Compensation for land acquired under National Highways Act by NHAI exempt from income tax u/s 96 RFCTLARR Act per CBDT Circular 36/2016.

ORDER

Per Udayan Dasgupta, J.M.:

This appeal is filed by the assessee against the order of the ld. Addl./JCIT (A) Mysore, dated 28.02.2024 passed u/s 250 of the Income Tax Act, 1961 (henceforth the Act) which has emanated from the order of the ITO, Ward-2(1), Bathinda dated 08.12.2018 passed u/s 143(3) of the Act.

2. The ld. DR filed an application for adjournment of hearing on the grounds of complexity of issues involved and citing heavy work load, which we consider not to be sufficient reasons for adjournment and as such, the same is rejected and we proceed to dispose of the appeal on merits of the case after hearing both the parties and considering the materials on record.

3. The grounds of appeal taken by the assessee before the tribunal are as follows:

“1. The Appellant filled his original return of income declaring income of Rs. 1719900/- on 30.09.2016. This income includes Rs.1113022/- as capital gain on the compulsory land acquisition compensation by the Central Government through NHAI. After filing the original 1TR CBDT issued circular no. 36/2016 dated 25^th Oct. 2016 clarifying that the any type of compulsory land acquisition compensation is exempted under Income Tax Act 1961 in view of section 96 of the Right to Fair Compensation and Transparency and Land Acquisition, Rehabilitation and Resettlement Act 2013. The appellant revised his return of Income and claimed the compulsory land acquisition compensation amount as exempted income under Income Tax Act 1961.

2. That the AO has erred in law and on facts in adding Rs. 1144702/- u/s 56 of the Income Tax Act 1961.\\

3. That the Ld. CIT/ADDL/JCIT(A) has also erred in law and on wrong facts dismissed Appellant appeal.

4. The Appellant carves for leave to add, delete or modify and of the Grounds of Appeal before or at any time of hearing.

5. Kindly deleted the addition of Rs. 1144702/- or any other relief as deemed fit to be allowed.”

4. Brief facts emerging from records are that the assessee has filed return on 30^th September, 2016, disclosing income of Rs. 17.19 lakhs, (which included income from long term capital gains of Rs. 11.13 lakhs), computed on the basis of compensation received from Central Government under the National Highway Act 1956, amounting to Rs.12.10 lakhs on compulsory acquisition of residential lands (vide an award dated 7^th November, 2014 issued by the Competent Authority, SDM, Bhatinda), plus interest of Rs.1,49,976/- received on delayed payment.

5. Subsequently, the return has been revised on 8^th August, 2017, at a lower figure of Rs. 6.06 lakhs, by claiming the land compensation received under the Act 56, as fully exempted in view of section 96 of RFCTLAAR Act read with CBDT circular No 36/2016 dated 25^th October, 2026.

6. However, the said claim of exemption, has been denied by the AO by observing as follows:

“4.9 To sum up, it is held that the land of the assessee was not acquired under the RFCTLAAR Act and award or agreement was not made under the RFCTLAAR Act so as to enable the assessee to be eligible u/s 96 of the RFCTLAAR Act. 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. Notification dated 31.12.2014 was issued by Ministry of Law & Justice wherein sub section (3) of section 105 of the RFCTLAAR Act was substituted by providing that the provision of th