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direct tax

04 September 2019

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.

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2 Replies

CA Sam (CA) (64 Points)
Replied 04 September 2019

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"