ITO Vs Suresh Prasad (ITAT Patna)
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.
ITAT held that whole of the capital gain arising on transfer of land by way of acquisition by the State Government is not taxable and additions made by AO by computing LTCG and disallowing exemption u/s 10(37) of the Income Tax is not sustainable.
FULL TEXT OF THE ORDER OF ITAT PATNA
The present appeal has been preferred by the revenue against the order of ld. CIT(A), Patna-2 dated 06.06.2018 [hereinafter referred to as ‘CIT’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). The revenue in this appeal has taken the following grounds of appeal:
i. The Order of the CIT (A] dt. 6.06.2018 is perverse and bad in law & facts in as much as he did not consider the basic fact of the Addition made under the Head, Long Term Capital Gain for Rs. 3,63,50,267/ as the Assessee failed discharge, the onus of evidence substantiating his claim of Exemption from Capital Gain on account of Agriculture Land, during the Assessment Proceedings.
ii. The Order of the CIT [A] is further perverse and bad in law & facts in as much as he has erred in admitting additional evidence in violation of Rule 46A.
iii. The Order of the CIT [A] is further perverse and bad in law & frets in as much as he failed to understand that TDS was deducted v/s 194LA treating it to be other than Agriculture Land, hence, it comes within the meaning of Capital Assets u/s 2(14)(iii).
iv. The Order of CIT [A] is further perverse and bad-in-law & facts in as much as he did not consider the Word, Compulsory Acquisition, for which the Assessee had given consent.
v. The Order of CIT [A] is further perverse and bad-in-law & frets in as much as he failed to consider the issue, reason and main frets behind the Addition, as to why the Assessing Officer has considered and treated it fit to be Capital Gain/Assets in the Assessment Order keeping in view of the provisions u/s 2(14)(iii) and u/s 10(37) of the I.T. Act, 1961.
vi. The Order of CIT [A] is further perverse and bad-in-law & facts in as much merely considered in his Order that- “it is undisputed and evidentially prove that the Compulsorily Acquired Land fulfills the Condition of provision of Section10[37] and Section 2(14)(iii) of the I.T. Act, 1961” merely on the ground that “part of the land is still under agricultural cultivation.
vii. The Order of CIT [A] is further perverse and bad-in-law & facts in as much opined on his own that- “TDS has been deducted by the Land Acquisition ( only due to not understanding the technical feet of Section 10(37] and 2(14)(iii).
viii. The Order of CIT [A] is further perverse and bad-in-law & facts in as much as 1 not consider the distance of the Acquired Land keeping in view of Municipal A Section 2(14)(iii).
2. Brief facts of the case are that 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/-.
3. 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. However, the AO on the basis of submission made by assessee, he had calculated the long term capital gain as under:
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