Compensation received for the compulsory acquisition of land under the National Highways Act, 1956 is exempt from income tax pursuant to Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

ORDER

This assessee’s appeal for assessment year 2018-19, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1073903494(1), dated 03.03.2025 involving proceedings under section 144 of the Income tax Act, 1961 (hereinafter referred to as ‘the Act’).

Heard both the parties. Case file perused.

2 For the reasons stated in the assessee’s condonation averments, delay of 262 days in filing of the instant appeal is condoned in light of Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC).

3. The assessee/appellant is aggrieved against both the lower authorities’ respective findings assessing his land acquisition compensation of Rs.6,41,12,987/- in lieu of compulsory acquisition of lands at Khondalpur for the highway project by National Highway Authority of India “NHAI” as taxable under section 56(2)(viii) r.w.s. 145B(1) r.w.s. 57(iv) of the Act; in assessment order dated 03.09.2021 as upheld in the lower appellate discussion.

4. That being the case, the Revenue could hardly dispute that the assessee has received the impugned compensation going by NHAI’s compulsory acquisition of land under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. And that case law [2025] 178 taxmann.com 446 (Chhattisgarh) Sanjay Kumar Baid Vs. ITO has already settled the very issue in the assessee’s favour and against the department, reading as under:

“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 ₹ 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 ₹ 87,94,860/- and shown the income of ₹ 73,58,113/- to be taxable income under the head of Short Term Capital Gains of ₹ 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 ₹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 ₹ 87,94,860/- determining the aggregate tax liability at ₹ 23,93,421/- and consequentially granted a refund of ₹ 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 ₹ 17,07,340/-. The said request was reiterated on 4-