The Patna bench of the Income Tax Appellate Tribunal (ITAT) recently ruled that as per the provisions of the Income Tax Act, 1961 no income tax is payable on compensation for the compulsory acquisition of land by the Government.
This came in a case where Shri Suresh Prasad is the assessee who had received compensation of ₹ 3,68,19,767/- when his land was acquired by the District Land Acquisition Officer.
The Assessing Officer, During the assessment proceedings, made an addition under the head Long Term Capital Gains Rs. 3,63,50,267/- because the assessee failed to provide the liability of evidence confirming his claim of exemption from capital gains on account of agricultural land.
The disappointed assessee reached CIT (A) with an appeal, and CIT (A) allowed it. Against which Revenue filed an appeal before ITAT. The Counsel (Mr Rupesh Agrawal) for the appellant revenue raised that the assessee completely failed to provide the evidence supporting his claim of capital gain exemption during the assessment proceeding.
Counsel (Mr Sunil Kr. Dubey) for the assessee side mentioned that circular No. 36/2016 dated 25.10.2016 issued by CBDT states that compensation received in respect of award or settlement is exempted from the recovery of income tax under section 96 of RFCTLARR Act is not taxable under the provisions of the Income Tax Act 1961 even if there are no exact provisions of exemption for such compensation in the I-Tax Act, 1961.
It was also elucidated that no discrepancy has been made in respect of compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of grant of exemption from income tax under the RFCTLARR Act.
A bench consisting of Mr Manish Borad, Accountant Member and Mr Sonjay Sarma, Judicial Member noted that the assessee got compensation against the compulsory acquisition of his commercial land in FY. 2014-15, which was exempted u/s 96 of the RFCTLARR Act. The same is clarified vide CBDT Circular No. 36/2016 released on 25/10/2016.
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Therefore, after considering the facts, the Bench dismissed the revenue appeal and held that the CIT(A) was justified by not supporting/confirming the action of the Accessing Officer.
What about compensation received by land owner for compulsory acquisition under other Acts? Other than RFCTLARR?? Why is there no clarity. This leads to unnecessary litigation, further burdening the judiciary. It may be challenged under Article 14 of the Constitution.
Under compulsory acquisition acts if it is a rural land, it is exempt under this act and if this is urban land it is taxable for any other further clarification please contact a practicing CA.
Is aquired land compensation and interest paid by govt.is taxable.