Compensation for compulsory acquisition of agricultural or non-agricultural land is exempt from taxation
Facts and issues of the case
The assessee receipt of compensation for Rs. 3,68,19,767/- against acquisition of his land by the District Land Acquisition Officer, Patna and it was found that the assessee was liable to pay tax on capital gain on compensation amount. Accordingly, the case was opened u/s 148 of the Income-tax Act and notice was issued upon the assessee and in response to such notice, the assessee filed its return of income for A.Y. in question. While doing so, the assessee showing his works contract business income for Rs. 1,20,960/- and agricultural income for Rs. 3,55,500/-. Further, the assessee has shown exempted income for Rs. 3,55,500/- under the head, agricultural income and Rs. 3,68,19,767/- under the head, compensation receipt amount totaling to Rs. 3,71,75,267/-.
Further, the AO issued notice u/s 142(1) to assessee to submit documentary evidence in relation to the compensation receipt and exempted income and in response to the same, the assessee had submitted his detailed reply. Now, dissatisfied with the above order passed by the ld. CIT(A), the revenue is in appeal before the Tribunal.
Observation by the court
The main grievance of the revenue relates to the exemption allowed to the assessee by the ld. CIT(A) from compensation received on acquisition of land and the remaining ground no. (ii) to (ix) are consequential or general in nature, therefore, need not to be adjudicated. At the time of hearing, the ld. DR submitted that order passed by ld. CIT(A) dated 06.06.2018 is perverse and bad in law. Since assessee completely failed to discharge the onus of evidence sustaining his claim of exemption from capital gain during assessment proceeding further ld. CIT(A) has erred in admitting additional evidence in violation of Rule 46A of the Income-tax Act and as such it required to be quashed.
On the other hand, ld. AR supported the order passed by the ld. CIT(A) and submitted that the order passed by the ld. CIT(A) was a reasoned order need not required any further inference by the Hon’ble Tribunal. And as such the compensation received by the assessee against compulsory acquisition of land by Govt. for construction of National Highway is beyond the purview of taxation. On consideration of rival submission and material available on record, we are of the view that the order passed by the ld. CIT(A) is a reasoned order and as such there is no need to inference by this Tribunal in the order passed by the ld. CIT(A). Besides that in the present case also the CBDT vide Circular No. 36/2016 dt. 25/10/2016 clarified that the compensation received in respect of award or agreement which has been exempt from levy of Income Tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income Tax Act, 1961 even if there is no specific provisions of exemption for such compensation in the Income Tax Act, 1961.
In the said Circular it is also clarified that no distinction had been made towards 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. In the instant case 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. Court therefore considering the totality of the fact as discussed hereinabove are of the view that the Id. CIT(A) was justified by not confirming the action of the A.O. Accordingly the appeal of the revenue is dismissed.
In the result, the appeal of the revenue is dismissed.ITO-Vs-Suresh-Prasad-ITAT-Patna..