April 2012
Ghanshyam Mudgal v. ITO ITAT ‘A’ Bench, Jaipur Before R. K. Gupta (JM) and N. L. Kalra (AM) ITA No. 896/JP/2010 A.Y.: 2007-08. Decided on: 9-9-2011 Counsel for assessee/revenue: Mahendra Gargieya/D. K. Meena
By Jagdish D. Shah, Jagdish T. Punjabi
Chartered Accountants
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Section 14 — Heads of income — Compensation received on acquisition of land under the Land Acquisition Act — Additional amount received was linked to the period when the Notification was issued till the date of actual possession — Whether AO justified in treating the sum so received as interest income — Held it was part of the compensation amount receivable and taxable as capital gains.
Section 2(1A) — Agricultural income — Compensation received on account of demolition of borewell and godown on agricultural land — Held that the amount received is agricultural income.
Facts:
During the year under appeal, the assessee’s land was acquired by the government agency under the Land Acquisition Act. Amongst other amounts, he received a sum of Rs.4.64 lakh with reference to the land acquired. As per the provisions of section 23(1A) of the Land Acquisition Act, the said amount was calculated @ 12% p.a. on market value of the land acquired for the period commencing on from the date notified for acquisition of land to the date of taking its possession. In addition, the assessee had also received Rs.8.54 lakh as compensation on account of demolition of borewell and godown used by him in his agricultural activities. According to the assessee, the sum of Rs.4.64 lakh received was part of the land compensation though it was computed on the basis of the period between the date of notification to the date of possession. As regards the sum of Rs.8.54 lakh received, it was contended that the same should be treated as receipt on account of transfer of agricultural land, income wherefrom is exempt from tax. However, the AO treated the sum of Rs.4.64 lakh as interest income. As regards the sum of Rs.8.54 lakh received, the AO assessed it as capital gains and after indexation the gain was determined at Rs.2.86 lakh. On appeal the CIT(A) agreed with the AO and upheld his order.
Held:
As regards the receipt of Rs.4.64 lakh, the Tribunal, relying on the decision of the Apex Court in the case of CIT v. Ghanshyam, (HUF) (224 CTR 522) agreed with the assessee that the amount received should be treated as enhanced compensation receivable on acquisition of the land by the government agency. Accordingly, it was held that the said receipt of Rs.4.64 lakh would be considered as part of capital gains and taxed accordingly.
As regards the sum of Rs.8.54 lakh received, the Tribunal observed that borewell is a form of irrigation and related to agricultural income. Hence, the compensation received on borewell is to be considered as compensation for agricultural land. Similarly, it was held that the compensation received against godown which was used for storage of agricultural produce, would also be considered as compensation for agricultural land.
