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direct tax

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A company PQR Ltd. possessed a land which was compulsorily acquired by NHAI. On account of the said compulsory acquisition, compensation of Rs.50,00,000 was received by it during FY 2017-18. Further, on account of an interim order passed by the High Court, enhanced compensation of Rs.30,00,000 was also received by PQR Ltd. during FY 2018-19. Discuss the tax implications in the hands of PQR Ltd. on account of receipt of the said compensation amounts.
Replies (2)

1) Compensation is taxable in the ACTUAL year of receipt

2) So, 50 L will be taxable in AY 2018-19, Indexation will be available only til the year in which such land is acquired by NHAI

3) Enhanced compensation will also be taxable on actual receipt so 30 L in AY 2019-20 note that no deduction/indexed deduction will be available because such deduction would already have been claimed in AY 2018-19 for 50 L.

4) Also consider whether the provisions of "Right to fair compensation..... (RFCTLARR Act) are applicable if yes, then capital gains is exempted completely - applicable only for agri land held by individual/huf

Exam Tip: State your assumption about "RFCTLARR Act" and write your answer accordingly

to be on a safer side in exam answer the question without claiming exemption and at the end state a note that " if provisions of RFCTLARR Act are attracted then capital gain will be exempted"

ok thanks for this.


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