The Pune bench of the Income Tax Appellate Tribunal (ITAT) deleted the income tax addition as the compensation on compulsory acquisition of land is exempted under section 10(37) of the Income Tax Act,1961.
Kishor Ganpatrao Karande, the assessee challenged the order dated 10-08-2018 passed by the Commissioner of Income Tax (Appeals)-1, Aurangabad. The assessee is an individual and an agriculturist.
The Government of Maharashtra acquired the land belonging to the assessee ad measuring 1H 21R and paid compensation to the assessee. The AO opined that as per the 7/12 extract, the said land is barren and situated within 8 K.M. from the Municipal area of Jalna. The AO treated the said land as non-agricultural land within the meaning of provisions of section 2(14)(iii)(b) of the Income Tax Act.
Further, he found that the assessee did not utilize the amount of capital gain in purchasing the new asset before the filing of return of income under section 139(1) of the Act, even not deposited in any capital gains accounts scheme.
It was contended by the assessee that he is illiterate, does not know Income Tax technicalities but has taken FDR.The AO proceeded to deny exemption under section 54B of the Income Tax Act. Further, he disallowed improvement costs for the non-filing of documentary evidence. The CIT(A) confirmed the view of AO in denying exemption under section 54B of the Act and upheld the disallowance made by the AO towards improvement cost for want of evidence.
A Coram comprising of Shri S S Viswanethra Ravi, Judicial Member observed that the assessee was into agricultural activity by sowing Bajara in his land for F.Y. 2008-09 and the same has been shown as paid in the revenue records in 7/12 extract due to lack of rain and drought. The assessee establishes the reasons for classification as barren land due to the non-availability of irrigation facilities. Therefore, the assessee is entitled to claim an exemption under section 10(37) of the Income Tax Act.
Further held that“the assessee fulfilled all the conditions contemplated in clause (i) to (iv) of sub-section (37) of section 10 of the Income Tax Act, but ignorant of the same as entitled to claim compensation derived from the Government of Maharashtra of compulsory acquisition as non-taxable, offered the capital gains to tax by claiming deduction under section 54B of the Income Tax Act. “
The compensation derived from the Government of Maharashtra on the compulsory acquisition of the assessee’s land, the assessee is entitled to claim the same as exempted u/s. 10(37) of the Act. Thus, the order of CIT(A) in confirming the view of AO in denying the deduction u/s. 54B of the Act is not justified and the addition made thereon is deleted. Thus, the grounds raised by the assessee are allowed.
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