2021 (9) TMI 37 - AT - Income Tax

Claim of deduction u/s 54H - compensation received on compulsory acquisition - as contended that section 54/54H of the Act neither speak about the investment of additional compensation nor about the extension of the time limit in respect of claim of deduction u/s 54 - HELD THAT - There is no dispute with regard to the fact that in the present case, there was compulsory acquisition. The quantum of compensation was increased by the Ld. Court of Addl. District Judge (North), Delhi. CIT(A) relying on the judgement of the Hon ble Andhra Pradesh High Court in the case of Chakri Ashok Kumar, Ongole 2014 (11) TMI 937 - ANDHRA PRADESH HIGH COURT as held since the very adjudication before various authorities proceeded on the assumption that there exits a separate component of additional compensation and since we find that such a concept is alien to the Scheme and the Act of for that matter, the I.T.Act, we allow the appeal and accordingly set aside the impugned order. As directed that benefit of section 54H of the Act shall be extended to the entire amount of compensation as enhanced by Hon ble High Court. The Revenue has not brought any contrary binding precedents to our notice, therefore, we do not see any infirmity in the order of Ld.CIT(A) and the same is hereby affirmed. Thus, ground raised by the Revenue is rejected.

Summary

Issues:
1. Whether the CIT(A) erred in deleting the addition made by the Assessing Officer by rejecting the assessee's claim of deduction u/s 54 of the IT Act, 1961?

Detailed Analysis:
The appeal filed by the Revenue was against the order of the learned CIT(A)-25, Delhi for the assessment year 2012-13. The dispute arose when the Assessing Officer observed that the assessee had received enhanced compensation on the compulsory acquisition of property and claimed exemption u/s 54 of the Income Tax Act, 1961. The Assessing Officer made an addition of ?4,55,00,000 in respect of the enhanced compensation, leading to a difference in the assessed income against the income declared in the return.

The CIT(A) allowed the claim of deduction u/s 54H of the Act after considering the submissions and relevant case laws. The Revenue challenged this decision before the Tribunal, arguing that the benefit of section 54H was not applicable to the assessee as the compensation received included interest and additional compensation. The Revenue contended that the assessee erroneously applied section 54H and emphasized that the benefit of section 54H was not available.

On the other hand, the counsel for the assessee supported the CIT(A)'s order, stating that there was no ambiguity in law regarding the claim for treatment of the enhanced compensation under section 54 of the Act. The counsel highlighted the intrinsic link between the acquisition and the enhanced compensation, supported by a decision of the Hon'ble Delhi High Court.

The Tribunal examined the contentions of both parties and referred to section 54H of the Act. The Tribunal noted that the Revenue failed to provide any contrary binding precedents to challenge the CIT(A)'s decision. Relying on a judgment of the Hon'ble Andhra Pradesh High Court, the Tribunal affirmed the CIT(A)'s order, extending the benefit of section 54H to the entire amount of compensation enhanced by the court. Consequently, the Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision.

In conclusion, the Tribunal's decision was pronounced at a Virtual Hearing on 31st August 2021, affirming the CIT(A)'s order and rejecting the Revenue's appeal.