2021 (3) TMI 561 - AT - Income Tax

Determination of amount payable as compensation - 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 - HELD THAT - 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 cut-off 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.

Summary

Issues:
1. Assessment under section 156 of the Act
2. Claim under section 154 of the Act
3. Entitlement for deduction under section 10(37) of the Income Tax Act
4. Exemption from levy of capital gain under section 45(5) of the Act

Analysis:

Assessment under section 156 of the Act:
The appellant challenged the assessment order for the assessment year 2014-15, disputing the liability to be assessed under a notice dated 07.11.2017 issued under section 156 of the Act. The Assessing Officer rejected the appellant's claim based on the timing of the assessment order and the absence of relevant CBDT Circular at that time. The CIT(A) upheld the rejection, stating that the rectification sought was not a mistake apparent on record. The Tribunal observed that the compensation was received after the RFCTLARR Act came into force, but ruled against the appellant, emphasizing the date when the appellant was entitled to receive the compensation, not when it was actually received.

Claim under section 154 of the Act:
The appellant moved an application under section 154 along with a CBDT Circular, claiming no tax liability on land acquisition by the Government under the RFCTAAR Act. The Assessing Officer rejected the claim, citing the absence of the Circular at the time of assessment. The CIT(A) dismissed the appeal, stating the rectification sought was not a mistake apparent on record. The Tribunal concurred, emphasizing the timing of entitlement to compensation for taxability determination.

Entitlement for deduction under section 10(37) of the Income Tax Act:
The appellant contended entitlement for deduction under section 10(37) of the Income Tax Act, asserting that the compensation received should not be subjected to tax. The Tribunal, however, noted the timing of land acquisition and compensation payment, ruling against the appellant's claim for exemption under section 10(37).

Exemption from levy of capital gain under section 45(5) of the Act:
The appellant claimed exemption from capital gain levy under section 45(5) of the Act, citing the compensation received post the enactment of the RFCTLARR Act. The Tribunal analyzed the relevant provisions and concluded that the Act's provisions were not applicable due to the timing of the award and compensation payment. The Tribunal emphasized the date of entitlement to compensation for taxability, dismissing the appellant's appeal.

In conclusion, the Tribunal dismissed the appeal, upholding the tax liability on the compensation received by the appellant for land acquisition by the National Highway Authority of India. The decision was based on the timing of entitlement to compensation and the inapplicability of the RFCTLARR Act provisions to the transaction in question.