Narsi Resorts Pvt. Ltd. Vs ITO (ITAT Delhi)
Additional Land Acquisition Compensation Held Exempt: Delhi ITAT Deletes ₹53.77 Lakh Addition
Revenue Officer’s Order Established Receipt as Additional Market Value
In Narsi Resorts Pvt. Ltd. v. ITO, ITA No.8819/Del/2025, concerning AY 2016–17, the Delhi ITAT deleted an addition of ₹53,76,797 representing additional compensation received on compulsory acquisition of agricultural land by the Haryana Government.
The Tribunal relied upon the District Revenue Officer’s order identifying the receipt as additional market value, together with the fact that the original compensation had been treated as exempt in an earlier assessment year.
However, the assessee’s separate challenge concerning ₹4,77,188 of expenditure was rejected because the CIT(A) had merely directed verification of whether that amount had already been added back.
Background: Additional Compensation Claimed as Exempt
The assessee filed its return on 7 October 2016, declaring nil income. It claimed exemption for ₹53,76,797, explaining that the amount represented additional compensation received from the Haryana Government for acquisition of its land.
In support, the assessee relied upon CBDT Circular No.36/2016.
The Assessing Officer considered that the requisite details supporting the exemption had not been furnished and added the amount to income. A further disallowance of ₹4,77,188 was made towards inadmissible expenditure.
The CIT(A) sustained the compensation addition. On the expenditure issue, however, the appellate authority directed the Assessing Officer to verify whether the assessee had already disallowed the amount in its return computation.
Original Compensation Had Been Accepted as Exempt
Before the Tribunal, the assessee submitted that compensation for acquisition of the same land had originally been received in AY 2010–11 and had been treated as exempt by the Department.
A copy of the earlier assessment order was furnished to show that the returned income had not been disturbed.
The assessee also produced the District Revenue Officer, Sonepat’s order dated 29 July 2015, which described the disputed payment as additional market value of the compulsorily acquired land.
According to the assessee, these documents had been placed before both lower authorities but had not received proper consideration.
Nature of the Receipt Proved Decisive
The Tribunal examined the earlier assessment treatment and the Revenue Officer’s order.
It recorded that the original compensation had been accepted as exempt and that the subsequent payment of ₹53,76,797 was clearly identified as additional market value.
The Bench further noted that the Haryana Government had compulsorily acquired the assessee’s agricultural land.
On these facts, it concluded that the compensation was exempt and directed deletion of the entire addition. The assessee’s grounds challenging taxation of the additional compensation were accordingly allowed.
The operative reasoning concerned the character of this particular receipt. The Tribunal did not undertake a separate examination of every statutory route through which acquisition compensation may fall outside taxation.
Expenditure Issue Required Verification, Not Another Disallowance
The assessee contended that the expenditure of ₹4,77,188 had already been added back in its computation of income.
If correct, another disallowance would duplicate the adjustment.
The Tribunal observed that the CIT(A) had only directed the Assessing Officer to reverify this factual position and decide accordingly. It found that such verification caused no prejudice to the assessee.
The challenge to that direction was therefore dismissed, while the Assessing Officer was instructed to comply expeditiously.
Thus, the Tribunal did not finally uphold a duplicate disallowance. It preserved verification of whether the adjustment had already been made.
Important Distinction: Company Assessee and Section 10(37)
Although the order initially describes the dispute as an exemption claim under Section 10(37), the assessee is a private limited company.
This requires careful presentation. Section 10(37) provides relief to individuals and Hindu undivided families, subject to its conditions. The decision should therefore not be cited as establishing that companies generally qualify under that provision.
Separately, CBDT Circular No.36/2016 dated 25 October 2016 clarifies that compensation exempt under Section 96 of the RFCTLARR Act, 2013 is also non-taxable under the Income-tax Act, even without a specific exemption thereunder. Its application depends upon the qualifying award or agreement. incometaxgujarat.gov.in
Author’s Comments
The useful principle emerging from this order is the importance of proving the precise nature of an acquisition receipt. Here, the official order identifying the payment as additional market value materially supported the claim.
Nevertheless, the judgment does not expressly establish the detailed applicability of the RFCTLARR Act to the acquisition. Receipt after 2014, agricultural character and compulsory acquisition should not be treated as substitutes for identifying the correct statutory exemption.
The order also contains an apparent drafting slip stating that the amount was “not exempt”, immediately before holding it exempt and deleting the addition. Its operative conclusion is unambiguous.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), Chennai [hereinafter referred to as ‘ld. CIT(A)] dated 03.11.2025 arising out of order dated 17.12.2018 passed under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2016-17. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
2. The twin issues raised in this appeal are regarding the disallowance of exempt income u/s 10(37) of the Act amounting to Rs. 53,76,797/- and 1 disallowance of expenditure amounting to Rs. 4,77,188/-. As per brief factual matrix of the case, original return of income was filed by the assessee on 07.10.2016 declaring nil income. The ld Assessing Officer noted that the appellant had claimed exempt income amounting to Rs. 53,76,797/-. Before the ld Assessing Officer has submitted that the additional compensation received from the Haryana Govt. on account of acquisition of its land and that the same was not taxable. In support of his contentions the assessee has relied upon CBDT Circular No. 36 of 2016. The ld Assessing Officer noted that the assessee had not submitted the requisite details in supports of its claims and consequently proceeded to add the same. The ld Assessing Officer also made a disallowance of Rs. 4,77,188/- on account of inadmissible expenses. The ld CIT(A) concurred with the findings of the Assessing Officer and confirmed the additions of Rs. 53,76,797/-. As regards the disallowance of Rs. 4,77,188/-, the ld CIT(A) remitted the issue to the file of ld Assessing Officer for reverification whether the same was added back by the appellant in his computation of income filed along with the return of income.
3. The ld counsel for the assessee Shri Sudesh Garg, Advocate, vehemently argued against the action of lower authorities. It was submitted that in A.Y. 2010- 11, appellant had received compensation on acquisition of its land by Govt. and the same was treated as exempt by the revenue. In support of his contentions, the appellant had provided a copy of the assessment order showing no interference with the returned income. The ld counsel has placed on record a copy of order of District Revenue Officer, Sonepat dated 29.07.2015 clearly indicating that the amount of Rs. 53,76,797/- is in the nature of additional market value of the parcels of land compulsory acquired by the Govt. The ld counsel vehemently argued that it had provided to the ld Assessing Officer all these documents but the same were not considered. The ld counsel argued that even the ld CIT(A) did not consider the situation even though same set of documents were placed for his consideration.
4. The ld DR argued in favour of the orders of lower authorities.
5. Heard rival parties. Case records perused.
6. We have noted that the revenue authorities have treated the transaction of grant of original compensation amount in A.Y. 2010-11 as exempt. We have also noted from the order of District Revenue Officer(supra) that the impugned amount of Rs. 53,76,797/- has been clearly shown as additional market value. There is no dispute, therefore, that the impugned amount is not exempt. The Haryana Govt. had acquired agriculture land of the assessee under the compulsory acquisition scheme. The compensation received therefrom is exempt from tax. Accordingly, the addition of Rs. 53,76,797/- challenged by the assessee through its ground of appeal no. 1 to 4 is directed to be deleted. The ground of appeal no. 1 to 4 raised by the assessee are, therefore, allowed.
7. The assessee has challenged through ground of appeal no. 5, the action of ld CIT(A) in remitting back to the ld Assessing Officer for verification the disallowance of expenses amounting to Rs. 4,77,188/-. We have noted that before the ld CIT(A), assessee had argued that the impugned amount was already added back by the appellant in its computation of income and that therefore the disallowance by the Assessing Officer was unwarranted. We have noted that the ld CIT(A) has merely directed the ld Assessing Officer to reverify this position and take a decision consequently we are of the considered view that no prejudice is caused to the appellant. The ld Assessing Officer is directed to comply with the directions of ld CIT(A) expeditiously. The ground of appeal no. 5 raised by the assessee is, therefore, dismissed.
8. In the result, the appeal of the assessee is partly allowed.
