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2024 (4) TMI 1109 - AT - Income TaxTaxation on gains arising out of compulsory acquisitions - Admission of Additional Grounds - LTCG in respect of property acquired under the land acquisition act - land was compulsorily acquired for Highways projects by The Land Acquisition Officer and District Revenue Officer, Tirupur - application of provisions of RFCTLARR Act - Effect of ACT's operation as ceased DR stated that the award has been given u/s 34/2002 of Tamil Nadu Highways Act, 2001 and not u/s 96 of RFCTLARR Act, 2013 and therefore the assessee is not entitled for exemption - HELD THAT - Upon perusal of award document as placed it could be seen that the compensation has been awarded by competent authority to the eligible persons on 27.11.2013 u/s 34/2002 of Tamil Nadu Highways Act, 2001 and the award has been received by the assessee on 02.12.2013. RCTLARR, Act, 2013 has been notified only with effect from 01.01.2014. The provisions of Sec. 96 of this Act provide that no income tax or stamp duty shall be levied on any award or agreement made under this Act. Subsequently, the Tamilnadu Government had amended the RFCTLARR Act, 2013 by inserting Sec. 105A vide RFCTLARR (Tamilnadu Amendment Act), Act, 2015 which placed these State land acquisition acts in a newly created fifth schedule on par with the Central Enactment, which are listed in the fourth schedule and have been exempted from the purview of RFCTLARR Act, 2013 except with respect to compensation, rehabilitation and resettlement Tamilnadu State Assembly has enacted Tamilnadu Land Acquisition Law (Revival of Operation, Amendment and Validation) Act, 2019 on 15.12.2019 in order to revive the operation of the Tamil Nadu Highways Act, 2001 which had ceased with effect from 27.09.2013 to exist due to enactment of RFCTLARR Act, 2013 as they were guided by Land Acquisition Act, 1894. As per Sec. 1(2) of TNLAL (ROAV) Act, 2019, aforementioned act has been given retrospective effect from 26.09.2013. As per Sec. 10 of TNLAL (ROAV) Act, 2019, compensation needs to be determined by the RFCTLARR Act, 2013 when the land is acquired under the Tamil Nadu Highways Act, 2001. RCTLARR, Act, 2013 has been notified only with effect from 01.01.2014. The provisions of Sec. 96 of this Act provide that no income tax or stamp duty shall be levied on any award or agreement made under this Act. Subsequently, the Tamilnadu Government had amended the RFCTLARR Act, 2013 by inserting Sec. 105A vide RFCTLARR (Tamilnadu Amendment Act), Act, 2015 which placed these State land acquisition acts in a newly created fifth schedule on par with the Central Enactment, which are listed in the fourth schedule and have been exempted from the purview of RFCTLARR Act, 2013 except with respect to compensation, rehabilitation and resettlement. Only provisions relating to compensation, rehabilitation and resettlement has been made applicable to the State Act and therefore, the provisions of Sec. 10 have limited applicability. The provisions of Sec. 11 specifically exclude the application of provisions of RFCTLARR Act. Undisputedly, the compensation has been received by the assessee is under a state act and not under RFCTLARR Act. Nothing has been shown that the benefit of RFCTLARR Act has ever been extended to the State Government by any notification, directly or impliedly. As held in the case of Jagdish Arora vs. ITO 2021 (6) TMI 459 - ITAT AGRA the exemption is required to be specifically granted by the statute and it cannot be inferred to be drawn. As the date of award of compensation as well as date of compensation received by the assessee fall before 01.01.2014 i.e., the date on which RFCTLARR Act came into effect. Therefore, no such benefit as averred by Ld. AR could be granted to the assessee. Accordingly, the additional grounds as urged by Ld. AR stand dismissed. Disallowance of excess indexed cost of acquisition claimed by the appellant - We concur with the stand of Ld. AO that the assessee could not adopt 50C value in place of actual cost of acquisition. Similarly, the provisions of Sec. 43CA or Sec. 56(2)(viib) do not render any aid to the case of the assessee to compute cost of acquisition. So far as the cost of improvement is concerned, we find that the same has been denied to the assessee since the assessee could not conclusively establish the same. The work order as well as work bill was deficient, though the payment was through banking channels and due TDS was deducted. Therefore, we deem it fit to restore the issue of cost of improvement to the file of Ld. AO with a direction to the assessee to substantiate its claim. The grounds, on merits, stand partly allowed.
Issues Involved:
1. Taxability of compensation received from compulsory land acquisition. 2. Disallowance of excess indexed cost of acquisition. 3. Disallowance of cost of improvement claimed. Summary of Judgment: 1. Taxability of Compensation Received from Compulsory Land Acquisition: The appellant argued that the compensation received for land acquired under the Tamil Nadu Highways Act, 2001 should be exempt u/s 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act). The Tribunal noted that the RFCTLARR Act, 2013 was notified with effect from 01.01.2014, and the compensation was received on 02.12.2013. The Tribunal highlighted that the Tamil Nadu Highways Act, 2001 ceased to exist from 27.09.2013 due to the enactment of RFCTLARR Act, 2013. However, the Tamil Nadu Government amended the RFCTLARR Act, 2013 through the RFCTLARR (Tamil Nadu Amendment Act), 2015, which was later declared null and void by the Hon'ble High Court of Madras. Consequently, the Tamil Nadu State Assembly enacted the Tamil Nadu Land Acquisition Law (Revival of Operation, Amendment and Validation) Act, 2019, giving retrospective effect from 26.09.2013. Despite this, the Tribunal concluded that the compensation received under a state act before the RFCTLARR Act came into effect does not qualify for exemption u/s 96 of the RFCTLARR Act. Therefore, the additional grounds raised by the appellant were dismissed. 2. Disallowance of Excess Indexed Cost of Acquisition: The appellant claimed the cost of the property as Rs. 119.90 Lacs based on the value fixed by the registration authority, instead of the actual cost of Rs. 30 Lacs. The Tribunal agreed with the AO that the assessee could not adopt the value u/s 50C for the cost of acquisition, as Sec. 50C is a deeming provision applicable only to the seller for computation of capital gains. The provisions of Sec. 43CA or Sec. 56(2)(viib) did not support the appellant's case. Thus, the AO's determination of the indexed cost of Rs. 65.21 Lacs was upheld. 3. Disallowance of Cost of Improvement Claimed: The appellant claimed a cost of improvement of Rs. 22.84 Lacs for filling and leveling the land. The AO rejected this claim, noting discrepancies in the work order and work bill, which did not specify the exact location of the land, and doubted that such expenditure would be incurred on land to be acquired by the government. The Tribunal found that the appellant could not conclusively establish the cost of improvement, though payments were made through banking channels and TDS was deducted. Therefore, the issue was restored to the AO for the appellant to substantiate the claim. Conclusion: The appeal was partly allowed, with the additional grounds dismissed, and the issue of cost of improvement remanded to the AO for further verification. The order was pronounced on 25th April, 2024.
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