Compensation received for compulsory acquisition of commercial land is exempt from levy of income tax: Patna, ITAT

Compensation received for compulsory acquisition of commercial land is exempt from levy of income tax: Patna, ITAT

The compensation received in respect of an award or agreement has been exempted from the levy of income tax as per Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013 (RFCTLARR Act), as held by the Patna Income Tax Appellate Tribunal (ITAT)

The two-member bench comprising of Sonjoy Sarma (Judicial Member) and Manish Borad (Accountant Member) observed that a distinction was not 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 facts of the case are that 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. As a result, the assessee filed its return of income and showed his work contract business income and agricultural income, along with exempted income under the head, agricultural income, and compensation receipt amount.

Consequently, a notice was issued by the AO under section 142(1) directing 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.

Aggrieved by this 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 Tribunal held that, "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,"

Thus, the order of the CIT(A) was accordingly upheld.