Tribunal Upholds Decision on Agricultural Land Sale & Capital Receipt Tax Treatment

Assistant Commisioner of Income Tax, Circle 45(1), New Delhi. Versus Veena Anand,

Assistant Commisioner of Income Tax, Circle 45(1), New Delhi. Versus Veena Anand, - TMI Issues Involved:
1. Deletion of addition on account of profit and gains of business or profession.
2. Admission of additional evidence in contravention of Rule 46A.
3. Treatment of compensation received for delay in property possession as capital receipt or income from other sources.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Profit and Gains of Business or Profession:
The assessee filed a return declaring total income, including salary, property income, short-term capital gain, and other sources. The Assessing Officer (AO) scrutinized the case and found that the assessee sold lands in Gurgaon, forming an opinion that the land ceased to be agricultural and should be taxed as capital gains. The AO also treated the income from the sale of land as business income, considering it an adventure in trade. The CIT(A) deleted the addition, holding that the land was agricultural, situated 12-15 KMs outside the municipal limits of Gurgaon, and thus not a capital asset under sec. 2(14) of the Income-tax Act, 1961. The Tribunal upheld the CIT(A)'s decision, noting that the revenue did not challenge the agricultural nature of the land and that the assessee's transactions did not constitute a business activity.

2. Admission of Additional Evidence in Contravention of Rule 46A:
The revenue contended that the CIT(A) erred by admitting additional evidence in contravention of Rule 46A. However, the Tribunal found no merit in this ground as the assessee did not file any application under Rule 46A, and the documents considered by the CIT(A) were already produced before the AO.

3. Treatment of Compensation Received for Delay in Property Possession:
The assessee received compensation from DLF Commercial Enterprises Ltd. for delay in handing over the possession of a property. The AO treated this compensation as income from other sources, but the assessee argued it was a capital receipt, reducing the cost of acquisition of the asset. The CIT(A) confirmed the AO's addition. The Tribunal, however, allowed the assessee's appeal, treating the compensation as a capital receipt, citing that the compensation was for delay in construction and not rental income. The Tribunal relied on precedents, including DDA vs. ITO, where similar compensation was treated as a capital receipt.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, holding that the land sold was agricultural and not liable for capital gains tax, and the compensation received for delay in property possession was a capital receipt.