The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) held that Income Tax is not leviable on award received on the compulsory acquisition of the agricultural land of partnership firm.
The assessee , Parasnath Vinimay Pvt. Ltd.is a Private Limited company. After filing the return of the income the case was processed under Section 143(1) of the Income Tax Act making prima facie adjustments of treating the compensation received for acquisition of land at Rs.41,51,828/- as taxable income thereby not giving the benefit of exemption under Section 10(37) of the Income Tax Act and assessing the income at Rs.41,16,070.
Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (Appeal) {CIT(A)}, who upheld the order. Accordingly, against the order the assessee filed an appeal before the tribunal.
During the proceedings, Soumitra Choudhury, counsel for the assessee submitted that the award of the land compensation was received under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and by virtue of Section 96 of RFCTLARR Act, the said compensation is exempt from tax.
Abhijit Datta, Counsel for Revenue, submitted that as per Section 10(37) of the Income Tax Act provides exemption to individual and HUF from payments of tax on the compensation received from Central Government Authority for compulsory acquisition of its land and since the assessee is a Private Limited company, it is not entitled to the said exemption.
The tribunal during the proceedings observed that in the case of rural agricultural land held by the assessee has been acquired by the central government and the compensation to the assessee has been given under the RFCTLAAR Act.
Since the assessee company has received compensation under the RFCTLAAR Act and the case of the assessee did not fall under section 46 of the RFCTLAAR Act, no income tax is leviable on the award received on the compulsory acquisition of agricultural land.
Further stated that the assessee is a partnership firm not an individual or HUF and the compensation received by assessee after referring to the CBDT circular issued on 25/10/2016 and section 96 of the RFCTLAAR Act, held that the sum received by the assessee is not taxable under the Income Tax Act.
The tribunal after reviewing the facts and submissions of the both parties a Single bench of Dr. Manish Borad (Accountant Member) held that Income Tax is not leviable on award received on the compulsory acquisition of the agricultural land of partnership firm
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