PARASHNATH VINIMAY PVT. LTD.,KOLKATA vs. ADIT, CPC, BANGALORE/ ACIT, CIRCLE-2(1), KOLKATA, KOLKATA

For that on the facts of the case, that while issuing intimation u/s. 143 (1) could not deny the adjustment claimed by the assessee as the same does not come within the ambit of 'an incorrect claim apparent from any information in the return', therefore, enhanced the gross total income made by the CPC was without juri iction which is confirmed by the Ld. CIT(A), as such his finding is completely arbitrary, unjustified and illegal.

For that on the facts of the case, the Ld. C.I.T.(A) has dittoed the order of the A.O.(CPC) and confirming the addition of Rs.41,51,828/- as intra head adjustment on capital gain, which is completely arbitrary, unjustified and illegal. Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 2

For that on the facts of the case the Ld. CIT(A) was wrong in confirming the A.O.'s Order in making the intimation u/s. 143(1) wherein the business income has been computed Rs.41,16,070/- in place of (Loss) Rs.35,760/- which is completely arbitrary unjustified and illegal.

For that on the facts of the case, the A.O. (CPC) was wrong in not considering the facts that the assessee received the compensation from Govt. on acquisition of agricultural land at Rural Area in India is not considered a capital asset, so, any gains from its compensation is not taxable under head capital gains, therefore, the addition of Rs.41,51,828/- which is confirmed by the Ld. CIT(A) is completely arbitrary unjustified and illegal.

For that on the facts and circumstances of the case, the compensation was received by the appellant company from District Land Acquisition Officer, Araria, North Bihar for acquisition of agricultural land, therefore, the amount received is not any way related to transfer of capital asset giving rise to capital gain as envisaged in section 2(14) of the I.T. Act.

For that on the facts of the case, the Ld. CIT(A) was wrong by confirming the charging of interest u/s. 234B and 234C amounting to Rs.303,672/- and Rs.63,899/- which are completely arbitrary, unjustified and illegal.

For that the appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal.”

Facts in brief is that the assessee is a Private Limited company and return of income was filed on 30/09/2017 declaring Nil income and claiming carry forward of loss at Rs.35,759/- and claiming refund of Rs.4,33,200/-. The case was processed u/s 143(1) of the Act on 29/03/2019 making facie adjustments of treating the prima compensation received for acquisition of land at Rs.41,51,828/- as taxable income thereby not giving the benefit of exemption u/s 10(37) of the Act and assessing the income at Rs.41,16,070/- Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 3

Aggrieved the assessee assailed the intimation u/s 143(1) of the Act before the ld. CIT(A) but failed to succeed. Even though the assessee filed the copy of CBDT Income Tax Circular 36/2016 dt. 25/10/2016, claiming 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 (in short ‘RFCTLARR Act’), and by virtue of Section 96 of RFCTLARR Act, the said compensation is exempt from tax. However, the ld. CIT(A) was not convinced and he was of the considered opinion that Section 10(37) of the 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 and thus, sustained the addition. Aggrieved the assessee is now in appeal before this Tribunal.

The ld. Counsel for the assessee, apart from referring to the CBDT circular referred (supra) also took us through section 96 and 46 of the RFCTLARR Act. Further reliance was placed on the decision of the coordinate bench of the ITAT Mumbai in the case of DCIT vs. M/s. Ganga Developers in ITA No. 2328/Mum/2021; Assessment Year 2017-18; order dt. 12/10/2022, wherein the assessee is a partnership firm. On the other hand the ld. D/R, supported the order of both the lower authorities. Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 4

We have heard rival contentions and perused the material placed before us. The sole grievance of the assessee is that the ld. CIT(A) has erred in not providing exemption of Rs.41,51,828/- as gains arising on account of acquisition of agricultural land by the Central Government. We notice that the assessee held land in rural area located at Dist. Purnea in Bihar. Compensation of Rs.42,62,880/- was awarded by the central government towards acquisition of assessee’s land and after deduction of tax at source net amount of Rs.38,40,192/- was received by the assessee which was duly deposited in the State Bank of India on 12/11/2016. Though the compensation received is Rs.42,66,880/- but the ld. Assessing Officer has mentioned the amount at Rs.41,16,069/-. We are here to deal with the issue that whether the alleged sum is exempt from tax. The ld. Counsel for the assessee has referred to the following CBDT Circular issued on 25/10/2016:- “Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ITA.II division, North Block, New Delhi, the 25th of October, 2016 Subject: Taxability of the compensation received by the land owners for the land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (’RFCTLAARAct’)-reg.-

The RFCTLARR Act which came into effect from 1st January, 2014, in section 96, inter alio provides that income-tax shall not be levied on any award or agreement made (except those made under section 46) under the RFCTLARR Act. Therefore, compensation received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFCTLARR Act), is exempted from the levy of income-tax.

As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non- agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 6

Hindi version of the order shall follow.”

Further before us ld. Counsel for the assessee, referring to the compensation advice bearing number 245/2016-17 has contended that, the said land as a rural agricultural land. In the above CBDT Circular in para 2, reference is made to Section 96 and 46 of the RFCTLAAR Act. For adjudication of the issue we will go through these two sections also:- “96. Exemption from income-tax, stamp duty and fees.–No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same.

Provisions relating to rehabilitation and resettlement to apply in case of certain persons other than specified persons.— (1) Where any person other than a specified person is purchasing land through private negotiations for an area equal to or more than such limits, as may be notified by the appropriate Government, considering the relevant State specific factors and circumstances, for which the payment of Rehabilitation and Resettlement Costs under this Act is required, he shall file an application with the District Collector notifying him of— (a) intent to purchase; (b) purpose for which such purchase is being made; (c) particulars of lands to be purchased. (2) It shall be the duty of the Collector to refer the matter to the Commissioner for the satisfaction of all relevant provisions under this Act related to rehabilitation and resettlement. Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 7

Now going through the above provisions, so far as the section 46 is concerned, the said section can come into operation only if any person other than a specified person is purchasing land through private negotiations for an area equal to or more than such limits, as may be notified by the appropriate Government, considering the relevant State, specific factors and circumstances. However, in the instant case, there is no private negotiation on the part of the assessee and it is purely a case where the 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 Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 8

Now after dealing with Section 96 of the RFCTLAAR Act, and going to the CBDT circular referred supra, we notice that no distinction has been made between the compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income tax under the RFCTLAAR Act, the exemption provided u/s 96 of the Act is wider in scope than the tax exemption provided in the existing provisions of the Income Tax Act. This clearly indicates that since the assessee company has received compensation under the RFCTLAAR Act and the case of the assessee does 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. Our view is further supported by the decision of the Mumbai bench of the ITAT in the case of M/s. Ganga Developers (supra), wherein also the assessee is a partnership firm (not an individual or HUF) and the compensation was received on 24/08/2013 and this Tribunal after referring to the CBDT circular referred supra and section 96 of the RFCTLAAR Act, held that the sum received by the assessee is not taxable under the Income Tax Act. Relevant part of the said order is extracted below:- Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 9

On careful perusal of the award dated 5/8/2016, it is clear that according to rule 18 (3) of the rights to fair compensation and transparency in land acquisition, rehabilitation and resettlement rules 2014 the Commissioner has granted approval to this award. The award was also passed after the land acquisition act 1984 stood repealed from 1/1/2014 which has been replaced by the right to fair compensation and transparency in land acquisition, rehabilitation and resettlement act of 2013. 011. The provisions of Section 24 of the act clearly provides that that when no award u/s 11 of the said land acquisition act has been made, then all the provisions of the new act relating to the determination of compensation shall apply. It also excludes where the award is already been made u/s 11 of that act and for that particular purpose only the old act continue to apply. In this case the award has been made on 5/8/2016. Therefore the new act shall apply.

According to Section 96 of that act income tax shall not be levied on any award agreement made Under that act except as provided u/s 46 of that act. This award/agreement is not u/s 46 of that act. Therefore the income arising in the form of compensation shall be governed by the provisions of Section 96 of the act.

Further the issue is squarely covered in favour of the assessee by the decision of the honourable Kerala High Court inVishwanatha M V Chief Commissioner 116 Taxmann.com 894, honourable Andhra Pradesh High Court in case of C nand Kumar 88 taxmann.com 526 as well as circular number 36/2016 dated 25/10/2016 which clarified in paragraph number 3 of the act that compensation received in respect of award agreement which is been exempted from levy of income tax as per provisions of Section 96 of that act shall also not be taxable Under the provisions of the income tax act. Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 10

As the learned CIT – A has carefully considered all the above judgement as well as the provision of new law and the old law of acquisition of land and therefore held that sum received by the assessee is not taxable, cannot be found fault with. Accordingly we confirm the order of the learned CIT – A and dismiss ground number 1 of the appeal of the AO.”

As the facts the case on hand are identical to the facts of the case law discussed above, we thus respectfully following the decision of the Co-ordinate Bench Mumbai in case of M/s. Ganga Developers (supra), and under the given facts and circumstances of the case are inclined to hold that the alleged sum of compensation received by the assessee is exempt from Income tax. Thus, the finding of the ld. CIT(A) is set aside and the effective Ground Nos. 1 to 6 raised by the assessee are allowed.

Ground No. 7 is consequential and Ground No. 8 is general in nature.

In the result appeal of the assessee is allowed. Order pronounced in the Court on 6th July, 2023 at Kolkata. (DR. MANISH BORAD) ACCOUNTANT MEMBER Kolkata, Dated 06/07/2023 *SC SrPs Assessment Year: 2017-18 Parasnath Vinimay Pvt. Ltd. 11

""यथ" / The Respondent 3. संबंिधत आयकर आयु" / Concerned Pr. CIT 4. आयकर आयु" अपील ( ) / The CIT(A)- 5. िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाड" फाईल /Guard file.