Sum of rs. 1 crore recieved as a settlement of court case

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shailesh (Querist)
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12 July 2017 hello sir,

we had recived sum of rs. 1 crore in agaist the settelment of court matter. the settelment is not taken place in court .
we recived the 1 crore rupees for withdrawal of case and all right agaist the agriculture land which we already sold in 2007.

now we recived rs.1 crore in equal portion to 10 family member.

so how this 1 crore is taxabel or not to us.
kindley explain following..
1) is it long term capital gain for agriculture land?? as the amt recieved is due to agriculture land?
2) what to do to save tax liability?

kindley help us.

Anand

Anand (Expert)
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12 July 2017 distribute to all cci members..😂😂😂

Anand

Anand (Expert)
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12 July 2017 yes its enhanced compensation.. and taxable in the year of receipt..

Anand

Anand (Expert)
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12 July 2017 for tax saving refer exemptions under section 54..

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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26 July 2025 Hey! About the Rs. 1 crore you received as settlement for withdrawing a court case related to agricultural land sold in 2007, here’s the breakdown on taxability and planning:

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### 1) Is this amount taxable as Long Term Capital Gain (LTCG)?

* **Agricultural land in rural areas** is **exempt from capital gains tax** under the Income Tax Act, if it qualifies as agricultural land as per the act (generally land situated outside urban limits).
* But here, the amount received is **not directly from sale** but from **settlement related to the land sale**.
* Since the land was sold in 2007 (long back), the original capital gain would have been dealt with then.
* The current Rs.1 crore is a **compensation/settlement amount** received now for **withdrawing rights** and settling the dispute.

**Tax treatment:**

* The amount may be considered as **‘capital receipt’** or **‘compensation’**.

* If the settlement amount relates to **rights over capital asset**, it may be treated as **capital gains**.

* But since the land was sold in 2007, and you are receiving this after 10 years, it could be argued as **capital receipt** or **compensation for withdrawal** of rights.

* You should check if the settlement amount is linked to **transfer of rights** over the property or **compensation for damage/withdrawal of suit**.

* Usually, if it’s compensation for **withdrawal of suit** without transfer of rights, it might be treated as **other income** or **capital receipt** (non-taxable if capital in nature).

* Since this is a complex matter, legal and tax advice with all documents is recommended.

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### 2) What to do to save tax liability?

* **Segregate nature of receipt:** Determine if it is capital receipt or income.
* If it’s capital receipt, **it may not be taxable immediately**.
* If any tax liability arises, consider investing in **capital gains exemption instruments** (like specified bonds under Section 54EC, or reinvestment in residential property under Section 54).
* Since the amount is divided between 10 family members, ensure proper documentation to show share of each.
* Consult a tax expert for structuring the receipt and filing returns accordingly.

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### Summary:

| Question | Likely Tax Treatment |
| --------------------------------------- | ------------------------------------------------------------ |
| Settlement amount related to land sale? | Could be capital receipt or capital gain |
| Taxability | Depends on nature of receipt (capital or income) |
| Exemption | Possible if treated as capital gain and invested accordingly |

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If you want, I can help draft a detailed explanation or suggest documents to support tax treatment. Would you like that?

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