Capital gain liability on Leasehold rights in a plot granted as compensation in pursuance of compulsory acquisition of agricultural land belonging to assessee’s deceased father

Overview :

Leasehold right in a plot allotted to assessee against right of agricultural land having belonged to assessee’s late father could not be considered as agricultural land and, therefore, profit on transfer of such leasehold right was taxable under the head ‘capital gains’, however, AO was not correct in not allowing cost of acquisition to assessee while computing long-term capital gain on transfer of leasehold rights in land. Accordingly, AO was directed to re-compute long-term capital gain.

Assessee had got allotment of leasehold rights in a plot of land as additional compensation granted by stated government towards compulsory acquisition of agricultural land owned by assessee’s late father. During the year under consideration assessee sold above leasehold rights and claimed resulting capital gain as exempt on the ground of nature of land acquired being agricultural land.

It is held that Leasehold right in a plot allotted to assessee against right of agricultural land having belonged to assessee’s late father could not be considered as agricultural land and, therefore, profit on transfer of such leasehold right was taxable under the head ‘capital gains’, however, AO was not correct in not allowing cost of acquisition to assessee while computing long-term capital gain on transfer of leasehold rights in land. Accordingly, AO was directed to re-compute long-term capital gain.

Decision: Partly in assessee’s favour.

Followed: A.R. Dahiya v. Asstt. CIT (2004) 269 ITR 542 (P&H) : 2004 TaxPub(DT) 1777 (P&H-HC) and Atul G Puranik v. ITO (2011) 132 ITD 499 (Mum-Trib) : 2011 TaxPub(DT) 1021 (Mum-Trib).

Referred: AR Dahiya v. Asstt. CIT (2004) 269 ITR 542 (Punj. & Har.) : 2004 TaxPub(DT) 1777 (P&H-HC).

IN THE ITAT, MUMBAI ‘C’ BENCH

G. MANJUNATHA, A.M. & RAVISH SOOD, J.M.

Pyaribai K Jain v. Addl. CIT

IT Appeal No. 2387 (Mum.) of 2017

A.Y. 2007-08

21 December, 2018

Appellant by: J.C. Lala

Respondent by: Abi Rama Kartikeyan

G. Manjunatha, A.M.

This appeal filed by the assessee is directed against the order of the Commissioner (Appeals)-32, Mumbai dated 25-1-2017 and it pertains to assessment year 2007-08. The assessee has raised the following grounds of appeal :–

“1. In the facts and circumstances of the case and in law without prejudice to ground 5 above, the learned Commissioner (Appeals) appeal erred in not holding that the entire consideration received of Rs. 9,70,37,500 is not taxable being enhanced consideration received on compulsory acquisition of agricultural land.

2. In the facts and circumstances of the case the learned Commissioner (Appeals) erred in not appreciating the fact that the Agricultural land referred to in (2011) 11 taxmann.com 92 (Mumbai) : 2011 TaxPub(DT) 1021 (Mum-Trib) was also not a capital asset as defined in section 2(14) in 1970.

3. In the facts and circumstances of the case the learned Commissioner (Appeals) erred in not appreciating the Explanation to section 45(5).

4. In the facts and circumstances of the case and in law the assessment is bad in law as the notice under section 143(2) was served on the appellant on the 1-8-2006, i.e., beyond the statutory period.”

2. The brief facts of the case are that the assessee has filed her return of income for assessment year 2007-08 on 30-7-2007 declaring total income of Rs. 3,40,29,760, consisting of income from long-term capital gain from sale of property at Rs. 3,34,83,700 and income from other sources. The assessee is a daughter of Late Shri Anoopchand Dungaji. Late Shri Anoopchand Dungaji owned certain agricultural land at Shirwane. The land owned by Late Shri Anoopchand Dungaji was compulsorily acquired by Government of Maharashtra under the Land Acquisition Act on 28-12-1965 for purpose of developing New Mumbai for which compensation has been paid. Late Shri Anoopchand Dungaji died on 12-2-1972. Government of Maharashtra has passed a resolution on 28-12-1994 to grant plot equivalent to 12.5% of the land compulsorily acquired by the government to all project affected persons in New Mumbai city under development as additional compensation. The assessee has got allotment of leasehold rights of a plot admeasuring 6,349.47 sq.mts. on 18-10-2006. The assessee has sold her leasehold rights in the said plot to M/s. Metro Developers, after obtaining necessary permission from CIDCO on 3-11-2006 for a consideration of Rs. 4,60,37,500. The assessee has computed long-term capital gain from transfer of property by adopting indexed cost of acquisition by taking into account fair market value of the property as on 1-4-1981, since she had acquired right over the property by inheritance and computed long-term capital gain at Rs. 3,84,83,700. The assessee also has taken the benefit of exemption provided under section 54EC by purchasing REC bonds for Rs. 50 lakhs and declared net taxable capital gain of Rs. 3,34,83,700.

3. The case has been selected for scrutiny and notices under section 143(2) and 142(1) of the Act, were issued. In response to notices, the authorised representative of the assessee appeared and filed various details, as called for. During the course of assessment proceedings, the assessing officer called upon the assessee to file complete details of sale of land including copy of sale deed in order to ascertain correctness of long-term capital gain computed by the assessee. Inspite of repeated notices, the assessee did not file copies of registered sale deed. Therefore, the assessing officer has issued notices us 133(6) to the jurisdictional Sub Registrar to ascertain and obtain copy of registered deed. The assessing officer further observed that the tripartite agreement between the parties dated 3-11-2006 does not specify the value of the land; however, for the purpose of payment of stamp duty, the value has been fixed at Rs. 9,14,40,000. Since there was a difference in consideration shown by the assessee for transfer of land and value of land fixed for payment of stamp duty, the assessing officer issued a show cause notice and asked the assessee as to why provisions of section 50C shall not be applied to adopt difference in amount as per sale deed and stamp duty value to full value of consideration.

4. In response, the assessee, vide letter dated 19-11-2009 filed details along with a memorandum of understanding dated 20-10-2006 between the assessee and M/s. Perfect Associates, as per which, total sale consideration for sale of land has been fixed at Rs. 9,70,37,500 and out of which a sum of Rs. 4,60,37,500 was paid to the assessee and balance amount of Rs. 5.10 crores has been paid to M/s. Perfect Associates. The assessee has opposed application of provisions of section 50C of the Income Tax Act, 1961 to argue that what was transferred is a leasehold right in the property but not a land and building, therefore, the provisions of section 50C has no application. The assessee also has taken an alternative argument to the effect that what was received from CIDCO is an additional compensation for compulsory acquisition of land and when the land was originally acquired, it was an agricultural land consequently, additional compensation awarded by CIDCO is also an acquisition of agricultural land which is not taxable, therefore, the return of income filed by the assessee by mistakenly admitting long-term capital gain on transfer of property may be substituted by Nil income from transfer of property. The assessee also has taken another argument inasmuch as that on transfer of leasehold rights to M/s. Metro Developers, M/s. Perfect Associates is one of the parties to the transactions and differential amount of Rs. 5.10 crores has been paid to the confirming party, M/s. Perfect Associates for rendering certain services in connection with allotment and transfer of property, therefore, the said amount has to be considered as expenses on transfer.

5. The assessing officer, after considering submissions of the assessee and also on analysis of the copies of agreement between the parties, came to the conclusion that what the assessee has got through inheritance was not agricultural land, only a right to receive the enhanced compensation. So, when the assessee got enhanced compensation, it was not against the agricultural land, but only a right. The right of the assessee was extinguished by receiving leasehold right on 18-10-2006 from CIDCO and it amounted to transfer within the meaning of section 2(47)(ii). Accordingly, he computed long-term capital gain by applying the provisions of section 50C by taking into account full value of consideration of Rs. 9,14,40,000. The assessing officer further observed that inspite of repeated requests, the assessee failed to file necessary details in respect of expenses of transfer and also indexed cost of acquisition. Hence, rejected expenses of transfer and indexed cost of acquisition claimed by the assessee. The assessing officer further observed that the assessee has transferred her leasehold rights in the property to M/s. Metro Developers on 3-11-2006. Since the holding period of the leasehold rights is less than 36 months, the assessing officer has computed short term capital gain by taking into account full value of consideration as per MOU dated 20-10-2006 and from that allowed cost of acquisition as per stamp duty value fixed under section 50C of the Act for Rs. 9,14,40,000 and computed short term capital gain of Rs. 55,97,500.

6. Aggrieved by the assessment order, assessee preferred appeal before the Commissioner (Appeals). Before the Commissioner (Appeals), the assessee has reiterated her submissions made before the assessing officer to argue that there is no capital gain on additional compensation received from CIDCO for re-allotment of land under 12.5% scheme because at the time of acquisition of land in the year 1965, the land in question was agricultural land and exempt from tax. Consequently, the additional compensation received is also on account of acquisition of agricultural land, therefore, not liable to tax. The assessee also raised other arguments taken before the assessing officer to argue that if at all capital gain is chargeable, then the amount paid to M/s. Perfect Associates for rendering services in connection with re-allotment and transfer of leasehold rights shall be allowed as deduction. The learned Commissioner (Appeals)-29, relying upon the case of A.R. Dahiya v. Asstt. CIT (2004) 269 ITR 542 (Punj. & Har.) : 2004 TaxPub(DT) 1777 (P&H-HC) held that the question whether an asset is a capital asset or not has to be determined in the year in which the asset is acquired or any compensation or part thereof is first received. Since the land in question when acquired by the government is an agricultural land, and it was not a capital asset, the additional compensation relates back to the original asset, will also not be taxable. However, it was further held that since the assessee has already offered the capital gain for tax as per return of income relying upon the case of Goetze India Ltd. v. CIT (2006) 284 ITR 323 (SC) : 2006 TaxPub(DT) 1528 (SC) held that in absence of any revised return filed by the assessee, assessee’s income cannot go below taxable income. Against the order of the learned Commissioner (Appeals), the assessee as well as the revenue are in appeal before the ITAT. The ITAT, on consideration of the legal ground taken by the assessee in the light of Hon’ble Supreme Court in the case of Goetze India Ltd. (supra) has set aside the issue to the file of the Commissioner (Appeals) to pass a fresh order on merit, considering the legal ground taken by the assessee.

7. During second round of proceedings before the Commissioner (Appeals), the learned Commissioner (Appeals), after considering relevant facts of the case and also by considering the decision of ITAT, Mumbai in the case of Atul G. Puranik v. ITO (2011) 132 ITD 499 (Mum-Trib) : 2011 TaxPub(DT) 1021 (Mum-Trib) held that it was a right in plot against which the assessee was allotted leasehold plot which could not be considered as agricultural land transferred during the year. This is exactly, the contention of the revenue in present appeal. As regards reliance on the case of A.R. Dahiya (supra), the learned Commissioner (Appeals) observed that the case law relied upon by the assessee is distinguishable on facts as in that case, it was held that once the nature of land transferred was accepted as agricultural land in the year of receipt of original compensation, the nature of such land again cannot be questioned in the year of enhanced compensation. Therefore, she opined that what was transferred by the assessee is a leasehold right received in lieu of right inherited from her father, therefore, consideration received on account of transfer of land is assessable to tax under the head ‘capital gain’ and accordingly re-computed long-term capital gain by adopting the value fixed for the purpose of stamp duty under the provisions of section 50C of the Act at Rs. 9,14,40,000 and after allowing cost of acquisition of Rs. 79,375, determined long-term capital gain of Rs. 9,13,60,625. The relevant observations of the learned Commissioner (Appeals) are extracted below :–

‘4.2 I have gone through the decision of Hon’ble ITAT. Mumbai “A” Bench in the case of Atul G. Puranik (supra) reported in (2011) 11 taxmann.com 92 (Mumbai) : 2011 TaxPub(DT) 1021 (Mum-Trib) as relied upon by the assessee, and find that the facts of said case was almost identical to the case of assessee. However, I find that the said case actually goes against the assessee in present case. In the said case, the assessee’s father was owner of certain agricultural lands which were acquired by the Govt. of Maharashtra in 1973 against certain compensation granted. Therefore, the assessee was allotted on 16-8-2004 under “12.5% Scheme” of the Government on lease basis for sixty years. The assessee sold the said plot to ‘P’ for a consideration of Rs. 2.50 crores on 25-8-2005. In the return filed, the assessee did not offer any income under the head ‘capital gain’ on account of such transfer of the leasehold Plot to ‘P’. The assessee’s case was that the original agricultural land was not a capital asset under section 2(14)(iii), and hence the said plot from CIDCO also did not become capital asset under section 2(14)(iii) and hence the section 45 did not apply to assignment of said leasehold plot. It was held by Hon’ble Tribunal in said case that the leasehold land transferred was a capital asset within the meaning of section 2(14), and the cost of acquisition of said capital asset is to be taken at the market value of leasehold rights in the Plot for sixty years at the time of the first transaction which was completed on 16-8-2004. However, regarding taxability of capital gain of the market value of plot allotted on 16-8-2004, the Hon’ble Tribunal in Para 9.4 of said order held as under :–

“9.4 Adverting to the facts of the instant case, once the assessee acquired rights in the Plot, which in itself is admittedly not an agricultural land, there is no question of considering it to be an agricultural land on the premise that it was allotted to the assessee against acquisition of agricultural land. Further the question whether the lands acquired by the Govt. in the years 1970/72 were agricultural land or not is beyond our purview as we are concerned only with the second transaction of transfer of rights in the Plot which event took place in the year under consideration. We, therefore, hold that the assessee’s contention that the rights in the Plot should also be considered as agricultural land transferred during the year is bereft of any force and is jettisoned. As such, we advance further to determine the amount of capital gain arising to the assessee in the year in question on the transfer of rights in the Plot.”

4.3 The highlighted portion of above decision indicates that it was a “right in Plot” against which the above assessee was allotted the leasehold plot, which could not be considered as agriculture land transferred during the year. This is exactly the contention of revenue in present appeal. The decision of jurisdictional tribunal on identical facts being binding in nature, there remains hardly any ground not to follow the same.

4.4 As regards assessee’s reliance on the case of A.R. Dahiya (supra), I find the said case distinguishable. In said case, it was held that once the nature of land transferred was accepted as agricultural land in the year of receipt of original compensation, the nature of such land again cannot be questioned in the year of enhanced compensation. In present case of assessee, the nature of asset transferred in year of original compensation, i.e., 1964 as agricultural land is not being questioned. What is being questioned is that the land allotted by CIDCO during the year is not against the said agriculture land per se, but against the right in said land. The Government has not given any direct enhanced compensation for the very agricultural land acquired, but granted certain concession in the new land allotted under a fresh scheme framed i.e. 12.5% Scheme to the then holders of agricultural land. Such Project Affected Persons can only be said to hold right to get allotted the land at concessional rate in lieu of agricultural land already transferred by them.

4.5 As regard assessee’s contention that Explanation (iii) of section 45(5) takes care of assessing officer’s argument that what the appellant inherited was a right to receive compensation, it is pertinent to note the opening para of said section which reads as “Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition of land….”. The said sub-section applies only where there is a transfer of capital asset originally (by way of compulsory acquisition). In present case, the original transfer in year 1964 was admittedly not of a capital asset (being agricultural land), hence the provisions of said section has no implications in present case.

4.6 In view of above, it is held that the Market Value of land allotted by CIDCO is to be considered as full value of consideration for the purpose of computing capital gain on transfer of right inherited by assessee from his father, which is at Rs. 9,14,40,000. The assessing officer has taxed the entire amount of Rs. 9,14,40.000 as long-term capital gain. I however notice that the assessee has spent an amount of Rs. 79.37S towards lease premium paid on getting the said land allotted to it, which should be allowed towards cost of acquisition. Hence, the assessee is chargeable to Long Term Capital Gain on Rs. 9,14,40,000 – 79,375 = Rs. 9,13,60,625. The appeal is decided accordingly.’

8. The learned AR for the assessee submitted that the learned Commissioner (Appeals) was erred in coming to the conclusion that what was transferred by the assessee is a leasehold right acquired in pursuance to a right in a land inherited from her father which is not agricultural land consequently, consideration received on transfer of leasehold rights is assessable to tax under the head ‘capital gains’, ignoring the fact that in the first round of litigation, the learned Commissioner (Appeals) has accepted the fact that additional compensation received on account of compulsory acquisition of land is to be treated on par with the nature of land when it was acquired. In this case, there is no dispute with regard to the fact that the land in question when it was acquired in 1965 was agricultural land and additional compensation received on account of compulsory acquisition of land will also be treated as agricultural income; consequently, the said compensation is exempt from tax. The learned AR further submitted that the learned Commissioner (Appeals) was erred in not appreciating Explanation to section 45(5) where it is stated that where by any reason of the death of the person, who made the transfer, the enhanced compensation received by another person, the amount referred to in clause (b) shall be deemed to be the income chargeable to tax under the head ‘capital gains’ of such other person. The learned Commissioner (Appeals) conveniently ignored the ownership means a bundle of rights and if the ownership is acquired by the government, no other right remained with the owner. The owner is inherited to only compensation/additional compensation. The learned AR further submitted that this aspect has been examined by the ITAT, Mumbai in the case of Atul G. Puranik (supra) where it was held that the cost of plot allotted has to be taken at the market value as on the date of receipt of leasehold rights. The learned AR further submitted that in case the additional compensation received held to be a capital asset liable for tax, then on subsequent sale, the amount received from sale of leasehold rights, the cost incurred by the assessee including amount paid to M/s. Perfect Associates needs to be deducted as expenses of transfer.

9. The learned DR, on the other hand, strongly supporting the order of the learned Commissioner (Appeals) submitted that the assessee himself had admitted in her return of income that she is liable to pay capital gain tax on transfer of leasehold rights of a land and accordingly declared long-term capital gain by adopting cost of acquisition of the plot as on 1-4-1981, therefore, taking a plea that additional compensation received for compulsory acquisition of agricultural land in the year 1965 is not taxable, is not in accordance with law. The learned DR further submitted that the issue before the assessing officer was the full value of consideration received as a result of transfer, but not the issue of taxability of compensation received on compulsory acquisition of land. When the assessing officer has pointed out the difference in market value of land and consideration shown in sale deed, the assessee has come out with an innovative argument to escape from the taxability of capital gain, therefore, the learned Commissioner (Appeals) has rightly apprised the facts to recompute long-term capital gain by adopting market value of the land.

10. We have heard both the parties, perused the material available on record and gone through the orders of authorities below. This is the second round of litigation. In the first round of litigation, the ITAT has set aside the issue to the file of Commissioner (Appeals) with a direction to admit legal ground taken by the assessee in the light of decision of Hon’ble Supreme Court in the case of Goetze India Ltd. (supra). Other than this, there is no difference in facts at the time of first round of litigation before the learned Commissioner (Appeals). In the first round of litigation, the learned Commissioner (Appeals) has accepted the fact that additional compensation received from CIDCO under 12.5% scheme on account of compulsory acquisition of agricultural land in the year 1965 is to be treated as additional compensation received on account of acquisition of agricultural land and could not be taxed. However, he further opined that since the assessee herself has admitted capital gain in her return of income and hence, held that the assessee’s income could not go below the returned income, directed the assessing officer to reconsider the assessment of income to the extent of income declared by the assessee in her return of income.

10.1 The assessee has transferred leasehold right in land allotted by CIDCO in pursuance of compulsory acquisition of land in the year 1965. The assessee has transferred said leasehold rights to M/s. Metro Builders on 3-11-2006 for a consideration of Rs. 4,60,37,500. The assessee has computed long-term capital gain on transfer of land by adopting full value of consideration as per sale deed by reducing indexed cost of acquisition by taking into account fair market value of the land as on 1-4-1981. These are undisputed facts. Neither the assessee nor the revenue are disputing these facts. The assessee has taken an alternative plea during the course of assessment proceedings to the effect that she had admitted capital gain on transfer of land by mistaken facts, but her admission cannot be taken as sacrosanct in view of the fact that additional compensation received on account of compulsory acquisition of agricultural land should be treated on par with the compensation received at the time of acquisition of agricultural land even though such compensation has been received subsequently for the purpose of taxation. If the original compensation is exempt from tax because of the nature of the land, then additional compensation received in subsequent year shall also needs to be exempt from tax. We find that the Hon’ble Punjab & Haryana High Court in the case of A.R. Dahiya (supra) has held that at the time of transfer of the asset, if the said asset does not fall within the definition of capital asset, then there is no occasion to treat the enhanced compensation in a subsequent year as capital gain chargeable to tax under section 45(5) of the Income Tax Act, 1961. The additional compensation received consequent to acquisition of original asset relate back to the nature of asset and accordingly, additional compensation received in subsequent years will also need to be exempt if original compensation received by the assessee is exempt from tax. There is no dispute with regard to the ratio laid down by the Hon’ble Punjab & Haryana High Court. When an original asset acquired is an agricultural land and consequent compensation is exempt from tax, obviously, enhanced compensation received in subsequent year is also exempt from tax. But the issue before the lower authorities is not the question of taxability of additional compensation received by the assessee. The issue before the assessing officer is with regard to the determination of full value of consideration in respect of transfer of a capital asset. The assessee has transferred her capital asset for a consideration of Rs. 4,60,37,500. When the assessing officer has invoked the provisions of section 50C in order to find out the market value of the property, then the assessee came out with an alternative argument inasmuch as the enhanced compensation received on account of compulsory acquisition of agricultural land in the year 1965 will also needs to be exempt under the Act. But, the assessee has not disputed the fact that she has transferred her leasehold right in the land allotted by CIDCO to M/s. Metro Developers for a consideration stated in the sale deed. What was transferred by the assessee is a capital asset. There is no dispute with regard to the nature of the asset, because the assessee has herself admitted this fact and computed long-term capital gain. Once, a particular asset is a capital asset liable to capital gain on transfer, then the next question for determination is what is the full value of consideration. In this case, as per the agreement entered into between the parties, the sale value has been fixed at Rs. 4,60,37,500, but market value of the land for purpose of payment of stamp duty was fixed at Rs. 9,14,40,000. The assessing officer has applied provisions of section 50C to replace full value of consideration claimed by the assessee in her return of income with guidance value fixed by the stamp duty authority for payment of stamp duty. When the assessing officer has replaced full value of consideration, the assessee claimed to have paid a sum of Rs. 5.1 crores to M/s. Perfect Associates for rendering services in connection with re-allotment of transfer of leasehold rights in the land and sought for deduction from full value of consideration being expenses of transfer. The assessing officer has doubted the testimony of documents furnished by the assessee and rejected the claim of deduction of expenses and re-computed long-term capital gain of Rs. 9,14,40,000 for additional compensation received by the assessee from CIDCO by rejecting expenses of transfer and cost of acquisition. The assessing officer further computed short-term capital gain on transfer of leasehold rights to M/s. Metro Developers and arrived at short-term capital gain of Rs. 55,97,500 by allowing cost of acquisition of Rs. 9,14,40,000. The learned Commissioner (Appeals) has modified the computation of capital gain by holding that what was transferred by the assessee is a capital asset and accordingly, the full value of consideration received as a result of transfer shall be adopted as per the value fixed by the stamp duty authorities for the purpose of payment of stamp duty.

11. Having considered arguments of both counsels, we find that now there are two issues to be resolved from the findings of the lower authorities. The first issue is whether additional compensation received from CIDCO in form of re-allotment of land under 12.5% scheme is taxable under the head ‘capital gain’. We have already made it clear that once the original asset when it was acquired is not a capital asset, then additional compensation received in subsequent years will also not be chargeable to tax under the head, ‘capital gain’ in the light of decision of Hon’ble Punjab & Haryana High Court in the case of A.R. Dahiya v. ACIT (supra). The second question needs to be resolved is computation of long-term capital gain from transfer of leasehold rights. The assessee has transferred leasehold rights for a consideration of Rs. 4,60,37,600. The market value of the land as on the date of transfer is at Rs. 14,40,000. Since the provisions of section 50C has come into operations for the year under consideration, the difference between sale consideration and market value of the land shall be added to the full value of consideration. Therefore, we find that there is no error in the findings of the learned Commissioner (Appeals) in adopting the full value of consideration of Rs. 9,14,40,000 as a result of transfer of asset.

12. Having said so, what is the cost of acquisition for the assessee. The assessee, in her return of income adopted cost of acquisition of Rs. 12,10,000 as fair market value as on 1-4-1981, then applied the benefit of indexation to arrive at cost of acquisition of Rs. 65,91,300. The assessee now claims that the cost of acquisition of land has to be determined as on the date of re-allotment of land by CIDCO. In support of her argument, the assessee has relied upon the decision of ITAT, Mumbai Bench in the case of Atul G. Puranik (supra). We find that in the case, the co-ordinate bench held that cost of plot allotted was to be taken at the market value as on date of receipt of leasehold rights. Further, when additional compensation received by the assessee is treated as not taxable because of nature of land acquired in the year of acquisition, and also fact that the said additional compensation partakes the nature of agricultural income, the cost of land when it was subsequently transferred shall be determined as on the date of receipt of additional compensation. In this case, the stamp duty authorities have fixed the market value as on the date of re-allotment of land to the assessee is at Rs. 9,14,40,000. Since the authorities fixed the cost of land as on the date of allotment is Rs. 9,14,40,000, obviously cost of acquisition for the assessee, when the land has been subsequently sold, will have to be taken at Rs. 9,14,40,000. Therefore, we are of the considered view that the assessing officer is incorrect in not allowing the cost of acquisition to the assessee while computing long-term capital gain on transfer of leasehold rights in land. Accordingly, we direct the assessing officer to re-compute long-term capital gain. However, such long-term capital gain computed by the assessing officer shall not go below long-term capital gain computed by the assessee in her return of income, because the assessed income cannot go below the returned income.

13. Insofar as the issue of payment of consideration to M/s. Perfect Associates, it is irrelevant for the purpose of computation of long-term capital gain, because the assessee has failed to prove the testimony of the documents including agreements entered into between M/s. Perfect Associates so as to show that it is genuine document and also the said consideration had been paid for rendering services in connection with transfer of property. Further, when total enhanced compensation is exempt, related expenses need to be ignored for computation. Accordingly, we set aside the issue to the file of the assessing officer for the purpose of re-computation of long-term capital gain in terms of our discussions given in the preceding paragraphs hereinabove.

14. In the result, appeal filed by the assessee is allowed, for statistical purpose.