Case Law Details

Case Name : Krishna Kumar Sharma Vs DCIT (ITAT Agra)
Appeal Number : ITA No. 173/Agra/2019
Date of Judgement/Order : 10/03/2021
Related Assessment Year : 2014-15

Krishna Kumar Sharma Vs DCIT (ITAT Agra)

It is clear that the land in question was acquired by National Highway Authority of India on 05.02.2013 under the National Highway Authority Act, 1856. When the award was passed acquiring the land, the Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013 (RFCTAAR Act) came into force with effect from 1st January, 2014 and the compensation as mentioned in Form 16A was given to the assessee on 01.01.2014.

From the perusal of aforesaid provision, it is clear that the award was made in Section 3G of the National Highways Act on 05.02.2013 and compensation was given as per Form 16A on 01.01.2014. Hence, we do not find applicability of RFCTAAR Act to the transaction under consideration before us. We are of the opinion that even section 24 is not applicable as in the present case award was passed on 05.02.2013, which is a date prior to the date when RFCTAAR Act was made applicable. Therefore, its provisions are not applicable. Further as per section 5 of the IT Act, income of assessee (compensation received by assessee) is required to be taxed when the said compensation have accrued in favour of the assessee or deemed to have been accrued.

Undisputedly, the assessee was entitled to receive the compensation when the award was passed quantifying the amount in favour of the assessee for acquisition of land. Therefore, in our opinion, the cutoff date for the purpose of determining its taxability is the date when the assessee was found to be entitled to receive the compensation and not the date when it was actually received by the assessee. In the light of the above we do not find any merit in appeal of the assessee.

FULL TEXT OF THE ITAT JUDGEMENT

This is an appeal filed by the assessee against the order dated 25.03.2019 of ld. CIT(A)-I, Agra for the assessment year 2014-15 on the following grounds :

“1. BECAUSE, upon due consideration of facts and in overall circumstances of the case appellant’ denies its liability to be assessed in terms of Notice dated 07.11.2017 said to be issued under section 156 of the ‘Act’.

2. BECAUSE, upon due consideration of the matter the Ld. ‘CIT(A)’ was not justified in o facts and in law too holding that “nature of rectification sought by him is not within the domain of section 154 of the Act as it is not mistake apparent from records” which finding is uncalled for having been recorded after adjudicating the claim on merits.

3. BECAUSE, while deciding the appeal Ld. CIT(A) has totally omitted to consider that ‘appellant’ is entitled for deduction under section 10(37) of the Income Tax ‘Act ‘and all the essential of section 10(37) are fully met by the ‘appellant’ and therefore, the compensation received by the ‘appellant’ cannot be subjected to tax.

4. BECAUSE, the Ld. ‘CIT(A)’ has wrongly held that ‘appellant’ is not entitled to exemption from levy of capital gain under section 45(5) of the ‘Act’ as the Income failing to take note of the fact that compensation was received on 31.03.2014 after the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (hereinafter referred to as the ‘RFCTLARR’ Act) came into force with effect from 01 January, 2014 and such compensation as per section 24 of the ‘RFCTLARR’ Act shall be deemed to have been received under the said Act.”

2. Brief facts of the case are that the assessment order in the case of assessee was passed on 20.09.2016 at the returned income of Rs.2,77,06,520/-, which included a sum of Rs.2,71,31,104/- as long term capital gain arising out of acquisition of assessee’s land by National Highway Authority of India. Subsequently, the assessee moved an application u/s. 154 before the Assessing Officer alongwith CBDT Circular No. 36/2016 claiming that there was no tax liability on the acquisition of land by Govt. Authority under RFCTAAR Act. The Assessing Officer rejected the claim of assessee on the premise that when the assessment order was passed on 20.09.2016, the CBDT Circular dated 25.10.2016 was not in existence and that the land of assessee was acquired on 05.02.2013 while the provisions of RFCTAAR Act were made effective from 01.01.2014. The appeal filed by the assessee against the said order stood dismissed by ld. CIT(A) observing that the rectification sought by assessee before the Assessing Officer was not a mistake apparent on the face of record.

3. The ld. AR submitted that the CIT(A) was not justified to consider the contention of the assessee that the sum received by the assessee as a result of compulsory acquisition of land amounting to Rs.2,77,06,520/- was erroneously and ignorantly offered to tax due to lack of knowledge while the compensation so received was exempt from tax. It was further submitted that no tax should be collected or levied without any authority of law; that the compensation was received by appellant on 31.03.2014 after the RFCTLARR Act came into force. The ld. counsel for assessee relied upon various decisions, as reproduced in assessee’s written submissions by the ld. CIT(A).

4. The ld. DR has disputed the submissions made by the ld. AR for the assessee orally as well as by written submissions.

5. We have heard the rival submissions and have gone through the material available on record. It is clear that the land in question was acquired by National Highway Authority of India on 05.02.2013 under the National Highway Authority Act, 1856. When the award was passed acquiring the land, the Right to Fair Compensation and Transparency in Land Acquisition Rehabilitation and Resettlement Act, 2013 (RFCTAAR Act) came into force with effect from 1st January, 2014 and the compensation as mentioned in Form 16A was given to the assessee on 01.01.2014. Section 3G of the National Highways Act, 1956 provides as under :

“(3G) Determination of amount payable as compensation.—

(1) Where any land is acquired under this Act, there shall be paid an amount which shall be determined by an order of the competent authority.

(2) Where the right of user or any right in the nature of an easement on, any land is acquired under this Act, there shall be paid an amount to the owner and any other person whose right of enjoyment in that land has been affected in any manner whatsoever by reason of such acquisition an amount calculated at ten per cent, of the amount determined under sub­section (l), for that land.

(3) Before proceeding to determine the amount under sub-section (1) or sub-section (2), the competent authority shall give a public notice published in two local newspapers, one of which will be in a vernacular language inviting claims from all persons interested in the land to be acquired.

(4) Such notice shall state the particulars of the land and shall require all persons interested in such land to appear in person or by an agent or by a legal practitioner referred to in sub-section (2) of section 3C, before the competent authority, at a time and place and to state the nature of their respective interest in such land.

(5) If the amount determined by the competent authority under sub­section (1) or sub-section (2) is not acceptable to either of the parties, the amount shall, on an application by either of the parties, be determined by the arbitrator to be appointed by the Central Government.

(6) Subject to the provisions of this Act, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to every arbitration under this Act.

(7) The competent authority or the arbitrator while determining the amount under sub-section (1) or sub-section (5), as the case may be, shall take into consideration—

(a) the market value of the land on the date of publication of the notification under section 3 A;

(b) the damage, if any, sustained by the person interested at the time of taking possession of the land, by reason of the severing of such land from other land;

(c) the damage, if any, sustained by the person interested at the time of Taking possession of the land, by reason of the acquisition injuriously affecting his other immovable property in any manner, or his earnings;

(d) if, in consequences of the acquisition of the land, the person interested is compelled to change his residence or place of business, the reasonable expenses, if any, incidental to such change.”

6. From the perusal of aforesaid provision, it is clear that the award was made in Section 3G of the National Highways Act on 05.02.2013 and compensation was given as per Form 16A on 01.01.2014. Hence, we do not find applicability of RFCTAAR Act to the transaction under consideration before us. We are of the opinion that even section 24 is not applicable as in the present case award was passed on 05.02.2013, which is a date prior to the date when RFCTAAR Act was made applicable. Therefore, its provisions are not applicable. Further as per section 5 of the IT Act, income of assessee (compensation received by assessee) is required to be taxed when the said compensation have accrued in favour of the assessee or deemed to have been accrued. Undisputedly, the assessee was entitled to receive the compensation when the award was passed quantifying the amount in favour of the assessee for acquisition of land. Therefore, in our opinion, the cutoff date for the purpose of determining its taxability is the date when the assessee was found to be entitled to receive the compensation and not the date when it was actually received by the assessee. In the light of the above we do not find any merit in appeal of the assessee. Accordingly, the same deserves to be dismissed.

7. In the result, the appeal is dismissed.

Order pronounced in the open court on 10/03/2021

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