Tax on compensation received

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CA Bikram Singh (Querist)
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07 February 2013 I have a piece of land that belongs to MIDC which i have taken on lease for 90 years. I wanted to construct a petrol pump on the said land for which NOC is aleady given by MIDC.

Now a power plant wishes to drag a high tension transmission line right over the land. As a result, i cannot construct Petrol Pump on the said land.

However the Power Generating co. has offered me a compensation. I wish to know the Tax implication for the receipt of compensation with refence to the following points..

1. The land is a Lease hold Land and not owned by me.

2. I have not yet started the Petrol Pump, so no business Income from the Land.

Kindly suggest under what Head the the compensation will be taxable and the rate of the tax for the same. Also let me know the section.

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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07 February 2013 The income Tax Act contains certain wonderful provisions.
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Without starting any business - how the income- can be defined to be a business income, and charged to tax ?
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But Section 28(va) (a) speaks as under-
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not carrying out any activity in relation to any business.
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Since you have obtained NOC from the MIDC to start the business of petrol pump by constructing it, it can be argued by the AO that -the amount has been received by you for not carrying out Petrol Pump Business Activity.
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Sir, the amount is Business Income Without Carrying on any business.
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