Chennai ITAT Remands Section 10(37) Exemption Claim to Assessing Officer in Vizhinjam Seaport Land Acquisition Matter

Case Background

Case Name: Madhavan Thambi Vijaya Kumar Vs CIT (Appeals) (ITAT Chennai)
Appeal Number: ITA No. 2669/Chny/2025
Date of Order: 27/07/2026
Assessment Year: 2018-19

Overview

The Chennai bench of the Income Tax Appellate Tribunal has remanded a matter involving exemption under Section 10(37) of the Income Tax Act, 1961 back to the Assessing Officer for fresh consideration, after the assessee presented critical documentary evidence before the Tribunal that had not been placed on record before the lower authorities. The case revolves around compensation received by the assessee on transfer of agricultural land for the Vizhinjam International Seaport Project and whether such compensation qualifies for exemption from capital gains tax.

Factual Matrix of the Case

Background of the Assessee and Assessment Proceedings

The assessee, an individual, had not filed a return of income for Assessment Year 2018-19. Based on data received through the Risk Management Strategy of the CBDT, which flagged a sale of immovable property for Rs. 1,12,84,777/- to Vizhinjam International Seaport Limited (VISL), the assessment was reopened under Section 147 of the Income Tax Act, 1961.

Following the issuance of notice under Section 148, the assessee filed a return of income declaring long-term capital gain (LTCG) of Rs. 27,65,497/-, after factoring in the indexed cost of acquisition and indexed cost of improvement. However, the assessee failed to substantiate these claims with adequate documentary evidence despite being granted multiple opportunities by the Assessing Officer.

Action Taken by the Assessing Officer

In the absence of the purchase deed, evidence establishing the date of acquisition, and documentation in support of improvement expenditure, the Assessing Officer proceeded to disallow all the deductions claimed. The entire sale consideration of Rs. 1,12,84,777/- was treated as taxable long-term capital gain, and the assessment was finalized under Section 147 read with Section 143(3) of the Income Tax Act, 1961.

Proceedings Before the CIT(A)

Confirmation of the Assessment Order

On appeal, the Commissioner of Income Tax (Appeals), NFAC, Delhi, upheld both the reopening of assessment and the additions made by the Assessing Officer. The CIT(A) confirmed the assessment order in its entirety.

Rejection of Section 10(37) Exemption Claim

A claim for exemption under Section 10(37) was raised by the assessee for the first time during the appellate proceedings before the CIT(A). This claim was rejected on the following grounds: