ITAT Deletes Rs 53.76 Lakh Addition, Holds Additional Compensation for Compulsory Acquisition of Agricultural Land Tax-Exempt:

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has deleted an income tax addition of Rs 53.76 lakh made on additional compensation received by Narsi Resorts Pvt. Ltd. for compulsory acquisition of its agricultural land by the Haryana Government. The Tribunal held that the compensation was exempt from income tax.

The assessee had filed its income tax return for Assessment Year 2016-17 on October 7, 2016, declaring nil income. During scrutiny, the Assessing Officer (AO) noticed that the company had claimed exempt income of Rs 53.76 lakh received as additional compensation for land acquisition. However, the AO disallowed the exemption, citing the absence of supporting documents. The AO also disallowed expenses amounting to Rs 4.77 lakh.

Before the ITAT, the assessee submitted that it had received compensation for the acquisition of its land in an earlier year, Assessment Year 2010-11, which had also been treated as exempt by the Income Tax Department. It relied on CBDT Circular No. 36 of 2016 and submitted an order dated July 29, 2015, issued by the District Revenue Officer, Sonepat. The order clearly described the disputed amount as additional market value of the land compulsorily acquired by the government.

After examining the records, the Tribunal noted by the Tribunal that "the ld CIT(A) has merely directed the ld Assessing Officer to reverify this position and take a decision consequently we are of the considered view that no prejudice is caused to the appellant. The ld Assessing Officer is directed to comply with the directions of ld CIT(A) expeditiously."

It was further observed that the original compensation had been treated as exempt by the Revenue authorities and that the disputed amount represented additional market value for compulsory acquisition of agricultural land. Accordingly, it directed the deletion of the addition of Rs 53.76 lakh.

Regarding the disallowance of Rs 4.77 lakh, the Tribunal upheld the CIT(A)'s direction to the AO to verify whether the amount had already been added back in the computation of income. It directed the AO to complete the verification expeditiously. Accordingly, the assessee's appeal was partly allowed.