This article provides an in-depth analysis of ITA No. 1429/DEL/2020, involving Sardar Sant Singh Makkar of Hisar and the Income Tax Officer (ITO) Ward – 4, Hisar. The case pertains to the assessment year 2013-14 and was filed on July 22, 2020. The final tribunal order was pronounced on November 23, 2022.
Sardar Sant Singh Makkar, a resident of Hisar, Haryana, filed an appeal against the assessment order dated March 28, 2016, passed under section 143(3) of the Income Tax Act, 1961. The appeal was heard by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘G’, New Delhi, through video conferencing. The bench comprised Shri Anil Chaturvedi, Accountant Member, and Shri Anubhav Sharma, Judicial Member. The appeal was related to the taxation of annuity compensation received by the appellant for land acquired by the Haryana government.
The appellant declared an income of Rs. 5,61,770 along with agricultural income of Rs. 5,50,000 for the year under assessment. The income sources included house property income of Rs. 1,51,200, income from other sources amounting to Rs. 3,72,371, and income under section 44AE amounting to Rs. 60,000. The appellant sold agricultural land in various villages and received land compensation and interest on compulsory acquisition from the Land Acquisition Officer, HUDA.
The primary issue in this case was the addition made by the Assessing Officer (AO) on account of royalty received by the appellant from the Haryana government, which was not offered for taxation. The appellant argued that the compensation and annuity received were part of the overall compensation for land acquisition and should be exempt under section 10(37) of the Income Tax Act.
The appellant contended that the annuity scheme under which the compensation was received was part of the land acquisition compensation package and should be exempt from taxation. The appellant relied on the notification dated November 9, 2010, issued by the Revenue & Disaster Management Department, Haryana, which stated that annuity payments were part of the social security benefits provided to landowners whose land was acquired.
The Revenue Department, represented by Shri Abhishek Kumar, Senior Departmental Representative (DR), argued that the annuity was not part of the award and could not be equated with compensation or interest upon compensation. The DR maintained that there was no provision under the Income Tax Act that exempted such payments from taxation.
The ITAT bench, after considering the arguments and examining the relevant provisions of the Land Acquisition Act and the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (R&R Act), concluded that the annuity payments were indeed part of the compensation package. The tribunal referred to the Supreme Court’s interpretation of the R&R Act, which highlighted the comprehensive nature of compensation, including annuity and other benefits provided under the Rehabilitation and Resettlement policy.
The tribunal analyzed several sections of the R&R Act, including Sections 16, 17, 18, 19, 23, 28, 31, and 69, which collectively established that rehabilitation and resettlement awards, including annuity payments, were part of the land acquisition award. Section 96 of the R&R Act explicitly exempted such payments from income tax. The CBDT Circular No. 36 of 2016 further clarified that compensation exempt under the R&R Act would also be exempt under the Income Tax Act, 1961.
The ITAT concluded that the tax authorities had erred in taxing the annuity payments received by Sardar Sant Singh Makkar. The tribunal allowed the appeal, ruling in favor of the appellant and holding that the annuity payments were exempt from taxation under the provisions of the R&R Act and the Income Tax Act.
This case sets a significant precedent for landowners receiving annuity payments as part of land acquisition compensation. It underscores the importance of understanding the comprehensive nature of compensation packages under the R&R Act and reinforces the tax exemption provisions for such payments.
For taxpayers, this case highlights the potential benefits of appealing against tax assessments that do not fully consider the provisions of related acts like the R&R Act. It also emphasizes the importance of being aware of government notifications and Supreme Court rulings that could impact tax liability.
In conclusion, the decision in ITA No. 1429/DEL/2020 reaffirms the need for a thorough understanding of the legislative framework governing land acquisition and compensation, ensuring that taxpayers receive the full benefits of exemptions provided under the law.
Sardar Sant Singh Makkar, Hisar Appeal for AY 2013-14: Annuity Compensation Case – ITA 1429/DEL/2020
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