Income Tax Officer-6(1), Lucknow V. M/s. V.S. Promoters and Builders Private Limited, Lucknow

ITA 378/LKW/2020

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The case involves V.S. Promoters and Builders Private Limited, which received compensation for land acquired by the Lucknow Development Authority under the RFCTLAAR Act, 2013. The Income Tax Officer disallowed tax exemptions on the compensation and added the amounts to the assessee's income, citing that the exemptions under the RFCTLAAR Act did not apply to companies. The CIT(A) reversed this decision, supported by a CBDT Circular and a Kerala High Court decision, which the Tribunal upheld. The case also addressed disallowances related to unsubstantiated salary and donation expenses, which were also reversed by the CIT(A) and upheld by the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136111 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-11-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 18-11-2020
• Other Referred Cases: Madaparambil Varkey Varghese vs. ACIT
• Laws Referred To: Income-tax Act, 1961, Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital Gains
• Section: 69C; 143(3); 115JB; 80G; 194LA; 20

Judgement Text

। आयकर अपीलीय अिधकरण Ɋायपीठ, लखनऊ । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, LUCKNOW BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT & SHRI GIRISH AGRAWAL, HON’BLE ACCOUNTANT MEMBER ITA No. 378/LKW/2020 Assessment Years: 2016-17 Income Tax Officer – 6(1) Lucknow Vs. V.S. Promoters and Builders Private Limited E-275/75 Subhash Marg Lucknow - 226004 [PAN: BPWPS5961Q] (Appellant) (Respondent) Assessee by : Shri A.P. Sinha, Adv. Revenue by : Shri Amit Nigam, D/R सुनवाई की तारीख/Date of Hearing : 30/11/2022 घोषणा की तारीख/Date of Pronouncement : 20 /02/2023 O R D E R PER BENCH : This appeal by the revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals) - 2, Lucknow, (hereinafter the “ld. CIT(A)”) dated 14/08/2020 for Assessment Year 2016-17 against the assessment order passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by Income-tax Officer, Ward-6(4), dated 04/12/2018. 2. In the present case, revenue has taken five (5) grounds of appeal dealing with two issues raised therein. Ground Nos. 1, 2 & 3 relate to exemption claimed by the assessee in respect of compensation received by it on account of compulsory acquisition of its land. The other issue vide Ground No. 4 relates to disallowance of expenses towards salary and towards donation made by the assessee. ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 2 3. Brief facts of the case are that assessee filed its return of income on 17/10/2016 reporting total income of Rs.4,67,00,600/- with book profit u/s 115JB of the Act at Rs.7,87,92,877/-, which was subsequently revised on 23/02/2017 at an income of Rs. 16,14,780/- and book profit u/s 115JB at Rs.17,93,181/-. Case of the assessee was selected for complete scrutiny through CASS for which statutory notices were issued and served upon assessee. Ld. AO noted that assessee has made part compliance in respect of notices issued to him. Ld. AO, further noted that assessee has claimed exemption of Rs.2,06,25,199/- towards receipt of “compensation on land” and another Rs.3,04,03,804/- as interest on the compensation, both of which are exempt as per Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (‘RFCTLAAR Act’). Ld. AO required assessee to substantiate its claim for which it submitted its reply by referring to CBDT Circular No. 36/2016, dt. 25/10/2016. However, ld. AO noted that provisions of Section 10(37) of the Act provides exemption on the capital gains arising only to an “individual” or “HUF” in respect of compulsory acquisition of an agricultural land situated in specified urban limit. According to him, it is not available to the assessee being a company. He, thus, disregarded claim of exemption made by the assessee and added Rs.5,10,29,003/- to the total income of the assessee. 3.1. Further, in respect of salary expenses of Rs.15,92,200/-, claimed in profit and loss account, ld. AO disallowed the same by observing that assessee has not produced books of accounts, bills, voucher and other documents for verification. On similar observations, ld. AO also added the amount of donation of Rs.1,51,000/- claimed as expenses in profit and loss account by holding it as unexplained expenses u/s 69C of the Act. ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 3 4. Aggrieved, assessee went in appeal to ld. CIT(A). Before ld. CIT(A), assessee reiterated facts and submitted that assessee owned land, located at village Ujariyaon, Pargana, Tehsil and District Lucknow, measuring about 0.228 hectares. The said land was compulsorily acquired by Lucknow Development Authority (LDA) as part of Gomti Nagar Vistaar Yojna, Part-1A, through Gazette Notification. Assessee received an amount of Rs.8,14,32,807/- as compensation through LDA. The said amount received by assessee represented compensation for land of Rs.2,06,25,199/- and interest of Rs.6,08,07,608/-. It was submitted by assessee that a deduction u/s 57(iv) of the Act was claimed for 50% of the interest amount of Rs.3,04,03,804/- in the return of income. For the balance it has been claimed it as exempt from tax in accordance with the provisions of RFCTLAAR Act, 2013. Before ld. CIT(A), it was contended that ld. AO chose to ignore the fact that exemption has not been claimed u/s 10(37) of the Act but under the RFCTLAAR Act, 2013, read with CBDT Circular no. 36/2016, dated 25/10/2016. 4.1. After considering submissions made by the assessee in respect of Section 96 of RFCTLAAR Act, 2013 read with CBDT Circular no. 36/2016 and by placing reliance on decision of the Hon’ble High Court of Kerala in the case of Madaparambil Varkey Varghese vs. ACIT in WP(C). No.1908 of 2019 (Kerala High Court), ld. CIT(A) deleted the addition made by ld. AO. Findings given by ld. CIT(A) in this respect are reproduced as under:- “The only objection of the AO is that the exemption is not available to the appellant as it is a Company which is not covered in the definition as contained in sec. 10(37) and is only available to assessees having status of Individual or HUF. Further according to the AO exemption is also not available to the appellant Company as the Circular has not stated to extend the exemption to all categories of assessees. On perusal of section 96 of the RFCTLARR Act, 2013 it is seen that as per the same it states that 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 ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 4 any fee for a copy of the same. Further the Circular No. 36 of 2016 issued by the CBDT in para 3 states that the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the exemption provided under the existing provisions of the Income Tax Act, 1961. It is seen that the RFCTLARR Act, 2013 is a Special Law and that Special Law should prevail over-the General law. Moreover, it is true that under any statue where there is special as well as general provision special provision always prevails. This aspect has been well recognised by the Hon'ble Supreme Court in several cases  CIT v. Oriental Fire & General Insurance Co. Ltd. [2007] 161 Taxman 181,291 ITR 370 (SC)  Britannia Industries Ltd, v. CIT [2005] 148 Taxman 468, 278 ITR 546 (SC)  UOI v. AzadiBachao Andolan [2003] 132 Taxman 373, 263 ITR 706 (SC)  General Insurance Corpn. of India v. CIT [1999] 106 Taxman 389, 240 ITR139 (SC). The AO's objection regarding section 10(37) does not hold good as exemption has not only been claimed under section 10(37) of the IT Act, 1961 but also under the RFCTLARR Act, 2013. Section 96 of the "RFCTLARR Act, 2013" exempts awards from the levy of Income-tax under the I.T Act, 1961. Section 96 was enacted under the 2013 Act for making tax-free award granted to the land losers but there was no specific provision to treat such award as tax-free under the Income-tax Act, 1961. CBDT vide Circular No: 36 of 2016 Dated 25/10/2016 offers due recognition to the provisions of section 96 enacted under the "RFCTLARR Act, 2013" so as to treat award under the said Act as tax-free under the Income –tax Act, 1961. The operative Para 2 and Para 3 of the Circular No.: 30 of 2016, dated 25/10/2016 reads as under: "Para 2. The RFCTLARR Act which came in to effect from 1st January, 2014, in section 96, inter-alia, provides that income-tax shall not be levied on any award or agreement made (except those made under section 46) under the RFCTARR 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." ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 5 "Para 3. As no distinction has been made between compensation received from compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under section the RFCTLARR Act, the exemption provided under 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 received in respect of award or compensation has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961." CBDT Circular No. 36 of 2016, dated 25/10/2016 clarifies that in absence of specific provision under the Income-tax Act, 1961 award under the "RFCTLARR Act, 2013" in the hands of land losers, both for agricultural and non- agricultural land is tax free. In the case of MadaparambilVarkey Varghese Vs ACIT (Kerala High Court) WP(C).No.1908 of 2019 it was held by the Hon'ble court that "Section 96 mandates that no income-tax shall be levied on any award made under the Act except under Section 46. Section 46 deals with the purchase of land by a person other than a specified person through private negotiations. The benefit of Section 96 is not available when a land is purchased through private negotiations by a person other than a specified person under Section 46(1). Therefore, in cases other than those covered by Section 46 of the 2013 Land Acquisition Act, the levy of income-tax is barred by Section 96 and as a consequence, the deduction or collection under Section 194LA of the Income Tax Act, 1961, is impermissible" It is further seen that according to section 96 of the said Act and also as per the Circular No. 36 of 2016 it is clear that exemption from Income-tax provided under section 96 of the "RFCTLARR Act, 2013", being special Act, prevails over the Income-tax Act, 1961. The RFCTLARR Act, 2013 also applies to all land losers, irrespective of their status. Further any award in any form made under this Act as defined under section 96 (except those covered under section 46) is exempt from income-tax both under normal and MAT provisions under the I.T Act, 1961. Thus the addition so made of Rs.5,10,29,003/- by disallowing the exemption is based on incorrect interpretation of the Act accordingly the same is directed to be deleted.” ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 6 5. In respect of disallowance of salary expense of Rs.15,92,000/-, ld. CIT(A) found favour with the assessee by observing that assessee has made payments through bank transfers for which ledger account was furnished and the same are duly reflected in books of accounts. Also, in respect of addition of Rs.1,51,000/- towards donation expenses, ld. CIT(A) noted that assessee has made a donation to Vipassana Meditation Centre of Rs.1,00,000/- and to Srimad Dayanand Bal Sadan of Rs.51,000/-, both of which are registered u/s 80G(5) of the Act. Ld. CIT(A) observed that the said amounts were duly added back by assessee in its computation of income and, therefore, no addition is called for in this respect which otherwise would lead to taxing the same amount twice. However, before ld. CIT(A), assessee made a fresh claim of deduction u/s 80G(5) towards these donations as it failed to claim the same in its return. Ld. CIT(A) allowed the claim of deduction u/s 80G(5) of the Act by observing that fresh claim regarding deduction can be made for the first time before Appellate Authorities. 6. We have heard the rival contentions and gone through the order of ld. CIT(A) as well as ld. AO. 7. Admittedly, it is undisputed that assesse has received compensation along with interest on compulsory acquisition of its land as stated above. The claim of assessee towards exemption on this is by way of reference to provisions contained in Section 96 of the RFCTLAAR Act, 2013 read with CBDT Circular no. 36/2016, dated 25/10/2016. It is not a case where an exemption has been claimed u/s 10(37) of the Act as observed by ld. AO. The only objection of ld. AO is that exemption is not available to assessee, it being a company not covered under the definition as contained in Section 10(37) of the Act as it is available only to assessees having status of “individual” or “HUF”. We note that Section 96 of the RFCTLAAR Act, 2013, provides that no income-tax or ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 7 stamp duty shall be levied on any award or agreement made under this Act except u/s 46 and no person other than a specified person u/s 46(1) of the RFCTLAAR Act, 2013, shall be liable to pay any fee for copy of the same. Further, CBDT Circular no. 36/2016, dated 25/10/2016 in para 3 states that exemption provided u/s 96 of the RFCTLAAR Act, 2013 is wider in scope than exemption provided under the existing provisions of the Act. The operative para 2 & 3 of the CBDT Circular no. 36/2016, dated 25/10/2016, are reproduced as under:- "Para 2. The RFCTLARR Act which came in to effect from 1st January, 2014, in section 96, inter-alia, provides that income-tax shall not be levied on any award or agreement made (except those made under section 46) under the RFCTARR 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." "Para 3. As no distinction has been made between compensation received from compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under section the RFCTLARR Act, the exemption provided under 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 received in respect of award or compensation has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961." 8. Thus, the above referred CBDT Circular provides that in absence of specific provisions in the Income-tax Act, 1961, award under the RFCTLAAR Act, 2013, in the hands of land losers, both for agricultural and non agricultural land is tax free, both under normal and MAT provisions, under the Act. ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 8 9. Considering the above submissions and provisions of law as well as CBDT Circular, we do not find any reason to interfere with the findings of ld. CIT(A) directing ld. AO to delete the addition made in this respect. Accordingly, grounds taken in this respect are dismissed. 10. Further, in respect of disallowance made by ld. AO towards salary expenses, ld. CIT(A) has meritoriously dealt with the issue after going through the material placed on record for which, we do not find any reason to interfere with the same. Accordingly ground taken in this respect is dismissed. 11. Further, in respect of disallowance of donation expenses claimed in the profit and loss account, it is a fact that assessee had suo moto added it back while computing its income and, therefore, no disallowance is called for in this respect as held by ld. CIT(A). Before ld. CIT(A), assessee has made a fresh claim of deduction u/s 80G of the Act in respect of donation made by it. Ld. CIT(A) after verifying the documents in this respect has held it to be allowable, though claimed for the first time before him. For this, we do not find any reason to interfere in the finding given by the ld. CIT(A). Accordingly, ground taken in this respect is dismissed. 12. In the result, appeal of the revenue is dismissed. Order pronounced under Rule 34(4) of the ITAT Rules, 1963, by placing result on the notice board on 20 .02.2023. Sd/- Sd/- (MAHAVIR SINGH) (GIRISH AGRAWAL) VICE PRESIDENT ACCOUNTANT MEMBER Lucknow, Dated: 20.02.2023 SC. Sr. P.S. ITA No. 378/LKW/2020 Assessment Years: 2016-17 M/s. V.S. Promoters and Builders Private Limited 9 Copy to: 1. The Appellant: 2. Respondent : 3. The CIT(A)- Lucknow 4. The CIT , Lucknow 5. The DR ITAT, Lucknow //True Copy// By Order Assistant Registrar ITAT, Lucknow Benches, Lucknow