Compensation received for land acquired under the National Highway Act is exempt from income tax under section 96 of the RFCTLAAR Act and clarified by CBDT Circular No. 36/2016.

ORDER

Per Dr. M. L. Meena, AM:

This bunch of appeal has been filed by the assessee against the separate order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 17.05.2022 & 18.05.2022 in respect of Assessment Year: 2016-17.

2. Since, there are similar issues in ITA Nos. 517, 518 & 519/Chandi/2022 on identical facts and therefore these appeals were heard together and adjudicated by the consolidated order for the sake of brevity. The grounds of appeal are reproduced from ITA No. 519/Chandi/2022 for the purpose of discussion and adjudication as follows:

“1.(a) That the Worthy CIT(A)-5, Ludhiana has erred in upholding the addition of Rs. 1,06,46,192 on account of compensation received on account of compulsory acquisition of agricultural land.

(b) That the Worthy CIT(A)-5, Ludhiana has failed to appreciate that the amount of compensation received as per the First, Second and Third Schedule of the RFCTLAAR Act, 2013 is exempt from tax.

(c) That the Worthy CIT(A)-5, Ludhiana has erred in not following the circular No. 36 of 2016 dated 25.10.2016 issued by the Central Board of Direct Taxes which is binding upon him.

2.(a) That the Worthy CIT(A)-5, Ludhiana has erred in upholding the addition of Rs.6,97,372 on account of award received by the assessee @12% over and above the amount of compulsory acquisition.

(b) That the Worthy CIT(A)-5, Ludhiana has failed to consider that the above amount of Rs.6,97,372 was part and parcel of award and not in the nature of interest.

3. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

3. At the outset, the ld. counsel for the assessee has submitted that the matter involved in these appeals are covered issue by the co-ordinate Bench decision delivered in the case of Sh. Ranjeet Singh v. Income Tax Officer , Ward-1(1), Bathinda in ITA No. 91/Asr/2023 in respect of AY: 2016- 17 order dated 30.08.2023 on the issue of claim of exemption by the assessee from Long Term Capital Gains arising from the Compulsory Acquisition of Land under National Highway Act, 1956 by relying on section 96 of RECTLARR Act, 2013 and clarificatory CBDT Circular No. 36/2016 (F. No. 225/88/2016-ITA.II) dated 25.10.2016. The relevant part of the judgment is reproduced as under:

“5. Briefly the facts of the case are discussed from I.T.A. No. 91/Asr/2023, Assessment Year: 2016-17 as a lead case that residential land measuring 120.51 Sq. Yards was acquired under National Highways Act , 1956 vide Notification dated 04.02.2014. The appellant received compensation of Rs.27,96,629/- and interest amounting to Rs.3,40,614/- totaling to Rs.31,37,243/- . The appellant claimed the amount of Rs.26,62,987/- as exempt from Income Tax in view of Section 96 of the RFCTLAAR Act CBDT and Circular No.36/2016 dated 25.10.2016.The AO has held that the land of the appellant was not acquired under the RFCTLAAR Act and award or agreement was not made under the RFCTLAAR Act so as to enable the appellant to be eligible u/s 96 of the RFCTLAAR Act. Accordingly, the benefit of exemption from income-tax is provided u/s 96 of the Act and that land acquisition effected under National Highway Act, 1956 is not eligible for benefit of exemption from income-tax as provided u/s 105 of that Act. The AO treated the amount of Rs.26,62,987/- as ‘Long Term Capital Gains’ u/s 45(5)(a) of the Act and added to the income of the appellant.

6. The Ld. CIT (A) has confirmed the addition by observing that Notification dated 31.12.2014 was issued by Ministry of Law & Justice wherein sub section (3) of section 105 of th