Exemption under Section 96 of the RFCTLARR Act applies to compensation received for land acquired under the National Highways Act, 1956, establishing equitable treatment under tax laws.

Judgment :

Sanjay K. Agrawal, J.

1. Invoking the appellate jurisdiction of this Court under Section 260A of the Income Tax Act, 1961 (for short, ‘the IT Act’), the assessee/appellant herein has preferred this appeal calling in question legality, validity and correctness of the impugned order dated 18-6-2025 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur (for short, ‘the ITAT’) in ITA No.57/RPR/ 2025, by which his appeal has been dismissed by the ITAT affirming the order of the Commissioner of Income Tax (Appeals) {for short, ‘the CIT(A)’} finding no merit.

2. This appeal so preferred was admitted for hearing on 6-8-2025 by formulating the following substantial question of law: -

“Whether, on the facts and circumstances of the case and in law, the learned Income Tax Appellate Tribunal (ITAT) was justified in dismissing the appeal of the appellant by upholding an addition of Rs. 73,58,113/- received as compensation against the acquisition of land by National Highway Authority of India under the National Highways Act, 1956 as exigible to tax which is contrary to Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013?”

3. The aforesaid question of law arises in following factual backdrop: -

4. The assessee/appellant herein had received compensation of Rs. 73,58,113/- on account of compulsory acquisition of his land from National Highways Authority of India (NHAI) under the National Highways Act, 1956 (for short, ‘the Act of 1956’). Thereafter, the assessee has filed his return of income for the assessment year 2017-18 on 7-11-2017 declaring his income as Rs. 87,94,860/- and shown the income of Rs. 73,58,113/- to be taxable income under the head of Short Term Capital Gains of Rs. 53,08,113/- pertaining to compensation received towards compulsory acquisition of his agricultural land under the Act of 1956 and paid tax to the tune of Rs. 24,30,521/- which was processed by the Central Processing Centre, Bengaluru and intimation order was issued exercising powers under Section 143(1)(a) of the IT Act wherein total income was assessed at Rs. 87,94,860/- determining the aggregate tax liability at Rs. 23,93,421/- and consequentially granted a refund of Rs. 37,100/-. It is the further case of the appellant that realising that the agricultural land having been acquired under the Act of 1956, the compensation so paid was liable to be exempted from payment of income tax in light of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (for short, ‘the RFCTLARR Act’), the appellant moved a rectification application before the Income Tax Officer on 12-10-2021 and sought refund of Rs. 17,07,340/-. The said request was reiterated on 4-9-2023. The rectification application was rejected by the Assessing Officer on 24-1-2024 holding that (i) the issue relating to taxability of compensation cannot be rectified as the same does not constitute mistake apparent on the face of record; and (ii) the land has been acquired by the NHAI under the Act of 1956 and the Act of 1956 being falling under the list of enactments specified in the Fourth Schedule, the same would be precluded from the RFCTLARR Act as per the provisions of Section 105(1) of the RFCTLARR Act and therefore the compensation received by the assessee from the NHAI would not be exempted from taxation under the provisions of Section 96 of the RFCTLARR Act.

5. Feeling aggrieved against the order dated 24