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2022 (10) TMI 599 - AT - Income TaxCompensation received on compulsory acquisition of land - Whether CIT(A) was right in holding that the compensation received on compulsory acquisition of land was not taxable and failing to appreciate that the award of compensation to the assessee was made u/s 11 of the Land Acquisition Act 1894 and not an award under RFCTLAAR Act 2013 and hence the provisions of the section 96 of the RFCTLAAR Act 2013 is not applicable in the case of the assessee and the compensation was rightly treated as business income of the assessee? - HELD THAT - On careful perusal of the award dated 5/8/2016 it is clear that according to rule 18 (3) of the rights to fair compensation and transparency in land acquisition rehabilitation and resettlement rules 2014 the Commissioner has granted approval to this award. The award was also passed after the land acquisition act 1984 stood repealed from 1/1/2014 which has been replaced by the right to fair compensation and transparency in land acquisition rehabilitation and resettlement act of 2013. The provisions of Section 24 of the act clearly provides that that when no award u/s 11 of the said land acquisition act has been made then all the provisions of the new act relating to the determination of compensation shall apply. It also excludes where the award is already been made u/s 11 of that act and for that particular purpose only the old act continue to apply. In this case the award has been made on 5/8/2016. Therefore the new act shall apply. According to Section 96 of that act income tax shall not be levied on any award agreement made Under that act except as provided u/s 46 of that act. This award/agreement is not u/s 46 - Therefore the income arising in the form of compensation shall be governed by the provisions of Section 96 of the act. Accordingly the income is not chargeable to income tax. The issue is squarely covered in favour of the assessee by the decision in Vishwanatha M V Chief Commissioner 2020 (5) TMI 465 - KERALA HIGH COURT in case of C nand Kumar 2017 (4) TMI 662 - ANDHRA PRADESH HIGH COURT as well as circular number 36/2016 dated 25/10/2016 which clarified in paragraph number 3 of the act that compensation received in respect of award agreement which is been exempted from levy of income tax as per provisions of Section 96 of that act shall also not be taxable Under the provisions of the income tax act. As CIT - A has carefully considered all the above judgement as well as the provision of new law and the old law of acquisition of land and therefore held that sum received by the assessee is not taxable cannot be found fault with. Accordingly we confirm the order of the CIT- A and dismiss ground number 1 of the appeal of the AO. Addition on account of deemed income from house property in respect of unsold flats deleted by CIT - A - HELD THAT - The identical issue arose in the case of the assessee for assessment year 2016 -17 which travelled up to the level of the coordinate bench where the above addition was deleted. CIT A following that decision of the coordinate bench in assessee s own case for assessment year 2016 - 17 2020 (9) TMI 1271 - ITAT MUMBAI has deleted the addition. DR could not show us any reason to deviate from the order of the coordinate bench in assessee s own case. In result respectfully following the decision of the coordinate bench in ITA in case of the assessee for assessment year 2016 17 we confirm the order of the learned CIT A in deleting the above addition. We dismiss ground of the appeal.
Issues Involved:
1. Taxability of compensation received on compulsory acquisition of land. 2. Applicability of Section 10(37) of the Income-tax Act to a partnership firm and non-agricultural land. 3. Applicability of CBDT Circular No. 36 of 2016. 4. Addition on account of deemed income from house property in respect of unsold flats. Detailed Analysis: Issue 1: Taxability of Compensation Received on Compulsory Acquisition of Land The primary issue was whether the compensation of Rs. 69,92,42,974 received by the assessee for compulsory acquisition of land was taxable. The learned Assessing Officer (AO) contended that the compensation was taxable as business income since the award was made under Section 11 of the Land Acquisition Act, 1894, which was in force until 31st December 2013, and not under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act). However, the Commissioner of Income-tax (Appeals) [CIT(A)] held that the award was made under the RFCTLARR Act, which came into force on 1st January 2014, and thus, the compensation was exempt from tax under Section 96 of the RFCTLARR Act. The ITAT upheld the CIT(A)'s decision, noting that the old Land Acquisition Act stood repealed as of 1st January 2014, and the award dated 5th August 2016 was governed by the new Act. Issue 2: Applicability of Section 10(37) of the Income-tax Act to a Partnership Firm and Non-Agricultural Land The AO argued that Section 10(37) of the Income-tax Act, which exempts compensation received on compulsory acquisition of agricultural land from tax, applies only to individuals and Hindu Undivided Families (HUFs) and not to partnership firms or non-agricultural land. The CIT(A) agreed that Section 10(37) was not applicable to the assessee, a partnership firm, but emphasized that the exemption under Section 96 of the RFCTLARR Act, as clarified by CBDT Circular No. 36 of 2016, was broader and covered the compensation received by the assessee. The ITAT concurred with the CIT(A)'s interpretation, confirming that the compensation was not taxable. Issue 3: Applicability of CBDT Circular No. 36 of 2016 The AO contended that CBDT Circular No. 36 of 2016, which clarifies that compensation received under the RFCTLARR Act is exempt from tax, was not applicable to the assessee's case. However, the CIT(A) and ITAT disagreed, noting that the circular explicitly states that compensation received under the RFCTLARR Act is exempt from income tax, regardless of whether it pertains to agricultural or non-agricultural land. The ITAT emphasized that the circular is binding on the tax authorities and must be followed. Issue 4: Addition on Account of Deemed Income from House Property in Respect of Unsold Flats The AO added deemed income from house property for unsold flats held as closing stock, determining an annual value of Rs. 3,40,459. The CIT(A) deleted this addition, relying on the ITAT's decision in the assessee's own case for the assessment year 2016-17, which followed the Gujarat High Court's ruling in CIT vs. Neha Builders Pvt. Ltd. The ITAT upheld the CIT(A)'s decision, noting that the AO did not provide any reason to deviate from the earlier ITAT judgment. Conclusion The ITAT dismissed the appeal filed by the AO, confirming the CIT(A)'s order that the compensation received by the assessee was not taxable under the Income-tax Act, 1961, due to the applicability of the RFCTLARR Act and CBDT Circular No. 36 of 2016. The addition on account of deemed income from house property for unsold flats was also deleted, following the precedent set in the assessee's own case for the previous assessment year.
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