TaxTMI 
TaxTMI 
2025 (9) TMI 614
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....A)] erred in passing the impugned order in the name of the deceased assessee and further the impugned order is bad in law in view of various judgements of the court. 2. On the facts and circumstances of case and in law, the Ld. CIT has erred in confirming the Assessment Order passed by the Ld. AO under section 143(3) of Income Tax Act which is passed against the principal of natural justice. 3. On the facts and circumstances of the case and in law the Ld. compensation CIT has erred in confirming the Rs. 75,95,230/- as Income from Other Sources. Of i. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming that the compensation received on surrender of land being treated as Income from other sources. ii. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming that the surrender of land is not an "agricultural income" and hence taxable. 4. On the facts and circumstances of the case and in law the Ld. CIT has erred in confirming the compensation received from surrender of land as taxable under the head "Income from Other Sources" instead of considering it as a Capital Recei....
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....sources." Alternatively, invoking section 50C, he computed long-term capital gains at Rs.3,39,93,600/-, though ultimately the addition rested on taxing the compensation as income from other sources. 6. The AO further disallowed proportionate interest expenditure of Rs.1,63,373/- under section 57(iii) and also disallowed salary expenses of Rs.5,11,000/-, holding them as not relatable to income from other sources. 7. On appeal, the learned CIT(A) affirmed the AO's action. His reasoning, running through a meticulous but adverse analysis, was that the land ceased to be agricultural after Collector permitted plotting for farmhouses and the agreement contemplated amenities such as roads and clubhouses. He further emphasized that the allotment of 14 acres was without consideration and thus no enforceable right accrued to the assessee; consequently, compensation could not be capital in nature but was rightly treated as income from other sources. "5.2.1. I have considered the submissions made by the Appellant. I have also perused the assessment order I find that the AO has treated the compensation received on cancellation of allotment letter as Income from other sources. The ....
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....ltural land? And if so, whether it is covered under clause (a) or (b) of section 2(14)(i) số as to take it out of the definition of capital asset and, thus the compensation as not taxable as capital gains? In my considered opinion the land is not agricultural land. It is undisputed fact in my considered onion that the Collector concerned was approached for giving permission for de-plotting of the said land. This fact is crucial since there was no requirement on part of the original owner of the land (through its partners) to approach the Collector for permission, Inter alia, for de-plotting unless and until it involved change of land use. In my considered opinion, the permission by the Collector for de-plotting of the land for construction of farm houses is change of land use. Thus, with permission of the Collector, the land was no more an agricultural land. This fact coupled with the provisions contained in the relevant agreement allowing construction of internal roads and club house etc. is indicative of the fact that post permission of the Collector, the land did not remain an agricultural land. The claim of the Appellant that he kept growing plants/fruits on such....
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....y in the nature of revenue expenditure and claimed as deduction by the payer. In the case of MMHR, the compensation paid to the Appellant must have been claimed as expenditure, thus, reducing its tax liability. Further, the corresponding receipts in the hands of the Appellant has been claimed as tax exempt. Thus, there is overall reduction in tax liability by undertaking the above transition through self-serving documents. Coupled with the above findings/observation, I observe that the Appellant has not paid any amount against allotment of 14 acres of land vide allotment of letter. Under these facts, can it be said that the said 'allotment letter' has conferred certain rights to the Appellant in the land (14 acres). In my considered opinion and putting thrust on the above arguments (that all these agreements are self-serving documents entered into with related parties to reduce overall tax liability), I hold that no rights in For transfer of any right, some consideration has to be there either in terms payment the 14 acres of land got transferred to the Appellant vide the said letter of allotment of cash or in kind. The said transactions not a gift as well since it....
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....argeability of capital gain tax. It is a fact that in the remand proceedings, the AO has accepted the impugned farm land as agricultural land. However, we find that the Ld. CIT(A) has simply rubbished the remand report without assigning any reason. We also find force in the contention of the assessee that the Ld. CIT(A) has relied upon certain documents which do not pertain to the assessee for example 7/12 extracts. We also find that the report of the Inspector was not provided to the assessee though used against him thereby violating the basic principles of natural justice. The AO has invoked the provisions of Sec. 50C of the Act though the facts on record show that there was no registered Transfer Deed executed for the surrender of said farm plots which means that no Stamp Duty value was assessed The word "assessable" has been brought under the provisions of Sec. 500 from 1.10.2009 therefore not applicable for the year under consideration. We also find that the assessee has substantiated his claim by valuation report which was filed before the AO and if the AO was not satisfied, the matter should have been referred to the DVO. Considering these facts in totality and the facts tha....
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....directions of the Hon'ble ITAT the valuation of the impugned land was referred to the District Valuation Officer, vide letter no. ACIT 12(1)/2014-15/MPK The DVO sent the Valuation report vide letter no VO/THN/CGT/2428/2014-15/145, dated 19.03.2016. As per the report, the column no. 3.3, titled Specifications' states that- "The subject property is agricultural land consisting of 51 Nos. Farm House Plots of land situated on Borgaon Virani Road. There is no compound wall/demarcation of the plots on the subject land defining boundaries, The land is of irregular shape and size. The subject property is very uneven, hilly lands surrounded by hillocks consisting similar plots. Full plot is covered by hedges and small plants. The property is surrounded in East side by llorgaon Virani Road, West side by Dhangarwadi, North side by Khuslanis plot and Sarpanchwadi by South. This property is located at about 8 km away from Pen City." On perusal of the replies by the DVO, to the objections filed by the assessee, in response to the Preliminary Valuation Report of the DVO dated 18.03.2015, it is noticed that the Reply of DVO to Objection-1 of the assessee states that ....
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....its agricultural character. Indeed, once the Assessing Officer himself, in obedience to the Tribunal's directions, has accepted the land as agricultural in earlier years, there remains little scope for disputation. We therefore hold that the compensation of Rs.75,95,230/- received on surrender of the 14 acres, forming part of the same 68 acres, partakes of the same character and must be regarded as arising from agricultural land. Consequently, such receipt lies outside the definition of "capital asset" under section 2(14) of the Act and is not taxable either as capital gains or as "income from other sources." 12. Coming now to the disallowance of salary expenditure of Rs.5,11,000/-, we find that the approach of the Assessing Officer suffers from a fundamental misconception. The impugned salary was not claimed as a deduction against income from other sources but was debited in the regular business accounts of the assessee's proprietorship concern, M/s Vithal Restaurant, and thus pertains squarely to business activity. The Assessing Officer, by mechanically linking this expenditure with the income from other sources, has conflated two distinct streams of income and their correspon....