Compulsory acquisition of urban land under the Karnataka state highway Act

Dear Sir,

Hope you are doing well !!

Yes, it is  exempted from income tax under section 10(37).

We have handled such cases before.

It is advisable to take a phone consultation for detailed discussion. 

If the agreement has been entered under such act then it can be exempt otherwise not. There is no specific thing mentioned regarding this under the section or circular it just says that the compensation has been received or transfer has taken place under the said act then consideration is exempt.

Thus, if you get it in writing that compensation has been received under said act then your receipt would be exempt.

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Thank you.

Dear sir,

Compulsory acquisition is the power of government to acquire private rights in land without the willing consent of its owner or occupant in order to benefit society. Compensation against such acquisition is provided to the assessee by the government. On occurrence of such transactions capital gain is to be computed as per the provisions of Income Tax Act. Section 45 of the act deals with situations which are not actual transfer but are deemed to be transfer of capital asset.

Section 45(5) specifically deals with compulsory acquisition of capital assets. The conditions to be satisfied by any transaction to fall under this section are as follows: –

1.Compulsory acquisition has taken place

2.Compulsory acquired asset must be capital asset

3.Compensation thereof has been determined or approved by Central Government or the Reserve Bank of India

4.Any court, Tribunal or other authority has the right to enhance the compensation, if necessary

There are no implication of section  46 of income tax act. 

Hi

Provisions of section 10(37) of the Income Tax Act lays down certain conditions which need to be satisfied in order to avail exemption towards capital gain arising on account of compulsory acquisition of an urban agricultural land.

Exemption under section 10(37) is available only on account of compulsory acquisition of urban agricultural land. However, all the following conditions are mandatorily required to be satisfied, in order to claim an exemption under section 10(37) of the Income Tax Act–

1. An exemption under section 10(37) is available only to an individual or a Hindu Undivided Family.

2. The exemption is available towards capital gain arisen on the transfer of agricultural land.

3. The said agricultural land should be situated within the area mentioned below-

• • The agricultural land should be situated within the jurisdiction of a municipality; municipal corporation; notified area committee or town area committee or town committee having a population of more than 10,000; or
  • The agricultural land should be situated within the following distance, measured aerially-

Distance limit

Population limit

Up to 2 kilometers from local limits of any municipality

More than 10,000 but not exceeding 1 Lakhs

Up to 6 kilometers from local limits of any municipality

More than 1 Lakhs but not exceeding 10 Lakhs

Up to 8 kilometers from local limits of any municipality

More than 10 Lakhs

4. The said agricultural land should have been used, for a period of two years immediately before the date of transfer, for the agricultural purpose by-

• • An individual or his parent; or
  • A Hindu Undivided Family.

5. The transfer of capital gain is on account compulsory acquisition under any law or the transfer consideration for which is determined / approved by the Central Government or the Reserve Bank of India.

6. The consideration or compensation from the transfer should have been received on or after 1st April 2004.

As per my understanding It is exempt.

 Section 46 does not deal with such acquisition.

Hi

Section 10 (37) is applicable on transfer of urban agricultural  land.