Query on income tax for part payment received from govt.

Tax queries 478 views 4 replies

Bhoomkar Madhusudan Manikrao

Deputy Executive Engineer

24 Points Joined December 2015

sir, we got part (50%) compensation amount from state govt. against compulsory accquisition of our agriculture land in response to district court decision in dec.2011. this amount includes basic plus soletium plus interest amount. land was acquired in 1992. Further case is in high court Aurangabad. both parties viz. govt & we have registered appeal in high court. final result is still not given but as a time being relief we got 50% amount through high court ( 25% against bank guarantee & 25% against self under taking). the subject land is 07 kms from municipalty limit. Earlier local C.A. advised there will not be any tax as the case is not finalised & it is compulsory acquisition of agriculture land. Now it is heard that above compensation is taxable. Can you please clarify the matter?

Replies (4)

CA YOGESH HARJAI

Tax Advisor

127 Points Joined June 2008

AS PER THE PROVISIONS OF SECTION 45(5) COMPENSATION SO RECEIVED ON COMPULSORY ACQUISITION OF LAND IS TAXABLE IN THE YEAR IN WHICH SUCH INITIAL COMPENSATION IS RECEIVED.

THEREAFTER IF THERE IS ENHANCEMENT IN COMPESATION AMOUNT BY ANY COURT, IT WILL TAXABLE IN THE YEAR IN WHICH SUCH ENHANCED COMPENSATION IS RECEIVED.

BUT IN A CASE WHERE ANY INTERIM RELIEF IS RECEIVED FROM THE COURT AND A PART COMPENSATION IS RECIVED, SAME WILL TAXABLE IN THE YEAR IN WHICH FINAL ORDER OF THE COURT IS MADE.

IN YOUR CASE AS YOU SAID IT IS JUST AN INTERIM RELIEF FROM THE COURT AND FINAL ORDER IS AWAITED, COMPENSATION SO RECEIVED WILL BE TAXABLE IN THE YEAR IN WHICH FINAL ORDER WILL BE PASSED BY THE COURT.

jaya krishna

Chartered Accountant

262 Points Joined April 2015

Whatever the amount received from sale or compulsory acquisition of agricultural land exception from tax...

kunal

kunal kansal

33 Points Joined March 2012

Agreed with jaya krishna.. if your land in question is agricultural land as per income tax act then there would be no tax on that..

CA YOGESH HARJAI

Tax Advisor

127 Points Joined June 2008

Sir,

There are certain conditions for agriculture land to satisfy for not including same in capital asset in order to avoid capital gain tax.

Agriculture Land is normally excluded from capital asset except in following cases-

(a) If it it is within he jurisdiction of a municipality or cantonment board and has population not less than 10,000

(b) (i) If it is within 2 kilometers of distance from limits of municipality or cantonment board and has population more than 10,000 but not more than 1,00,000

(ii) If it it is within 6 kilometeres from limits of municipality or cantonment board and has population more than 1 lakh but not more than 10 lakhs

(iii) If it is with in 8 kilometers of limits of municipality or contanment board and has population more than 10 lakhs

In above cases agriculture land will be included in definition of capital asset.

In this case as land is 7 kms from municipal limits it will fall under b(iii). Kindly check the population according tolast preceding census and if it is more than 10 lakhs it will be taxable.