Balaji Developers Vs ITO (ITAT Pune)
The Income Tax Appellate Tribunal (ITAT) Pune, in the case of Balaji Developers v. ITO, delivered a decision on a matter concerning the taxability of compensation received from compulsory land acquisition. The case centered on whether a partnership firm could claim an income tax exemption on compensation received for land held as stock-in-trade that was compulsorily acquired by the National Highways Authority of India (NHAI).
Case Background and Initial Rulings
Balaji Developers, a partnership firm engaged in land development, filed its income tax return for the Assessment Year 2016-17. During a limited scrutiny, the Assessing Officer (AO) discovered that the firm had claimed an exemption of Rs. 2,74,48,078 for compensation received from the NHAI. The firm’s claim was based on Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLAAR Act) and a supportive CBDT Circular No. 36/2016.
The AO denied the exemption, arguing that Section 10(37) of the Income Tax Act, which provides a similar exemption, is applicable only to individuals and Hindu Undivided Families (HUFs). The AO also noted that since the land was held as stock-in-trade, the compensation was not a capital gain but a business income, which was not eligible for the exemption. This decision was upheld by the National Faceless Appeal Centre (CIT(A)).
