Compensation For Compulsory Acquisition Of Commercial Land Exempted From Income Tax: ITAT

The two-member bench of Sonjoy Sarma (Judicial Member) and Manish Borad (Accountant Member) has observed that no distinction was made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income tax under the RFCTLARR Act.

The assessee received compensation for the acquisition of his land by the District Land Acquisition Officer, Patna. It was found that the assessee was liable to pay tax on capital gain on the compensation amount. The case was opened under section 148 of the Income Tax Act and a notice was issued to the assessee. In response to the notice, the assessee filed its return of income. While doing so, the assessee shows his work contract business income and agricultural income. Further, the assessee has shown exempted income under the head, agricultural income, and compensation receipt amount.

The AO issued a notice under section 142(1) to the assessee to submit documentary evidence in relation to the compensation receipt and exempted income. The assessee had submitted his detailed reply. However, the AO, on the basis of a submission made by the assessee, calculated the long-term capital gain.

The assessee appealed before the CIT (A), and the CIT(A) allowed the appeal of the assessee.

The department challenged the exemption allowed to the assessee by the CIT(A) from compensation received on the acquisition of land.

The department contended that the order passed by CIT(A) was perverse and bad in law. The assessee completely failed to discharge the onus of evidence sustaining his claim of exemption from capital gain during the assessment proceeding.

The assessee relied on Circular No. 36/2016 dated 25.10.201 issued by the CBDT. As per the circular, compensation received in respect of an award or agreement is exempted from the levy of income-tax vide section 96 of the RFCTLARR Act. The compensation is also not taxable under the provisions of the Income-tax Act of 1961, even if there is no specific exemption provision in the Income-tax Act of 1961.

The Tribunal upheld the order of the CIT(A).

"The assessee received compensation for compulsory acquisition of commercial land during the F.Y. 2014-15, which was exempted under section 96 of the RFCTLARR Act, as clarified by the CBDT Circular No. 36/2016 dt. 25/10/2016," the tribunal ruled.

Case Title: ITO Versus Shri Suresh Prasad

Citation: I.T.A. No. 210/PAT/2018

Dated: 04.08.2022

Counsel For Appellant: Sr. DR Rupesh Agrawal

Counsel For Respondent: Advocate Sunil Kr. Dubey

Click Here To Read/Download Order