Income Tax Appellate Tribunal - Chandigarh
Dcit, Circle, Sangrur vs Shri Ram Gopal, Sangrur on 30 May, 2022
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, च डीगढ़
I N T H E I NC OM E T A X A P PEL L A TE T RI B U N AL
D I VI SI O N B E N C H , " B " , CH A ND I G AR H
BEFORE SHRI N.K. SAINI, VICE PRE SIDENT &
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
आयकर अपील सं./ ITA No. 397/C H D / 2 0 1 9
नधारण वष / Assessment Year : 2015-16
The DCIT, बनाम Sh Ram Gopal,
Circle Prop. M/s Shri Shakti Packers,
Sangrur Sangrur.
थायी लेखा सं./PAN NO: AAPPG5573K
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Sh. Nikhil Goyal, CA and
Sh. Deepak Anand, Advocate.
राज व क ओर से/ Revenue by : Dr. Ranjeet Kaur, Sr. DR
सुनवाई क तार$ख/Date of Hearing : 02.03.2022
उदघोषणा क तार$ख/Date of Pronouncement : 30. 05.2022
आदे श/Order
Per Sudhanshu Srivastava, Judicial Member:
This appeal has been preferred by the Department against order dated 24.01.2019 passed by the Ld. Commissioner of Income Tax (Appeals), Patiala [hereinafter referred to as 'CIT(A)'] for assessment year 2015-16.
2.0 The brief facts of the case are that the assessee had filed his return of income declaring income of Rs. 3,55,32,270/- under Long Term Capital Gain and agricultural income of Rs. 35,000/- after claiming deduction of Rs. 1,28,80,000/- under Chapter VIA of the Income Tax 2 ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur Act, 1961 (hereinafter called 'the Act') . During the year the assessee derived income from house property, Long Term Capital Gain, interest income, manufacturing of egg trays and purchase and sale of food grains. The assessee's case was selected for scrutiny through CASS under 'Limited Scrutiny'. During the course of assessment proceedings, it was noticed by the Assessing Officer (Assessing Officer) that the land including factory building of the assessee was acquired by the State Govt. and the assessee had received compensation amount of Rs. 6,27,31,581/- including interest. The details of the compensation amount received by the assessee were as under:-
1. Amount from compensation - Rs. 4,19,10,484/-
2. Interest - Rs. 82,47,979/-
3. Amount of solatium - Rs. 1,25,73.139/- 2.1 The assessee claimed deduction of solatium of Rs. 1,25,73,139/-
while calculating Long Term Capital Gain and the Assessing Officer required the assessee to justify deduction claimed on account of solatium and asked the assessee to show as to why the capital gain should not be computed with reference to the entire compensation received by the assessee. In response to the query raised by the Assessing Officer, the assessee submitted a detailed reply (reproduced in the assessment order). The sum and substance of the assessee submissions was that in computing the period referred to in Section 23 3 ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur of the Land Acquisition Act, 1894, any period or periods during which the proceedings for the acquisition of land were held up on account of any stay or injunction by the order of any of the Court will have to be excluded and further in addition to the market value of the land, the Court shall be awarding in every case a sum of 15% of such market value in consideration of the compulsory nature of the acquisition. It was the submission of the assessee before the Assessing Officer that the amount of solatium was not taxable and should be allowed as a deduction from the total amount of compensation. The Assessing Officer, however, did not agree with the submissions of the assessee and went on to hold that the amount of solatium received i.e. Rs. 1,25,73,139/- was to be treated as income of the assessee under the head Long Term Capital Gains and capital gains was worked out at Rs. 5,22,85,716/- as per the following computation:-
Full value consideration (Excluding 5,44,83,623/- Solatium & Interest) Less Cost of acquisition (as per Index cost) 27,69,678/-
Less Cost of Improvement 14,46,368/-
Long Term Capital Gain 5,02,67,577/-
Less exemption U/s 54F 50,00,000/-
Less exemption U/s 54EC 55,55,000/-
Long Term Capital Gain 3,97,12,577/
Add solatium as per para 2.3 above 1,25,73,139/-
Total Long Term Capital Gain 5,22,85,716/-
4
ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur
2.2 Apart from this, the Assessing Officer also held that the interest
received on compensation was to be taxed under the head 'income from other sources' and only 50% of the interest amount received was to be be claimed as exempt in terms of section 57(iv) of the Act. Accordingly, the addition of Rs. 41,23,990/- was also made under income from other sources. The total income was computed at Rs. 5,65,94,729./-
2.3 Thereafter, the assessee filed an application u/s 154 of the Act before the Assessing Officer for rectification of a mistake apparent from the records, i.e. the solatium having been added twice in the assessment order and the Assessing Officer, vide order dated 15.01.2018, passed u/s 154 of the Act rectified the mistake and the assessed income was reduced to Rs. 4,39,81,416/-.
2.4 Aggrieved, the assessee preferred an appeal before the Ld. First Appellate Authority and it was the contention of the assessee before the Ld. CIT(A) that the entire receipts of land acquisition were covered by the Right to Fair Compensation and Transparency in the Land Acquisition, Rehabilitation and Resettlement Act 2013 (hereinafter referred to as 'RFCTLARR') but the Assessing Officer had not followed the binding Circular of the CBDT and had not given the benefit of exemption to the assessee. The Ld. CIT(A) accepted the contention of 5 ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur the assessee and allowed the appeal of the assessee by directing the Assessing Officer to treat the entire compensation including solatium as exempt.
2.5 Against this order of the Ld. First Appellate Authority, the Department has now approached this Tribunal and has raised the following grounds of appeal:-
1. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 1,25,73,139/- under the head Long Term Capital Gain on account of solatium.
2. Whether on the facts & in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.41,23,990/- on account of interest received on compensation in view of provision of section 56 of the Income Tax Act, 1961.
3. Whether on the facts & in the circumstances of the case, Ld. CIT(A) has erred deleting the all Long Term Capital Gain shown by assessee in its return of income in view of RFCTLARR Act. But as per the award letter of the office of competent authority land acquisition (Sub Divisional Magistrate) Sangrur all the acquisitions being made under National Highway Act, 1956 compensation and interest is be paid under the provision of Land acquisition Act, 1894 and it is chargeable to Long Term Capital Gain.
4. It is prayed that the order of Ld. CIT (A) be set aside and that of the Assessing Officer be restored. 6
ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur
5. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed of.
3.0 The Ld. Sr. Departmental Representative (Sr. DR) submitted that she was relying heavily on the observations of the Assessing Officer in this regard. It was submitted by Ld. Sr.DR that there were numerous judicial precedents supporting the stand of the Department that the compensation received was taxable and that all the components therein would form the part of income. It was also submitted that now the Hon'ble Courts have drawn distinction between interest u/s 28 of the Land Acquisition Act and Interest u/s 34 of the said Act. It was submitted that it has been held that whereas the compensation given to the assessee of the land acquired would be income, the enhanced compensation would be income by virtue of section 45(5) (b) of the Act. Similarly, with reference to the exemption being allowed on interest received, the Ld. Sr. DR submitted that in terms of section 56(2) (viii) , the interest was taxable but the assessee can claim exemption on 50% of the interest amount in terms of section 57(iv) of the Act. 4.0 In response, the Ld. AR submitted that the Land was compulsorily acquired by Government situated at National Highway No. 64 on a stretch of land from Km 50.700 to Km 209.50 on the Patiala - Sangrur - Bhatinda section. Our attention was drawn to the Award dated 15.01.2014. Our attention was also drawn to a copy of the letter by SDE 7 ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur wherein price was fixed vide meeting held on 26.12.2013. It was submitted that the amount of Award was calculated on presentation of this copy of letter. It was submitted that in terms of acquisition letter vide dated 15.01.2014, the proprietary rights of the acquired land vested absolutely in Ministry of Road Transport & Highway free from all encumbrance. Our attention was further drawn to the letter dated 11.01.2019 bearing No.04/LAC/NH-64 issued by Collector, Sangrur which specified that out of about 3000 land owners, about 636 land owners were disbursed compensation till 31.12.2014. It was submitted that, thus, it was abundantly clear that majority of land owners were given the payments after 31.12.2014. It was further submitted that the date of Award in the assessee's case is 15.01.2014 and, thus, the acquisition of land fell within the purview of RFCTLARR Act although the award of compulsory acquisition was received by the assessee on 14.02.2015. In this regard our attention was also drawn to the copy of the cheque and the copy of assessee's bank statement which evidenced this claim of the assessee. It was also submitted that section 96 of the RFCTLARR Act provides exemption from income-tax, stamp duty and fees. The Ld. AR also drew our attention to Circular No. 36/2016 issued by CBDT and it was submitted that in terms of this Circular, compensation received in respect of Award or agreement which has been exempt from levy of income tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of the Income Tax Act, 8 ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur 1961 Act even if there is not specific provision of exemption for such compensation under the Income Tax Act, 1961. The Ld. AR submitted that, thus, in view of the factual position, the assessee's case fell squarely with the provisions of RFCTLARR Act and in view of the CBDT Circular, as afore mentioned, the Ld. CIT(A) had rightly deleted the addition made by the Assessing Officer.
5.0 We have heard the rival submissions and have also perused the material on record. In this case the facts are not in dispute. From the records, it is apparent that the impugned transaction is covered under RFCTLARR Act. Even the Assessing Officer has not disputed this position that the land for which compensation has been received had been acquired by the National Highway Authority of India (NHAI) and it is also a matter of record and it also remains undisputed that NHAI is one of the bodies covered u/s 106 of the RFCTLARR Act and all compensation given by them are exempt. Further, as per Schedule 1 of the RFCTLARR Act, compensation includes additional compensation, solatium and any other receipt which implies that solatium and interest are part of compensation. We also note that CBDT Circular No. 36/2016 dated 25.10.2016 has extended the exemption by including compulsorily acquisition of land without any restriction on area as well as acquisition of land. It is also settled law that the Income-tax authorities are bound by the guidelines laid down the CBDT Circulars. The position as it 9 ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur stands now with the passage of the RFCTLARR Act, is that all compensations received qua this Act are not taxable. It has been clarified by the CBDT Vide Circular No.36/2016 dated 21.10.2016 that even where there is no separate deduction allowable under the Income Tax Act, any compensation covered by sections 105 and 106 of the RFCTLARR Act is exempt from taxation. We note that the Ld. CIT(A) has also given a detailed findings on the issue in which the Ld. CIT(A) has also quoted and followed certain judicial precedents and we are in complete agreement with the findings so arrived at by the Ld. CIT(A) in this regard. Accordingly, we find no reason to interfere with the findings of the Ld. CIT(A) on the issue and we uphold his findings while dismissing the ground raised by the Department. 6.0 In the final result, the appeal of the Department stands dismissed.
Order pronounced on 30.05.2022.
Sd/- Sd/- ( N. K. SAINI) (SUDHANSHU SRIVASTAVA) Vice President Judicial Member Dated : 30. 05.2022 "आर.के."
आदे शक त+ल,पअ-े,षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकरआयु.त/ CIT
4. आयकरआयु.त (अपील)/ The CIT(A)
5. ,वभागीय त न1ध, आयकरअपील$यआ1धकरण, च3डीगढ़/ DR, ITAT, CHANDIGARH
6. गाडफाईल/ Guard File 10 ITA No. 397-c-2019 -
Shri Ram Gopal, Sangrur आदे शानस ु ार/ By order, सहायकपंजीकार/ Assistant Registrar