TaxTMI 
TaxTMI 
2026 (1) TMI 181
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....AO during the assessment proceedings and the same was being raised by the assessee for the first time during the appellate proceedings and therefore, the Id. CIT(A) ought to have given an opportunity to the AO to furnish his comments either under the provisions of Rule 46A of the I.T. Rules or by calling for a remand report under the provisions of Sec. 250(4) of the IT. Act. 2. On the facts and circumstances of the case and in law, the Id. CIT(A) has erred in deleting the addition made by the AO of Rs. 5,30,21,178 by holding that the proceeds received by the assessee against sale of TDRs were exempt under Section 96 of the Right of Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Maharashtra Amendment) Act 2018 (RFCTLRR Act), without verifying whether the lands in lieu of which the TDRs were awarded to the assessee were compulsorily acquired by the competent authority under the said statute and whether the relevant conditions specified in the Act were fulfilled while acquiring the assessee's land. 3. Without prejudice to the above grounds, on the facts and circumstances of the case and in law, the Id. CIT(A) erred in hol....
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....ever, the assessee sought some time to file the explanation but the same were never filed till the conclusion of assessment proceedings. Ld. AO further observed that out of the land which has been surrendered by the assessee only the land costing Rs. 1,53,75,670 is appearing in the balance sheet but for the remaining amount, i.e. Rs. 5,17,89,425 were not found under the heading Fixed Asset in the balance sheet. Ld. AO thus concluded that out of the total sum of sale of TDR of Rs. 6,85,71,501 only the cost of Rs. 1,53,75,670 is appearing in the Fixed Assets and he treated the remaining amount of Rs. 5,31,95,834 as a business receipt liable to tax and made the addition thereof. Income assessed at Rs. 5,30,21,178 in the following manner : S. No. Particulars Amount in Rs. A Income from Salary Rs. 30,00,000 B Income from House Property Rs. 37,800 C Income from business/ profession as per Sch.BP of ITR (-)Rs. 44,70,811 Add : Disallowances/ Additions Income from sale of TDR [Para 5.3] Rs. 5,31,95,834 D Income from other sources Rs. 14,20,893 E Gross Total income Rs. 5,31,83,716 Less :....
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.... compulsorily acquired by the Pimpri Chinchwad Muncipal Corporation (PCMC) under the provisions of the MRTP Act vide agreement dated 04th April, 2016. In consideration of the same, Transferrable Development Rights ('TDR') for 18,393.91 Sq Mtrs were granted to the Respondent through issue of Development Right Certificates (DRC's'). A copy of the DRCs received by the Respondent are attached at Page no. 66 to Page no. 698 of the Paper-Book submitted before Your Honours. 2. On perusal of Para no. 6 of the agreement for surrender of land to PCMC dated 04th April, 2016 attached at Page no. 486 to Page no. 508 of the Paper-Book submitted before Your Honours, it can be seen that the TDR has been granted to the Respondent in accordance with Rule no. 4 of the notification dated 29 January, 2016 issued by the Urban Development Department of the Maharashtra Government. 1.3. In this regard it is respectfully submitted that the Land Acquisition Act, 1894 was replaced vide RFCTLARR Act In 2013 with the primary purpose to regulate land acquisition and provide for compensation, rehabilitation and resettlement of affected persons. Whereas, the MRTP Act, 1966, made p....
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.... not be entitled to claim exemption from income tax, stamp duty, and registration fees as provided under Section 96 of the said Act. 1.7. However, on bare reading of Section 46 of the RFCTLARR Act, it is evident that Section 46 of the RFCTLARR Act, governs the application of rehabilitation and resettlement provisions in cases where land is acquired through private negotiations. The said Section mandates that any person, other than the "specified persons" defined therein, who intends to purchase land through private arrangement exceeding the threshold limits as may be notified by the Appropriate Government, is required to intimate the District Collector of such intention and furnish details regarding the purpose of acquisition and particulars of the land proposed to be purchased 1.8. It would be appreciated that the Respondent's case Involving the grant of TDR in lieu of the land acquired does not fall under the purview of Section 46 of the RFCTLARR Act since the same was acquired on account of reservation arising out of MRTP Act and not through private negotiations. 1.9. Further, CBDT vide Circular No. 36 of 2016 dated 25th October, 2016 offers due re....
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....s of this Act shall be in addition to and not in derogation of, any other law for the time being in force." 1.13. On bare reading of the above, it can be inferred that any rights, benefits, or compensation provided under this Act exist alongside those provided by other existing laws, ensuring that affected individuals receive the most favorable conditions from whichever law provides a better outcome for them. 1.14. The above interplay between MRTP Act and RFCTLARR Act has also been recognised by the State Government of Maharashtra vide notification dated 29th January, 2016 issued by the Urban Development Department of the Maharashtra Government wherein the grant of TDR as fair compensation for the lands reserved for public amenities, social facilities and utilities in the Development Plans prepared under the provisions of MRTP Act have been provided. 1.15. The notification provides as follows: "Whereas, the lands reserved for public amenities, social facilities and utilities in the Development Plans (hereinafter referred to as the said Development Plan) of the Municipal Corporations (hereinafter referred as to as the said Planning Authorities) pr....
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....onal Highways Act, 1956 remains in force for acquisition procedure, the compensation, rehabilitation and resettlement provisions of the RFCTLARR Act, 2013 automatically apply. The relevant portion of the said judgement is reproduced as under: " ... 14. As rightly contended by the learned Additional Solicitor General of India and the learned standing counsel for NHAI, Act, 1894 alone. Section 103 of the Act categorically states that the provisions of Central Act 30 of 2013 shall be in addition to and not in derogation of any other law for the time being in force. In fact, clause 22 of the statement of objects and reasons of Central Act 30 of 2013 reads as follows: "22. Certain Central Acts dealing with the land acquisition have been enlisted in the Bill. The provisions of the Bill are in addition to and not in derogation of these Acts. The provisions of this Act can be applied to these existing enactments by a notification of the Central Government." Central Act 30 of 2013 provides for repeal of the Land Acquisition Central Act 30 of 2013 bears the following bitfe: "THE RIGHT TO FAIR COMPENSATION AND TRANSPARENCY IN LAND ACQUISITION, REHABILITATIO....
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...., as well as rehabilitation and resettlement, shall be governed in accordance with the provisions of the RFCTLARR Act which provides an exemption from the levy of income tax, stamp duty and fees under Section 96. 1.21. Therefore upon a harmonious reading of the above judgement alongwith the notification dated 29th January, 2016 issued by the Urban Development Department of the Maharashtra Government, it can be clearly said that the compensation granted to the Respondent is determined as per the provisions of RFCTLARR. 1.22. In this background, we hereby draw Your Honours' reference to a recent judgement of the Hon'ble Chhattisgarh High Court, in the case of Sanjay Kumar Baid vs. ITO [Tax C No. 176 of 2025] wherein the Hon'ble High Court has held as under: "In view of the above-stated legal position, it is held that once compensation is determined under the provisions of the RFCTLARR Act, as a necessary corollary, the benefits flowing from the provisions of the said Act, including exemptions from income tax, stamp duty and fees contemplated under Section 96 of the RFCTLARR Act, would also have to be made applicable." A copy of the said....
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....ferable Development Rights ("TDR") admeasuring 3,613 sq. mtr. to River Residency dated 24.10.2016 114-120 8 Copy of sale agreement of Transferable Development Rights ("TDR") admeasuring 11,748 sq. mtr. to River Residency dated 24.10.2016 121-133 x ✓ 9 of Translated sale agreement Transferable Development Rights ("TDR") admeasuring 11,748 sq. mtr. to River Residency dated 24.10.2016 134-141 10 Copy of sale agreement of Transferable Development Rights ("TDR") admeasuring 57 sq. mt. to Safewealth Developers dated 26.12.2016 142-154 x ✓ 11 Translated sale agreement of Transferable Development Rights ("TDR") admeasuring 57 sq. mt. to Safewealth Developers dated 26.12.2016 155-162 x ✓ 12 Copy of sale agreement of Transferable Development Rights ("TDR") admeasuring 88 sq. mt. to More Shinde Associates dated 06.01.2017 163-173 x ✓ 13 Translated sale agreement of Transferable Development Rights ("TDR") admeasuring 88 sq. mt. to More Shinde Associates dated 06.01.2017 174-179 14 Copy of purchase deed dated 07.02.2009, p....
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.... 27 Copy of relevant extract of Balance sheet for F.Y. 2012-13 601-602 x ✓ This is to certify that all the papers enclosed in this paper book are on record before the income-tax authorities as indicated in column 4 & 5 above. It may be noted that documents at sr. no. 5, 7, 9, 11, 13, 15, 17, 19, 21 and 23 are the English translations of documents in vernacular language. These are not in the form of additional evidences. sd/- CA Neelesh Khandelwal Authorized Representative 10. On the other hand, ld. DR contended referring to the following written submissions and relied on the decisions referred therein : "This is an appeal filed by the Department against the order of the Id. CIT(A) in allowing the capital gain from sale of TDR as exempt from tax u/s. 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act). 2. The brief facts of the case is that during the course of assessment proceedings, the Assessing Officer observed that the Respondent's capital account had increased by Rs. 6,73,53,668. The Respondent during the cou....
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....t is seen from the record that the respondent assessee had purchased certain immovable property situated at Village Chikhali, within the territorial jurisdiction of the Pimpri-Chinchwad Municipal Corporation ("PCMC") from various transferors in the Financial Year 2008-09. A perusal of the registered conveyance instruments clearly evidences that, as on the date of purchase, the said parcel of land stood earmarked/reserved for public purposes under the Development Plan of the PCMC. The reservation existed pursuant to a Notification dated 30.05.2008 issued by the Town Development Division of the PCMC. 6. Subsequently, during Financial Year 2016-17, the respondent assessee surrendered the said reserved land to the Municipal Corporation. In consideration of such surrender/relinquishment, the respondent assessee has not accepted monetary compensation but agreed to receive and was allotted Transferable Development Rights ("TDR"). The respondent assessee, thereafter alienated the said TDRs for an aggregate consideration of Rs. 6,85,71,504 and has claimed that the said sum is exempt under Section 96 RFCTLARR Act". 7. This claim is not tenable on the facts and in law, since....
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.... apply to compensation (in the form of TDR) received under the local planning laws. 11. On perusal of the copy of the legal opinion furnished by the respondent assessee, which forms part of the Paper Book, it is observed that the Advocate, in his opinion, has stated that the Pimpri Chinchwad Municipal Corporation (PCMC) is the "Appropriate Authority" for acquisition of the land under reservation. However, such an opinion is not in consonance with the provisions of the RFCTLARR Act. Under the RFCTLARR Act, the term "appropriate government has been specifically defined to mean the Central Government or the State Government, depending upon the nature and purpose of the acquisition. The role of a Municipal Corporation or local body is generally limited to recommending or facilitating the acquisition of land required for public purposes, such as roads, parks, or public utilities. The power to initiate, approve, and notify the acquisition, determine compensation, and undertake rehabilitation and resettlement vests solely with the appropriate government as per the statutory framework of the RFCTLARR Act. Therefore, the acquisition of land directly by the Municipal Authorities, su....
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....nder the Act. The provisions of the RFCTLARR Act apply to any land acquisition, compensation, rehabilitation and resettlement undertaken by the appropriate authority, as defined under Section 3 of the Act, namely, the State Government, Central Government or the District Collector, when such land is acquired for its own use, hold and control, including for Public Sector Undertakings and other public purposes. Section 46 of the Act specifies a set of "specified persons" who are excluded from the purview of certain provisions of the Act. In the State of Maharashtra, the specified persons are those other than an Association of Persons, society or trust aided or controlled by the appropriate Government. Consequently, the specified persons exclude the appropriate Government and Government companies, and therefore, the exemption under Section 96 is available only in respect of acquisitions made by them. 14. Further, Section 105A, which was inserted with effect from 2018 and is applicable only to the State of Maharashtra, provides that the provisions of the RFCTLARR Act shall not apply to certain State enactments mentioned in Schedule V of the Act. Schedule V enumerates the State ....
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....n." 11. We have heard the rival submissions and perused the record placed before us. So far as the Revenue's appeal is concerned, the issue under consideration is regarding the addition made by the Assessing Officer for income from sale of TDR mainly on account of the reason that assessee has not provided the details of cost of land appearing in the books of accounts, which have been acquired by Pimpri Chinchwad Municipal Corporation. Before proceeding ahead, we would like to take note of the finding of ld. AO making the impugned additions : "5] During the financial year 2016-17 there was a substantial increase in the proprietor's capital. As compared to the balance in capital account of Rs. 7,08,85,113/- as of 31.03.2016 the balance in capital account was increased to Rs. 13,82,38,781/- as of 31.03.2017. The increase of Rs. 6,73,53,668/- was mainly on account of issuance of Transferrable Development Rights (TDRs) in the form of DRC (Development Right Certificates) amounting to Rs. 7,41,37,000/- in favour of the assessee by the Pimpri Chinchwad Municipal Corporation. After deducting the Corporation TDR Charges of Rs. 50,55,296/- and Rs. 5,10,200/- towards commis....
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....t as an investment. In view of this, on verification of the balance sheet of the assessee as at 31.03.2016, it was noticed that out of the four lands in the aforementioned table, only the land amounting to Rs. 76,87,835/- purchased from Mr. Subhash More and another land of Rs. 76,87,835/- purchased from Mr. Kantilal Sane, totalling to Rs. 1,53,75,670/- appearing at Serial No. 2 and 3 in the above details provided by the assessee is appearing as investment in the balance sheet of the assessee as at 31.03.2016. The other two lands ie, the lands at Serial No. 1 above amounting to Rs. 1,56,90,500/- and the land at Serial No. 4 above amounting to Rs. 3,60,98,925/- totalling to Rs. 5,17,89,425/- were nowhere disclosed in the audited balance sheet of the assessee as at 31.03.2016. Therefore, going by the assessee's own contention the sum of Rs. 5,31,95,834/- le. (Rs. 6.85,71,504/- (-) Rs. 1,53,75.670/-) comes under the purview of business income. Further, the assessee has never furnished the details narrating (i) the year in which land was purchased, (ii) amount invested, (iii) total land purchased, (iv) cost of land per square feet, (vi) total area of land sale, (vii) year of sale, (....
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....herefore did not offer the income earned from allotment of TDR to tax while filing his return of income. Further, the contention of the appellant is supported by circular No. 36/2016 dated 25.10.2016 issued by CBDT which states that compensation received in respect of award or settlement is exempted from the recovery of income tax under section 96 of RFCTLARR Act and is not taxable under the provisions of the Income Tax Act 1961 even if there are no exact provisions of exemption for such compensation in the I.Tax Act. In view of this, the addition of Rs. 5,31,95,834/- is hereby deleted." 3. The decision of the Id. CIT(A) is not found to be acceptable since no details have been brought out during the assessment proceedings or during the appellate proceedings as to whether the land held by the assessee were compulsorily acquired by the appropriate authorities as per the procedure laid down under the RFCTLARR Act, or the same were surrendered by the assessee in exchange of TDRs. The Id. CIT(A) has held that the TDRs received by the assessee is covered by the RFCTLARR Act and has given relief to the assessee without discussing the below mentioned specific facts. i. Th....
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....and hence all capital gains shall be taxable. Section 96 of the RFCTLARR Act, 2013 provides exemption from income tax and stamp duty levied on any acquisition covered under the Act, except for persons referred to in section 46 of the RFCTLARR Act, 2013. However, for being covered under the said provisions, it has to be proved that the land was compulsorily acquired under the above provisions other than by the Specified persons for the purposes defined under the Act. Therefore, the decision of the Id. CIT(A) is not found to be acceptable and the same may be challenged further. 4. The decision of the Ld. CIT(A) is not acceptable on the basis of Grounds of appeal enclosed. Therefore second appeal is filed on the grounds enclosed as Grounds of appeal." 13. During the course of hearing, ld. Counsel for the assessee made two fold submissions. He firstly stated that the land owned by the assessee has been acquired by PCMC and Transferable Development Rights (TDRs) have been issued in lieu thereof. He submitted that the TDRs valuing Rs. 7,41,37,000 were issued by PCMC and the income arising from the acquisition of the land (after reducing the costs incurred by....