My land was notified and an award was made under the Land Acquisition Act, but I thought the award was too low, negotiated a higher figure and executed a sale deed. The Assessing Officer now says that was a voluntary sale and denies s.10(37). Is he right?
No. Where the whole procedure under the Land Acquisition Act has been followed — notification under s.4, declaration under s.6 and an award under s.9 — the acquisition is a compulsory acquisition, and the fact that the amount of compensation was afterwards settled by negotiation and a sale deed executed does not convert it into a voluntary sale. The Supreme Court allowed the appeal and quashed the s.148 proceedings, and overruled the Kerala High Court's contrary decision in Info Park Kerala.
Decided by the Supreme Court (A.K. Sikri J and R.K. Agrawal J) on 2017-01-11, reported as Civil Appeal No. 344 of 2017 (arising out of SLP (C) No. 19367 of 2014), Supreme Court of India, Civil Appellate Jurisdiction. It bears on section 10(37), section 2(14)(iii), section 148, section 45 of the Income Tax Act 1961, in Capital Gains, Capital Gains Exemptions and Reassessment & Reopening matters.
This is the answer to the commonest attack on a s.10(37) claim: that the execution of a sale deed and the agreement on price show consent. The Court's route is that consent to the price is not consent to the acquisition — the landowner had already lost the land by the time he bargained, and his alternative was a reference under s.18 to the District Judge rather than a refusal to sell. The Court also said, obiter but usefully, that the same reasoning holds under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, where the Collector may pass a rehabilitation and resettlement award with the consent of the landowners and the character of the acquisition nonetheless remains compulsory. The limits matter as much: s.10(37) still has to be satisfied on its own terms — an individual or Hindu undivided family, land in an area described in item (a) or item (b) of s.2(14)(iii), agricultural use by the assessee or a parent during the two years immediately preceding the transfer, and compensation received on or after 1 April 2004. Balakrishnan decides only limb (iii), the compulsory-acquisition limb. If the acquisition proceedings were never begun and the State simply bought the land by private treaty, this case does not help.
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The appellant owned 27.70 acres in Sy. No. 293/8, comprising 18.60 hectares of paddy field at Attippra village, Thiruvananthapuram District, and used it to grow paddy. The Government of Kerala sought to acquire it for the third phase of the development of Techno Park. A notification under s.4(1) of the Land Acquisition Act, 1894 issued on 1 October 2005 and a declaration under s.6 on 2 September 2006; the Land Acquisition Collector passed the award on 15 February 2007 fixing compensation at Rs 14,36,616. The appellant did not accept that figure, negotiated with Techno Park, and it was agreed that he would be paid Rs 38,42,489. He executed a registered sale deed on 8 May 2008. Techno Park deducted 10 per cent as TDS, which the Income-tax Department refunded on the view that no capital gain was payable because of s.10(37). He filed his return for assessment year 2009-10 and was assessed accordingly. On 30 May 2012 a notice under s.148 was issued on the footing that this was a voluntary sale rather than a compulsory acquisition; the Joint Commissioner rejected his objection on 11 March 2013 and directed the Assessing Officer to compute the income. A single judge of the Kerala High Court dismissed his writ petition on 11 July 2013 following Info Park Kerala v. ACIT (2008) 4 KLT 782, and the writ appeal was dismissed on 19 February 2014.
The appeal was allowed and the proceedings under s.148 were quashed. Insofar as the acquisition of the land was concerned the land was compulsorily acquired, because the entire procedure prescribed under the Land Acquisition Act had been followed; the settlement related only to the amount of compensation, and agreement on the amount does not change the character of the acquisition from compulsory acquisition to voluntary sale. The Kerala High Court's decision in Info Park Kerala v. ACIT (2008) 4 KLT 782 was overruled.
The Court reproduced s.10(37) in full and observed that on a transfer of agricultural land by way of compulsory acquisition under any law no capital gains tax is payable. It then traced the acquisition: notification under s.4, declaration under s.6, and the award, with which the acquisition was complete; all that remained was payment and taking possession. Where the compensation fixed was unacceptable, the Act gave the owner a reference under s.18 to the District Judge, but that route goes only to quantum and has nothing to do with the acquisition. On the acquisition itself the appellant had succumbed to the Government's action; his only objection was to the market value. He chose negotiation instead of the s.18 reference and, having settled the figure, executed the sale deed as a necessary consequence. Had the steps under ss.4, 6 and the award not been taken, he would not have agreed to divest himself of the land at all; he was compelled to do so and negotiated only to avoid litigation. The Court added that the same position obtains under the 2013 Act, where the Collector may pass a rehabilitation and resettlement award with the consent of the landowners and the character of the acquisition nonetheless remains compulsory. As to Info Park Kerala, which had reasoned that title passed under sale deeds executed by the owners and so there was no compulsory acquisition, the Court disagreed: as far as the acquisition of the land was concerned there was no consent, and negotiations confined to the quantum of compensation cannot alter the nature of the acquisition.
Merely because the compensation amount is agreed upon would not change the character of acquisition from that of compulsory acquisition to the voluntary sale.
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Handle my notice → Ask a CA on WhatsAppNo. Where the whole procedure under the Land Acquisition Act has been followed — notification under s.4, declaration under s.6 and an award under s.9 — the acquisition is a compulsory acquisition, and the fact that the amount of compensation was afterwards settled by negotiation and a sale deed executed does not convert it into a voluntary sale. The Supreme Court allowed the appeal and quashed the s.148 proceedings, and overruled the Kerala High Court's contrary decision in Info Park Kerala. This was decided by the Supreme Court (A.K. Sikri J and R.K. Agrawal J) and bears on section 10(37), section 2(14)(iii), section 148, section 45 of the Income Tax Act 1961. It is reported as Civil Appeal No. 344 of 2017 (arising out of SLP (C) No. 19367 of 2014), Supreme Court of India, Civil Appellate Jurisdiction. This is the answer to the commonest attack on a s.10(37) claim: that the execution of a sale deed and the agreement on price show consent. The Court's route is that consent to the price is not consent to the acquisition — the landowner had already lost the land by the time he bargained, and his alternative was a reference under s.18 to the District Judge rather than a refusal to sell. The Court also said, obiter but usefully, that the same reasoning holds under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, where the Collector may pass a rehabilitation and resettlement award with the consent of the landowners and the character of the acquisition nonetheless remains compulsory. The limits matter as much: s.10(37) still has to be satisfied on its own terms — an individual or Hindu undivided family, land in an area described in item (a) or item (b) of s.2(14)(iii), agricultural use by the assessee or a parent during the two years immediately preceding the transfer, and compensation received on or after 1 April 2004. Balakrishnan decides only limb (iii), the compulsory-acquisition limb. If the acquisition proceedings were never begun and the State simply bought the land by private treaty, this case does not help. If it applies to you, the first step is this: Put the acquisition file on record: the s.4(1) notification, the s.6 declaration and the Collector's award, with their dates. The Court's reasoning turns on the completion of that sequence before any negotiation began.
The appellant owned 27.70 acres in Sy. No. 293/8, comprising 18.60 hectares of paddy field at Attippra village, Thiruvananthapuram District, and used it to grow paddy. The Government of Kerala sought to acquire it for the third phase of the development of Techno Park. A notification under s.4(1) of the Land Acquisition Act, 1894 issued on 1 October 2005 and a declaration under s.6 on 2 September 2006; the Land Acquisition Collector passed the award on 15 February 2007 fixing compensation at Rs 14,36,616. The appellant did not accept that figure, negotiated with Techno Park, and it was agreed that he would be paid Rs 38,42,489. He executed a registered sale deed on 8 May 2008. Techno Park deducted 10 per cent as TDS, which the Income-tax Department refunded on the view that no capital gain was payable because of s.10(37). He filed his return for assessment year 2009-10 and was assessed accordingly. On 30 May 2012 a notice under s.148 was issued on the footing that this was a voluntary sale rather than a compulsory acquisition; the Joint Commissioner rejected his objection on 11 March 2013 and directed the Assessing Officer to compute the income. A single judge of the Kerala High Court dismissed his writ petition on 11 July 2013 following Info Park Kerala v. ACIT (2008) 4 KLT 782, and the writ appeal was dismissed on 19 February 2014. The matter was decided on 2017-01-11 by the Supreme Court (A.K. Sikri J and R.K. Agrawal J). On those facts the Supreme Court held as follows. The appeal was allowed and the proceedings under s.148 were quashed. Insofar as the acquisition of the land was concerned the land was compulsorily acquired, because the entire procedure prescribed under the Land Acquisition Act had been followed; the settlement related only to the amount of compensation, and agreement on the amount does not change the character of the acquisition from compulsory acquisition to voluntary sale. The Kerala High Court's decision in Info Park Kerala v. ACIT (2008) 4 KLT 782 was overruled.
The Court reproduced s.10(37) in full and observed that on a transfer of agricultural land by way of compulsory acquisition under any law no capital gains tax is payable. It then traced the acquisition: notification under s.4, declaration under s.6, and the award, with which the acquisition was complete; all that remained was payment and taking possession. Where the compensation fixed was unacceptable, the Act gave the owner a reference under s.18 to the District Judge, but that route goes only to quantum and has nothing to do with the acquisition. On the acquisition itself the appellant had succumbed to the Government's action; his only objection was to the market value. He chose negotiation instead of the s.18 reference and, having settled the figure, executed the sale deed as a necessary consequence. Had the steps under ss.4, 6 and the award not been taken, he would not have agreed to divest himself of the land at all; he was compelled to do so and negotiated only to avoid litigation. The Court added that the same position obtains under the 2013 Act, where the Collector may pass a rehabilitation and resettlement award with the consent of the landowners and the character of the acquisition nonetheless remains compulsory. As to Info Park Kerala, which had reasoned that title passed under sale deeds executed by the owners and so there was no compulsory acquisition, the Court disagreed: as far as the acquisition of the land was concerned there was no consent, and negotiations confined to the quantum of compensation cannot alter the nature of the acquisition. In the words reproduced by the source cited on this page: "Merely because the compensation amount is agreed upon would not change the character of acquisition from that of compulsory acquisition to the voluntary sale." The decision followed or applied Info Park Kerala v. Assistant Commissioner of Income Tax (2008) 4 KLT 782 (Ker.) — expressly overruled.
It was decided by the Supreme Court on 2017-01-11 and is reported as Civil Appeal No. 344 of 2017 (arising out of SLP (C) No. 19367 of 2014), Supreme Court of India, Civil Appellate Jurisdiction. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 10(37), section 2(14)(iii), section 148, section 45, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was allowed and the proceedings under s.148 were quashed. Insofar as the acquisition of the land was concerned the land was compulsorily acquired, because the entire procedure prescribed under the Land Acquisition Act had been followed; the settlement related only to the amount of compensation, and agreement on the amount does not change the character of the acquisition from compulsory acquisition to voluntary sale. The Kerala High Court's decision in Info Park Kerala v. ACIT (2008) 4 KLT 782 was overruled. It arises in Capital Gains, Capital Gains Exemptions and Reassessment & Reopening matters, on section 10(37), section 2(14)(iii), section 148, section 45 of the Income Tax Act 1961, and was decided by A.K. Sikri J and R.K. Agrawal J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Say expressly, in the reply to the notice, that the negotiation went only to quantum and that the alternative open to you was a s.18 reference, not a refusal to part with the land. Prove the other three limbs of s.10(37) separately — individual or HUF, land within item (a) or item (b) of s.2(14)(iii), agricultural use in the two years immediately preceding the transfer by you or a parent, and receipt on or after 1 April 2004. The judgment reproduces the clause in full and each limb must be met. If the Assessing Officer relies on Info Park Kerala v ACIT (2008) 4 KLT 782, point out that the Supreme Court expressly overruled it. If interest or enhanced compensation is involved, note that the Explanation to s.10(37) covers compensation enhanced or further enhanced by a court, tribunal or other authority — but do not stretch that to interest without separate authority.
Validity check could not be completed. Validity check could not be completed. The judgment's own overruling of Info Park Kerala is taken from the text read. Later treatment of Balakrishnan itself was NOT checked: indiankanoon's search endpoint returned HTTP 429 on the citator queries attempted, and no other citator was consulted. Nothing in the material read for this batch doubts it. Note that the exemption itself is unaffected by the substitution of the s.2(14)(iii) distance test by the Finance Act 2013 in any respect decided here, because s.10(37)(i) simply incorporates whatever item (a) or item (b) of s.2(14)(iii) says for the year in question. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The full judgment plus the Record of Proceedings was read from the indiankanoon print view. The two operative sentences were separately confirmed through the phrase-fragment index before the print view was fetched, and both came back word for word. The judgment does not use numbered paragraphs, so no paragraph number is given for the quote; it appears in the paragraph beginning 'In our view, insofar as acquisition of the land is concerned'. The judgment records the award as made on 15 February 2007 and describes it as an award under s.9, whereas an award in a land acquisition case is made under s.11; the Court twice refers to it as the 'Award under Section 9'. That is in the source and has not been corrected. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed and the proceedings under s.148 were quashed. Insofar as the acquisition of the land was concerned the land was compulsorily acquired, because the entire procedure prescribed under the Land Acquisition Act had been followed; the settlement related only to the amount of compensation, and agreement on the amount does not change the character of the acquisition from compulsory acquisition to voluntary sale. The Kerala High Court's decision in Info Park Kerala v. ACIT (2008) 4 KLT 782 was overruled.
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