Sir my grand father agricultural land was acquired by Haryana Govt and we received compensation on that but the amount was very less then the market price. In this regard, case was filed in High Court. High court decision came in my favour and enhance compensation was given by the land acquisition department but TDS was dedcuted on the amount recevied. My grand father died and the return was filed by legal heir to take the refund. The return was filed on the basis that the ehnace income and interest received is tax free. Now the AO sent notice u/s 148. I want to know that whether enhance amount received is taxable or not. If not give me decision or section under which it is not taxable
Dear Sir,
Compensation enhanced by the Court, Tribunal or other authority is to be deemed to be the income chargeable under the head 'Capital Gains' of the previous year in which such amount is received by the assessee. For this purpose, the cost of acquisition and the cost of improvement shall be taken to be "Nil".
Further, interest on enhanced compensation Is also taxable under other sources.
Please feel free to revert/call back in case of any doubts.
Thanks and Regards,
CA Abhishek Dugar
If only your grand father is having agricultural income then it will be treated as agricultural income.
As per my knowledge, Capital Gain on Compulsory Acquisition of Agricultural land is exempt u/s 10(37) of the Income Tax Act, 1961. But the Agricultural land must have been used for Agriculture purpose for the preceding to previous years from the year of compulsory acquisition by the Assessee or hi parents.
If The Compensation Or Consideration For Such Transfer Or Acquisation Is Enhanced Or Further Enhanced By The Court,Tribunal Or Any Other Authority Then The Capital Gain Arises. Suppose The Central Government Fixed The Price As Rs1000/Sqr Mtr But The Court Or Tribunal Or Any Other Authority Increased It To Rs 2000/Sqr Mtr. Then The Assessee Is Liable To Pay Capital Gains On The Amount Increased. 2.If While Getting Compensation You Received Any Interest On That Amount By The Govt Then You Have To Pay The Tax For That Interest Also. Suppose Your Compensation Was 200000 And You Received 230000 Then 30000 Will Be Treated As Tax And You Will Have To Add This Interest In Your Income While Filing The Return.
Dear Sir,
If the land sold was an agricultural land and used for agricultural purposes then it will be exempt under the Income Tax Act.
But if the land is not covered under the definition of Agricultural Land, then the whole of the enhanced compensation shall be chargeable to tax.
Trust this clarifies your query.
Feel free to call back/ get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
