2022 (9) TMI 337 - AT - Income Tax

Taxability of compensation received on acquisition of land - Exemption un/s 96 of the RFCTLARR Act - income tax liability on any award or agreement made - Addition made under the Head Long Term Capital Gain - whether assessee discharged onus of evidence substantiating his claim of Exemption from Capital Gain on account of Agriculture Land? - exemption allowed to the assessee by the ld. CIT(A) - HELD THAT - The order passed by the ld. CIT(A) is a reasoned order and as such there is no need to inference by this Tribunal in the order passed by the ld. CIT(A). Besides that in the present case also the CBDT vide Circular No. 36/2016 dt. 25/10/2016 clarified that the compensation received in respect of award or agreement which has been exempt from levy of Income Tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income Tax Act, 1961 even if there is no specific provisions of exemption for such compensation in the Income Tax Act, 1961. In the said Circular it is also clarified that no distinction had been made towards compensation received for compulsory acquisition of agricultural land and non agricultural land in the matter of providing exemption from income Tax under the RFCTLARR Act. In the instant case the assessee received compensation for compulsory acquisition of commercial land during the F.Y. 2014-15 which was exempted under section 96 of the RFCTLARR Act, as clarified by the CBDT Circular No. 36/2016 dt. 25/10/2016. We therefore considering the totality of the fact as discussed hereinabove are of the view that the Id. CIT(A) was justified by not confirming the action of the A.O. Accordingly the appeal of the revenue is dismissed.

Summary

Issues:
1. Exemption from capital gain on compensation received for land acquisition.
2. Admission of additional evidence in violation of Rule 46A.
3. Consideration of TDS deduction and classification of land as a capital asset.
4. Failure to consider the term "Compulsory Acquisition."
5. Failure to address the reasons behind the Assessing Officer's decision.
6. Consideration of the land's agricultural use for exemption.
7. Interpretation of TDS deduction by the Land Acquisition Officer.
8. Evaluation of the distance of the acquired land in relation to municipal area.

Analysis:

Exemption from Capital Gain:
The appeal pertains to the revenue challenging the order of the CIT(A) regarding the exemption from capital gain on compensation received for land acquisition. The revenue argues that the CIT(A) erred in not considering the basic fact of the addition made under Long Term Capital Gain due to the failure of the assessee to provide evidence substantiating the claim of exemption. However, the CIT(A) allowed the appeal of the assessee, stating that the compulsorily acquired land fulfilled the conditions under relevant provisions of the Income Tax Act, leading to the deletion of the addition.

Admission of Additional Evidence:
The revenue further contested the admission of additional evidence by the CIT(A) in violation of Rule 46A. The revenue claimed that the CIT(A) should not have admitted such evidence. However, the CIT(A) justified the admission of additional evidence based on the documents submitted by the assessee, including the Gazette Notification and sale receipts, confirming the land's acquisition under specific provisions of the Act.

Classification of Land and TDS Deduction:
Issues also arose regarding the classification of the acquired land as a capital asset and the treatment of TDS deduction under relevant sections of the Income Tax Act. The revenue argued that the CIT(A) did not consider the TDS deduction under the correct sections, leading to an erroneous decision. However, the CIT(A) based the decision on the CBDT Circular, clarifying the taxability of compensation received for compulsory acquisition of land, which supported the exemption of such compensation from taxation.

Failure to Consider Compulsory Acquisition:
The revenue raised concerns about the CIT(A) not considering the term "Compulsory Acquisition" and failing to evaluate the distance of the acquired land concerning municipal areas. However, the CIT(A) reasoned that the compensation received for the compulsory acquisition of commercial land fell under the exemption provided by the RFCTLARR Act, as clarified by the CBDT Circular, thereby justifying the decision to dismiss the appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision, considering the totality of facts and the relevant provisions of the Income Tax Act and circulars issued by the CBDT. The appeal of the revenue was dismissed, affirming the exemption from taxation on the compensation received for the compulsory acquisition of land.