The main legal point established in the judgment is that the nature of acquisition remains compulsory under Section 10(37) of the Income Tax Act, 1961, despite negotiations for compensation.

JUDGMENT :

A.K. Sikri, J.

Leave granted.

2. Heard the matter finally at this stage with the consent of the parties as it was fixed for final disposal.

3. The question of law that is raised in this appeal and squarely arises for consideration is the following:

"Whether, on the facts and circumstances of the case, the High Court was justified in denying the claim for exemption under Section 10(37) of the Income Tax Act, 1961 to the appellant?"

4. This question has arisen under the following circumstances:

5. The appellant was the owner of 27.70 Acres of land in Sy. No. 18.60 hectares of paddy field in Block No. 17 of Attippra village in Thiruvananthapuram District comprised in Sy. No. 293/8. This was agricultural land. The appellant was using the same to grow paddy.

6. The Government of Kerala sought to acquire the aforesaid property of the appellant for the public purpose namely, 3rd phase of development of Techno Park'. For this purpose, Notification under Section 4(1) of the Land Acquisition Act, 1894 (hereinafter referred to as the 'LA Act') was issued on 01.10.2005. An opportunity was given to the appellant to file his objections, if any, under Section 5A of the LA Act. Record does not reveal as to whether such objections were filed or not. However admittedly, thereafter, declaration under Section 6 of the LA Act was issued on 02.09.2006 wherein the Government had declared that it was decided to acquire the land for the aforesaid purpose. After this acquisition, the Land Acquisition Collector (Special Tahsildar), after following the due procedure, even passed the award on 15.02.2007. As per this award, compensation was fixed at Rs.14,36,616/-. It appears that the amount of compensation fixed by the Land Acquisition Collector was not acceptable to the appellant. At that stage, some negotiations started between the parties on the amount of compensation and ultimately it was agreed by the Techno Park, for whom the property in question was acquired, to pay a sum of Rs.38,42,489/-. After this amount was agreed upon between the parties, the appellant agreed to execute a sale deed of the property in question in favour of Techno Park. Such sale deed was executed on 08.05.2008 and duly registered with the Sub-Registrar, Kazhakkootam. While disbursing the aforesaid amount of sale consideration, the Techno Park deducted 10% of the amount of TDS and it was later refunded to the appellant herein by the Income Tax Department taking a view that no capital gain was payable on the aforesaid amount received by the appellant as the same was exempted under Section 10(37) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). We would like to re-produce the provisions of Section 10(37) of the Act, which read as under:

"Section 10(37). in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the 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 the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;

(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.

Explanation - For the purposes of this clause, the expression "compensation or consideration" - includes the compensation or consideration enhanced or further enhanced by any court, tribunal or other authority."

7. As it is clear from the above, on the transfer of agricultural land by way of compulsory acquisition under any law, no capital gain tax is payable. It is clear from the a