The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) in a recent ruling, held that the compensation received by the assessee for the loss of crops/ loss of trees on laying of gas pipeline is capital in nature under the provisions of the Income Tax Act.
The sole submission of the assessee to the tribunal was that the compensation received towards loss of crops and losing the rights to carry on agricultural activities on the land, under which the gas pipeline has been laid, is exempt from capital gains tax. They contended that the compensation received by the assessee was entirely for loss of crops and loss of the right to cultivate the agricultural land over the land under which the gas pipeline has been laid and therefore, the entire amount is to be treated as agricultural income.
The first appellate authority had given a partial relief to the assessee by holding that income on “loss of trees”, is chargeable to income tax.
Relying on the decisions in CIT vs. Jyotikana Chowdhurani and V.Venugopala Varma Rajah vs.CIT, the bench opined that the income received by the assessee as the compensation for loss of trees on laying of gas pipeline is capital in nature.
It noted that as in the above cases, the present assessee was also not allowed to cultivate the trees or carry on any agricultural operations on the land under which the gas pipeline has been laid down. Therefore, the entire compensation received for the loss of crops/loss of trees is clearly agricultural income.
Read the full text of the Order below.
