which he was to receive for said land. As far as acquisition of land in question is concerned, there was no consent. appellant was put in such condition that he knew that his land had been acquired and he cannot reiterate same. appellant, therefore, only wanted to salvage situation by receiving as much compensation as possible commensurate with market value thereof and in process avoid litigation so that appellant is able to receive compensation well in time. If for this purpose appellant entered into negotiations, such negotiations would be confined to quantum of compensation only and cannot change or alter nature of acquisition which would remain compulsory. We, therefore, overrule judgment of Kerela High Court in Info Park Kerala vs. 8 Assistant Commissioner of Income Tax (2008) 4 KLT 782. As result appeal of appellant is allowed and proceedings under Section 148 of Act are quashed. J. [A.K. SIKRI]J. [R.K. AGRAWAL] NEW DELHI; JANUARY 11, 2017 9 ITEM NO.7 COURT NO.8 SECTION IIIA SUPREME COURT OF INDIA RECORD OF PROCEEDINGS Petition(s) for Special Leave to Appeal (C) No(s). 19367/2014 (Arising out of impugned final judgment and order dated 19/02/2014 in WA No. 240/2014 passed by High Court Of Kerala At Ernakulam) BALAKRISHNAN Petitioner(s) VERSUS UNION OF INDIA & ORS Respondent(s) (with appln. (s) for exemption from filing O.T.) Date : 11/01/2017 This petition was called on for hearing today. CORAM : HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MR. JUSTICE R.K. AGRAWAL For Petitioner(s) Mr. K. Radhakrishnan, Sr. Adv. Ms. Kiran Bhardwaj,Adv. For Respondent(s) Mr. H.R. Rao, Adv. Ms. Niranjana Singh, Adv. Mr. Arijit Prasad, Adv. Mr. R.M. Bajaj, Adv. Mrs. Anil Katiyar,Adv. UPON hearing counsel Court made following ORDER appeal is allowed in terms of signed reportable judgment. Pending application(s), if any, stands disposed of accordingly. (Ashwani Thakur) (Mala Kumari Sharma) COURT MASTER COURT MASTER (Signed reportable judgment is placed on file) Balakrishna v. Union of India & Or