Brief Fact of the Case
The assessee has an agricultural land. During A.Y. 2010-11, M/s Indian Oil Coproration Ltd, had laid down the underground pipe-line. The Land of the assessee was in the way of pipe line to be laid down. For digging of land and laying the pipe-line, the Indian Oil Corporation Ltd. had paid Rs. 4,75,980/- to the assessee which was considered to be a capital in nature. However, the A.O. did not find merit in the submissions of the assessee and made the addition treating the said amount as revenue receipt and also causal and non-recurring nature.
Contention of the Assessee
This amount is received for granting the right to use the land for laying the pipeline and damages done to the land. The land is still owned by the assessee and there is no transfer of any asset. Therefore, compensation received by the assessee is not eligible for capital gain tax and relied upon the decided case law of Shri Thakorbhai V. Naik V/s The Income Tax Officer, Ward-3(4), Surat (ITA No. 781/AHD/2010)and Shri Vijay Ishwarbhai Desai Vs The Income Tax Officer, Ward-3(1), Surat (ITANo. 544/AHD/2010).
Contention of the Revenue
Revenue considered that said amount as taxable holding the amount received is for the loss of future profit.
Held by CIT(A)
The ld. CIT(A) after considering the submissions of the assessee confirmed the addition made by the AO by observing that “The appellant has relied on two decisions of Hon’bleITAT. However, the facts of the present case are different. In these cases the assessing officer had assessed the said receipts under the head other sources and the CIT(A) had held them to be capital receipts. No appeal was filed before the ITAT by the department against order of the CIT(A). Therefore, the issue before ITAT was not whether these receipts were of capital nature or revenue nature. The department having accepted the receipt to be of capital nature (by not filing appeal against the CIT(A)’s order), the ITAT modified the CIT(A)’s order that these receipts were not subject to capital gain tax as no capital asset had been transferred. In the present case, the assessing officer has held them to be revenue receipts of casual and non-recurring nature. I concur with the view of the assessing officer and uphold the addition.”
Held by the Tribunal
Following the ratio laid down by the Hon’ble Bombay High Court in the Case of Dr. (Ms) Avimay S. Hakim Vs ITO in ITA 2923/2010it was held that sum received by the assessee towards the damage to the land belonging to the assessee cannot be said to be revenue receipt. The fact that the land has remained with the assessee and that the assessee in future may earn profits from the said land, cannot be a ground to hold that the compensation received by the assessee in lieu of damage caused to the land was revenue receipt. In the result, the appeal of the assessee was allowed and the impugned addition sustained by the CIT(A) was deleted.