Sunil Khadawala Legal Heir of Manhar Khadawala Vs National Faceless Appeal Centre (ITAT Mumbai)
No Flip-Flop by Revenue -Same Land, Same Facts – Consistency Wins- Tribunal Bars Revenue from Changing Stand
Background
- Filed ROI on 29.09.2011 declaring ₹7.83 lakh.
Dispute:
Taxability of ₹75,95,230/- received as compensation on surrender of 14 acres of land in Raigad.
Disallowance of interest expenditure ₹1,63,373/- u/s 57(iii).
Disallowance of salary expenses ₹5,11,000/-.
AO’s Findings
- Land was not agricultural (Collector’s permission for farmhouses, Tehsildar’s report of barren land).
- Compensation treated as Income from Other Sources.
- Alternatively invoked sec. 50C for LTCG, but ultimately taxed as IFOS.
- Disallowed interest & salary as not connected with such income.
CIT(A) Order (24.06.2025)
- Confirmed AO’s action.
- Held land ceased to be agricultural & allotment of 14 acres was without consideration, hence no enforceable rights.
- Treated compensation as taxable u/s “Income from Other Sources”.
- Also confirmed disallowances of interest & salary.
Assessee’s Arguments before ITAT
- Earlier year (AY 2009-10) in same land, ITAT had held it as agricultural land; AO in order giving effect (31.03.2015) accepted it as agricultural based on: Talathi & Gram Panchayat certificates, Revenue records (7/12 extracts), DVO report confirming agricultural nature.
- Compensation from same 68-acre tract cannot now be taxed differently.
- Salary belongs to restaurant business, not linked with IFOS.
- Interest expenditure directly linked with preserving FD interest income (overdraft facility).
Tribunal’s Findings
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