The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the income tax cannot be levied on the compensation or enhanced compensation received on Compulsory Acquisition of the agricultural land.
For the relevant assessment year, the Assessing Officer observed that the land belongs to the assessee was acquired by the Government for which he received enhanced compensation of Rs. 42,88,140/- and interest of Rs. 64,29,833/- from Haryana State Cooperative Supply and Marketing Federation Ltd. The Officer rejected his return as per which he claimed the said income as exempted under section 10(37) of the Income Tax Act, 1961.
While considering the appeal, the Tribunal noted that the Supreme Court in case of CIT vs. Ghansyam HUF recently held that the interest awarded under section 28 of the Land Acquisition Act is capital receipt and is nothing but an accretion to the value of compensation. Thus, according to the Apex Court, it is part and parcel of the compensation, hence is not taxable.
While concluding the matter in favour of the assessee, the Tribunal held that “From the perusal of the order of the CIT(A), it can be seen that the CIT(A) has not given a separate finding as to why the Assessing Officer is justified in making an addition. The Assessing Officer, as well as the CIT(A), have not given any finding as to the fact that the assessee has not received interest u/s 28 of the Land Acquisition Act, 1894. This issue has been decided by the Hon’ble Apex Court in case of Union of India Vs. Hari Singh (Civil Appeal No. 15041/2017 order dated 15th September 2017) wherein it is held that on agricultural Land no tax is payable when the compensation/enhanced compensation is received by the assessee as their land were agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. The CIT(A) has not taken cognizance of the decision of the Apex Court in case of Hari Singh (supra). The ratio of the said decision is applicable in the present case.”Subscribe Taxscan AdFree to view the Judgment