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Jagan Nath Prasad and Sons Versus Income Tax Officer, Ward-1 (3) , CGO Complex, Ghaziabad

2015 (10) TMI 240 - ITAT DELHI

Taxing the compensation received - whether be taxed as Capital Receipt? - it is an admitted fact that the assessee received a sum towards the damages to the land belonging to it and the AO taxed it considering the same as revenue receipt, the ld. CIT(A) upheld the view taken by the AO.

Held that:- On a similar issue their lordships of the Hon’ble Bombay High Court in the Case of Dr. (Ms) Avimay S. Hakim Vs ITO (2011 (8) TMI 147 - Bombay High Court) held that the fact that the land has .....

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. - Decided in favour of assessee. - ITA No. 676/Del/2015 - Dated:- 5-8-2015 - Sh. N. K. Saini, J. For The Assessee : Sh. Ashish Singhal & Smt. Ekita Gupta, CAs For The Revenue : Sh. J. P. Citandraker, Sr. DR ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 27.11.2014 of ld. CIT(A), Ghaziabad. 2. The only effective ground raised in this appeal reads as under: That the learned Assessing Authority was not justified in taxing the compensation received amounti .....

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Indian Oil Corporation Ltd. The AO asked the assessee to explain the nature of receipts, documentary evidence and as to why the said amount may not be added to its income. The assessee submitted that M/s Indian Oil Corporation laid down underground pipeline and paid the impugned amount for the damages done to the land, therefore, it was capital in nature. The AO did not find merit in the submissions of the assessee and made the addition of ₹ 4,75,041/- treating the said amount as revenue .....

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e-line. The land of assessee was in the way of pipe-line path to be laid down. For digging of land and laying the pipe-line, the Indian Oil Corporation Ltd. had paid ₹ 4,75,980/- to the assessee. This amount is received for granting the right to use the land for laying the pipeline and damages done to the land. The land is still owned by the assessee and there is no transfer of any asset. Therefore, compensation received by the assessee is not eligible for capital gain tax. As per the Asse .....

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on before me is whether the capital receipt is chargeable to capital gain tax or not. As per section 45 any profit or gains arising from the transfer of capital asset is chargeable to tax. Thus, transfer of capital assets is a necessary condition for chargeability of capital gain tax. In the case before me, the assessee continued to be the owner of the agricultural land. There is no transfer of agricultural land, or any right in agricultural land by the assessee to GGCL. When there is no transfe .....

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treated as capital receipt not chargeable to tax. Also, a letter received from M/s Indian Oil Corporation Ltd. is enclosed herewith, which shows that the amount of ₹ 4,70,800/- had been paid as compensation for the land. The amount received as the compensation received for damages done to the land and granting the right to use the land for laying the pipeline below the land of the assessee. Therefore, it is a capital receipt in nature and not taxable. It is submitted that appeal may pleas .....

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State Government or the Corporation, as the case may be shall be liable to pay compensation to such person for such damage, loss or injury, the amount of which shall be determined by the competent authority in the first instance. It means that compensation is paid only when there is any damage done to the person interested in the land under which the pipeline has been laid. The amount paid is in the form of compensation for damages. In our case, M/s Indian Oil Corporation ltd. had paid ₹ .....

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facts of the present case are different. In these cases the assessing officer had assessed the said receipts under the head other sources and the CIT(A) had held them to be capital receipts. No appeal was filed before the ITAT by the department against order of the CIT(A). Therefore, the issue before ITAT was not whether these receipts were of capital nature or revenue nature. The department having accepted the receipt to be of capital nature (by not filing appeal against the CIT(A) s order), th .....

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ore the authorities below and further submitted that this issue is squarely covered by the decision of the Hon ble Bombay High Court in Income Tax Appeal No. 2923/2010 in the case of Dr. (Ms) Avimay S. Hakim Vs ITO, 12(3)(2) order dated 10.08.2010. Reliance was also placed on the following decisions of the ITAT Ahmadabad Bench: Shri Thakorbhai V. Naik Vs ITO in ITA No. 781/Ahd/2010, order dated 30.07.2010 Vijay Ishwarbhai Desai Vs ITO in ITA No. 544/Ahd/2010, order dated 16.12.2010 7. In his riv .....

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