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2024 Supreme(Online)(ITAT) 2612
INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
Shri Mahavir Singh, VP, Shri Manoj Kumar Aggarwal, AM
Shri T.S. Lakshmi Venkataraman – Appellant
Versus
Shri AR V Sreenivasan – Respondent
ITA No.243/Chny/2023
For the Appellants/Petitioners: Shri T.S. Lakshmi Venkataraman (FCA) -Ld. AR
For the Respondents: Shri AR V Sreenivasan (Addl. CIT) - Ld. DR
Compensation from compulsory land acquisition under state law is not taxable under RFCTLARR Act provisions, reaffirming the nexus of state-specific regulations.
Headnote:(A) Income Tax Act - Sections 43CA, 50C, 56(2)(viib) and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - Taxability of capital gains arising from compulsory acquisition of land - The court held that irrespective of the amendments in compensation applicability, the compensation received under the Tamil Nadu Highways Act, 2001 is not subject to income tax as per Section 96 of RFCTLARR Act. (Paras 3-8)
(B) Admissibility of additional grounds in appeal - Additional grounds can be admitted if they relate to the root of the matter and do not require new facts - Dismissal of the additional grounds as they pertain to state legislation and existing law applicability. (Paras 1.1-1.3)
(C) Cost of acquisition and improvement disallowance - Assessment of long-term capital gains - The Tribunal upheld the disallowance of improvement costs for lack of substantial proof while agreeing to restore the matter of improvement costs back to the AO for further substantiation. (Paras 7)
(D) Final decision - The appeal was partly allowed with directions.
| Table of Content |
|---|
| 1. legal grounds and distinctions in applicable statutes. (Para 3 , 4 , 5 , 6) |
| 2. the court's reasoning on disallowance of costs based on evidentiary requirements. (Para 7) |
| 3. final outcome and conclusions drawn from the proceedings. (Para 8) |
ORDER
Manoj Kumar Aggarwal (Accountant Member)
1.1 Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 09-02-2023 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 28-12-2016. The grounds raised by the assessee read as under:
1. The order of Commissioner of Income Tax (Appeals), NFAC dated 09.02.2023 in confirming the assessment framed by the AO is opposed to the facts of the case and is not legally maintainable.
2. On the facts and circumstances of the case, the first appellate authority is not justified in confirming the action of the AO in bringing to tax under the head long term capital gains in respect of property to an extent of 76.41 cents acquired under the land acquisition act, which has been judicially settled that gains arising out of such compulsory acquisitions are not liable for taxation. The land was compulsorily acquired for Highways projects by The Land Acquisition Officer and District Revenue Officer, Tirupur by proceedings dated 27.11.2013.
3. On the facts and circumstances of the case, the first appellate authority is not justified in confirming the action of the AO in disallowing a sum of Rs.1,21,91,007/- as excess indexed cast of acquisition claimed by the appellant.
4. On the facts and circumstances of the case, the first appellate authority is not justified in disallowing the cost of improvement made by the assessee to an extent of Rs.22,84,468/- which has been claimed as a deduction in computing long term capital gains.
1.2 The assessee has raised additional grounds of appeal on 31.12.2023 which read as under: -
1. On the facts and circumstances of the case, the appellant has wrongly offered to tax a sum of Rs.45,91,310/- on capital gains arising out of compulsory acquisition of urban land which is exempt u/s 96 of The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act , 2013, which act of the assessee has been acted upon by the Department in framing the assessment which is bad in law .
2. On the facts and circumstances of the case, further, it is submitted that the appellate authorities has power to grant relief / benefit to the assessee in accordance with law which was failed to be claimed by the assessee due to ignorance of law.
3. On the facts and circumstances of the case, the above-mentioned additional grounds travel to the root of the assessment framed, therefore, it is raised before Hon'ble ITAT, even though it has not been raised before the lower authorities, by relying on the decision of Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs CIT 1998 229 ITR 383 (SC).
1.3 The Ld. AR filed paper book and advanced arguments in support of grounds of appeal as well as additional grounds of appeal. Reliance has been placed on various judicial decisions to support the same, the copies of which has been placed on record. The Ld. Sr. DR controverted the arguments of Ld. AR. Having heard rival submissions, our adjudication would be as under.
2. Proceedings before lower authorities
2.1 It transpired that the assessee purchased 100 cents of land at Survey No.251, Ward-F, Block No.9, TS No.7, Mannarai Village, Tirupur (in short ‘Tirupur’ property) for Rs.30 Lacs on 21.12.2005. During this year, a portion of land to the extent of 76.41 cents was acquired by Land Acquisition officer & District Revenue officer (LAO & DRO), Tirupur on compulsory acquisition for compensation of Rs.255.88 Lacs. The assessee admitted capital gains by taking cost of the property as Rs.119.90 Lacs as against actual cost of Rs.30 Lacs. The s
