Compensation received for compulsory land acquisition under the National Highways Act is eligible for income tax exemption under Section 96 of the RFCTLARR Act, 2013, as the benefit of uniform compensation determination laws must extend to the associated tax exemptions to avoid constitutional discrimination.

आदेश / ORDER

PER PARTHA SARATHI CHAUDHURY, JM:

This is a remand matter from the Hon’ble Jurisdictional High Court vide order passed in TAXC No.228 of 2024, dated 05.05.2025 in the case of Raipur Reality Private Limited Vs. ITO, Ward-3(1), Raipur.

2. The brief facts in this case are that the assessee is engaged in the real estate business and had filed return for A.Y 2017-18 on 30.10.2017 declaring taxable income at NIL. During the year under consideration, the lands of the assessee situated at Abhanpur, Bhatgaon, Nimora were acquired under the National Highways Act, 1956. The assessee claimed a capital gain of Rs.3.41 crores arising from the said transaction as exemption u/s.10(37) of the Income Tax Act, 1961 (for short ‘the Act’) read with Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Reassessment Act, 2013 (for short ‘the RFCTLARR Act’). The A.O completed the assessment u/s.143 (3) of the Act on 10.10.2019 accepting the returned income, however, the Principal Commissioner Income Tax (for short ‘Pr.CIT’) in exercise of his powers u/s. 263 of the Act, set aside the said assessment by the order dated 11.02.2022, holding that the claim of the assessee was not tenable and directed for adjudication of the same afresh.

3. The assessee challenged the order of the Pr.CIT before the Income Tax Appellate Tribunal (ITAT) and ultimately the ITAT dismissed the appeal of the assessee vide order dated 17.08.2023 upholding the order of Pr.CIT.

4. Meanwhile on 28.03.2023, the A.O passed a fresh order in consequence of the directions issued by Pr.CIT and by making the addition and dismissing the claim of the assessee qua exemption u/s.10(37) of the Act which was further affirmed by the Ld.CIT(Appeals) vide order dated 26.02.2024 and subsequently also affirmed by the ITAT vide order dated 28.06.2024, for which, the assessee had further carried the matter before the Hon’ble Jurisdictional High Court, wherein it was held and observed as follows:

“13. Admittedly, the Assessing Officer has passed an order of assessment on 28.03.2023 directing addition of Rs.65,04,107/-, against which, the assessee preferred an appeal before the CIT (Appeals), which has been dismissed by the order dated 26.02.2024. Being aggrieved by the said order, the assessee has preferred an appeal before the ITAT and the ITAT has dismissed the appeal on 28.06.2024 without considering the issue as to whether addition of Rs.65,04,107/- received as compensation against the acquisition of land by NHAI is liable to tax. The ITAT has not considered the issue on merits and dismissed the appeal by observing that earlier the Tribunal has already dismissed the appeal of the appellant, while affirming the order of CIT (Appeals) under Section 263 of the Act of 1961. In our considered opinion, the order passed by the ITAT is contrary to the facts and law available on record. The ITAT by its earlier order dated 17.08.2023 has only affirmed the legality, validity and correctness of the order passed under Section 263 of the Act of 1961, consequent to which, the Assessing Officer has passed a fresh order of assessment on 26.02.2024. Therefore, the ITAT was required to decide the issue as to whether addition of Rs.65,04,107/- received as compensation against the acquisition of land by NHAI is liable to tax or not, however, the ITAT has not considered the same and wrongly relied on the earlier decisions, which had no nexus with the issue involved in the appeal preferred before the Tribunal.

14. Accordingly, the order dated 28.06.2024 passed by the ITAT is set-aside to the aforesaid extent. The matter is remitted to the ITAT to decide the issue as to whe