The Pune bench of the Income Tax Appellate Tribunal (ITAT) held that the compulsory acquisition of agricultural land will not attract the capital gains which was chargeable to tax calculation.
Nandkumar Gajanan Lad, the appellant assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for confirming the addition made by the assessing officer as the cost of acquisition in the computation of capital gain on transfer of Plots by the assessee.
Nikhil S. Pathak and Ajinkya M. Vaishampayan, the counsels for the assessee contended that the market value of the plots allotted against compulsory acquisition by the Government constituted the full value of consideration and the same value became the cost of acquisition in the transaction of sale.
It was further submitted that the first transaction of transfer by compulsory acquisition will not attract capital gain because it was a transfer of agricultural land.
Ramnath P. Murkunde, the counsel for the revenue department relied on the decisions of lower authorities and contended that the amount paid by the assessee had constituted the cost of acquisition of the property transferred which resulted in total short-term capital gain with the assessee’s share.
It was also submitted that the addition made by the assessing officer as the cost of acquisition of property transferred was as per the law and sustainable.
The bench observed that the cost of acquisition of the two plots in the second transaction of transfer was their fair market value on the date of their allotment to the assessee, which constituted the basis for the full value of consideration in the first transfer transaction.
The two-member bench comprising R.S. Syal (Vice President) and Partha Sarathi Chaudhury (Judicial) directed the assessing officer to re-adjudicate the matter while allowing the appeal filed by the assessee.
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