TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 614
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....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 Receipt u/s and making it taxable under the head "Capital Gain". 5. On the facts and circu....
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.... 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 AO has held: Income earned from the said lang agriculture income is satisfy the definition of agriculture income as since it does ....
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....al 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 land, does not make the land agricultural land. Further, the Appellant has not furnished any evidences to establish this fact. This argument gets strengthened by the fact that during the relevant year, the Ap....
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.... 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 is allotment by Firm transferred to the Appellant vide letter of allotment, there is no question of to the Appellant. In view of these facts. I hold that in absence of any rights being in absence of surrender of any rights, the compensation am....
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....d 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 that there was a denial of natural justice, we restore this issue back to the files of the AO. The AO is from the Thehsil records relating to the nature of the farm plots. The AO is also directed to refer the matter relating to the valuation to the District Valua....
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....ns' 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 "While determining FMV of the subject property it has been already considered as Agricultural land and accordingly FMV has been estimated. However, now it is added in specification that subject property is an Agricultural land." 10. We have carefully considered the rival submissions and traversed the factual matrix in depth. ....
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.... 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 corresponding heads. The Income-tax Act is structured around the principle of compartmentalization of heads of income, and deductions permissible under one head cannot be disallowed by erroneously attributing them to another. Once it is accepted that the assessee carried on a business and salary expenditure was incurred wholly and exclusively fo....