Income Tax Appellate Tribunal - Amritsar
Sushil Kumar,Bathinda vs The Income Tax Officer, Ward-1(1), ... on 20 March, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
(PHYSICAL HEARING)
BEFORE DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER
AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER
I.T.A. No. 677/Asr/2024
Assessment Year: 2016-17
Sushil Kumar, Vs. Income Tax Officer,
H. No. 957, Nehru Gali, Ward -1(1), Bathinda
Amrik Singh Road, Bathinda
Punjab-151001
[PAN: ACIPK 2004L]
(Appellant) (Respondent)
Appellant by : Sh. Pranav Jain, Adv. (Virtual)
Respondent by : Sh. Charan Dass, Sr. D. R.
Date of Hearing : 17.03.2026
Date of Pronouncement : 20.03.2026
ORDER
Per Udayan Dasgupta, J.M.:
This appeal is filed by the assessee against the order of the ld. CIT (A) NFAC, Delhi dated 21.10.2024 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 14.12.2018 passed u/s 143(3) of the Income Tax Act, 1961.
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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. Brief facts emerging from records are that the assessee has filed return on 5th August, 2016, disclosing income of Rs. 10.4 lakhs, (which included income from long term capital gains), computed on the basis of compensation received from Central Government under the National Highway Act 1956, amounting to Rs.1.22 crores on compulsory acquisition of residential lands (vide an award dated 7th November, 2014 issued by the Competent Authority, SDM, Bhatinda), which includes interest of Rs.13.58 lacs received on delayed payment.
4. Subsequently, the return has been revised on 29th July, 2017, at a lower figure of Rs. 3.58 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 25th October, 2026.
5. However, the said claim of exemption, has been denied by the AO by observing as follows:
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I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 "4.8 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 the Act relating to the determination of compensation in accordance with First Schedule, rehabilitation and resettlement in accordance with Second schedule and infrastructure amenities in accordance with the Third Schedule shall apply to the enactments relating to land acquisition specified in the Fourth Schedule with effect from 01.01.2015. The Notification is only applicable to extend certain benefits in accordance with the RFCTLAAR Act and such acquisitions made under the enactments relating to land acquisition specified in Fourth Schedule were not brought under the RFCTLAAR Act itself. If the intention of the Central Government were to extend the benefit of exemption u/s 96 of the RFCTLAAR Act to the acquisitions made under the National Highway Act, 1956, it could have omitted the National Highway Act, 1956 specified in the Fourth Schedule as provided u/s 105(2) of the RFCTLAAR Act.
5. In view of the above, the assessee is not eligible for claiming exemption from income fat on the basis of Circular No.36/2016 of the CBDT and also 96 of the RECTLAAIR Act and apart from that the claim of the assessee u/s 10:37), he is not eligible also for exemption 10:37) of the IT Act as the assessee received compensation on acquisition of land in the residential category. Thus, the amount of compensation received by the assessee on acquisition of his residential and is taxable under the provisions of the Income Tax Act 1967
6. Without prejudice to the above, it is observed that notification for acquisition of land was issued in this order that proprietary rights of the acquired land shall vest in Central Govt with effect from 02.11.2014. case on 04.02.2014 and Award was given on 07.11.2014. The Land Acquisition Collector has clearly held in his However, Notification regarding amendment in section 105 of the RFTCLAAR Act was isread on 31.12.2014. which was 4 I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 applicable from 01.01.2015. Hence, even otherwise, the notification is not applicable in this case.
7. The contention of the assessee that the compensation received from compulsory acquisition land was exempted under section 10(37) of the Income Tax Act has abo been considered. In this regard the assessee vide his earlier reply dated 12.11.2018 stated that the assessee is an agriculturist and land was cultivated by assessee from a long period. The copies of jamabandi and gardwari were also enclosed therein.
7.1 The reply fled by the am the contentions of the assessee duly been considered. However, the following observations are made on the contention of the assessee.
(i) The land in question has clearly been held as residential in Schedule LA-7 of the Award No.1 dated 04.11.2014 by the Land Acquisition Collector (SDM). Hence, the land in question is not agricultural land.
(ii) The assessee has accepted compensation at the rate specified for residential land from the LAC thereby admitting that the land in question was residential.
(iv) Inspector of this office was deputed on 07.12.2018 to make on the spot enquiries regarding present status of the remaining land of the assessee after acquisition. The Inspector has reported that in Khasra No 846/1, out of which, land measuring 474.745 Sq Yards was acquired, wild trees, grass and bushes were standing, which clearly prove that the land was not used for agricultural operations for a long time. Hence, it is held that the land acquired by the LAC was not agricultural as claimed by the assessee.
8. In view of the above facts, the assessee is not eligible for claiming exemption from income tax on the basis of Circular No.36/2016 of the CBDT and u/s 96 of the RFCTLAAR Act as well as u/s 10(37) of the Act and the amount of compensation received by the assessee on acquisition of his residential land is taxable under the provisions of the Income Tax Act, 1961.
9. As noted above, the assessee received compensation of Rs. 1.10.17.123/- and interest amounting to Rs. 13,65,253/- totaling to Rs. 1,23,82,376/- during the year and the amount of Rs. 1,22,41,855/- was credited to HDFC account of the assessee on 19.05.2015, after deduction of TDS of Rs. 1,40,621/-. Accordingly, the amount of sale consideration is adopted 5 I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 at Rs. 1,10,17,123/- as provided u/s 45(5)(a) of the Act. Regarding cost of acquisition, the assessee has submitted purchase deed of the land acquired under National Highway Act, 1956. As per purchase deed the assessee purchased 4725 Sq. yds of land for a consideration of Rs. 95,000/-in Nov. 1992 and paid stamp duty of Rs. 11875/- thereon. Thus, the assessee acquired the capital asset measuring 4725 sq. yds during the financial year 1992-93 for a consideration of Rs. 1,06,875/-, Out of this, the residential land of the assessee measuring 474.745 sq yards was acquired and hence proportionate indexed cost of acquisition works out to Rs. 52,054/, In view of the facts, long term capital gains u/s 45(5)(a) of the Act are computed as under: -
Sale consideration Rs. 1,10,17,123/-
Less:
Indexed cost of acquisition Rs. 52,054/-
Long term capital gains Rs. 1,09,65,069/-"
6. However, the interest portion of Rs.13.65 lacs has been charged to tax u/s 56(2)(viii) of the Act 61 as "income from other sources" and deduction u/s 57(iv) of the Act equal to fifty percentage of such income has been allowed.
7. The matter carried in first appeal, against the disallowance of the claim of exemption of the assessee amounting to Rs.1.10 crores, being the amount of land compensation received on compulsory acquisition by the Central Government (under NH Act '56), has been dismissed by the Ld. first appellate authority by observing as follows:
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I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 "5.1. During the appellate proceedings, the assessee claimed that his land was agricultural land and was acquired by compulsory acquisition. Therefore, the assessee contended that the compensation received on compulsory acquisition of agricultural land was exempt from Income Tax as per the provisions of section 10(37) of the Act. However, it is noted that the land of the assessee was residential in category and therefore the proceeds arising from sale of such land are taxable in the hands of the assessee as per the provisions of Income Tax Act.
Therefore, the assessee is not eligible for claiming exemption from Income Tax on the basis of Circular No.36/2016 of the CBDT and u/s 96 of the RFCTLAAR Act as well as u/s 10(37) of the Act. COME In view of the facts narrated above, the contention of the assessee is rejected and the action of the AO making addition of Rs.1,09,65,069/- under the head "Capital Gains" is hereby confirmed. Accordingly, Grounds No. 1 to 5 are dismissed."
8. Now the assessee is before the tribunal on the grounds contained in the memorandum of appeal in form 36.
9. In course of hearing the Ld. AR of the assessee based his arguments on the CBDT circular No 36/2016 dated 25/10/2016 and submitted that as per the above circular , the compensation received by the assessee from the Government (under the NH Act 56 )as compensation of land, is exempted from income tax and has also referred to the provisions of section 96 of the RFCTLAAR Act 2013(henceforth the Act 2013 ), and has a filed a written submission before us , the relevant part is reproduced as under:
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I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 "8. In the case of the Assessee, the award was given on 07.11.2014 (confirmed by the Land Acquisition Collector Pg.-1-1A of PB), but it is a matter of fact that the award of compensation was not paid to the Assessee and it was paid only on 18.05.2015 (proof in the form of bank statement is enclosed in the paper book-3-4 and also confirmed by the Land Acquisition Collector Pg-1-1A of PB).
9. a) The AO has ignored the fact that since the compensation on account of compulsory acquisition of land has been received during the FY 2015-16 [i.e. 18.05.2015 and after 01.01.2015). Though the Land was acquired under the NHAI Act, the acquisition amount was received after 01.01.2015 and thus is received only under the RFCTLARR Act, 2013.
b) Reliance is placed on the CBDT Circular No. 36/2016 dated 25.10.2016, wherein it has been stated that the all the compensations received for compulsory acquisition of agricultural or non-agricultural land is exempt from Income Tax Act, under the RFCTLARR Act. (Judgment set pg-5-6).
c) Reliance is placed on the letter of Ministry of Transport and Highways. dated 28th December 2017 (Judgment set 7-13) in which it has been stated as under: -
"I am directed to say that the land required for National Highway Projects is acquired under the provisions contained in Section 3 of the National Highways (NH) Act, 1956. Pursuant to the enactment of the RFCTLARR Act of 2013 and its coming into force with effect from 01.01.2014, certain provisions of the 2013 Act became applicable to the other related Acts mentioned in the Fourth Scheduled, Including the NH Act, 1956 with effect from 01.01.2015 in terms of Section 105(3) of the RFCTLARR, 2013."
d) Further in the letter dated 28.12.2017 issued by Ministry of Road Transport & Highways under the subject: Land Acquisition under the National Highways Act, 1956 has been stated in para 4.6 (iii) as under: -
"(a) All cases of Land Acquisition where the Awards had not been announced under section 3G of the NH Act till 31.12.2014 or where such awards had been announced but compensation had not been paid in respect of majority of the land holdings under acquisition 8 I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 as on 31.12.2014, the compensation would be payable in accordance with the First Schedule of the RFCTLARR Act, 2013."
10. The case of the Assessee is also duly covered by the Judgment of Sh Ranjeet Singh vs ITO in ITA No. 91/Asr/2023 order dated 30.08.2023 wherein on similar facts addition has been deleted. (Judgment set pg-45-69)"
10. Referring to the various tribunal decisions on the issue cited in his submission, he prayed that the exemption claimed on the land compensation received by him may please be allowed.
11. Per contra the Ld. DR has filed a short written submission, stating that the exemption is not admissible vide CBDT - OM dated 6th June, 2019, in F / No 225 / 72 / 2019 - ITA - 11, where it has been clarified that the benefit of section 96 of the Act 13, exempting income tax on award would not be applicable for cases in which land acquisition , has been undertaken as per the enactments specified in the Fourth Schedule to the said Act.
12. The relevant portion of his submission is reproduced as under:
"It is submitted that complex issue is involved in this case and case is also covered by CBDT circular and exemption is not admissible vide CBDT OM dated 06.06.2019 in F. No. 225/72/2019-ITA-11 where in it is clarified the tasability of compensation received by the land owners for the land acquired under various central acts in Fourth Schedule in accordance with the provisions of the First, Second and Third Schedule of the Right to Fair 9 I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (RFCTLARR Act) 2013. As per pars 04 of the said OM, it has been clarified that "for the land acquisition undertaken as per enactments specified in the Fourth Schedule of the RFCTLARR Act, 2013, no other provisions of the RFCTLARR Act, 2013 would be applicable except for the provisions relating to the determination for compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Third Schedule. Accordingly, the benefit of section 96 of the RFCTLARR Act, 2013 exempting income tax on the award would not be applicable for cases in which land acquisition is undertaken as the per the enactments specified in the Fourth Schedule to the said Act.
13. Referring to the above he submitted that the compensation received by the assessee is not exempted under the Income Tax Act 61.
14. We have heard the rival submissions and considered the materials on record and the decisions of the coordinate benches of the tribunal placed before us.
15. We find that this issue has been elaborately discussed and considered by various High Courts and the matter is settled favoring the land owners.
16. Before that, we would like to refer to an order issued by the Ministry of Rural Development dated 28th august, 2015, which is reproduced as below:
"MINISTRY OF RURAL DEVELOPMENT ORDER New Delhi, the 28th August, 2015 S.O. 2368(E).--Whereas, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013) (hereinafter referred to as the RFCTLARR Act) came into effect from 1st January, 2014;10
I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 And whereas, sub-section (3) of Section 105 of the RFCTLARR Act provided for issuing of notification to make the provisions of the Act relating to the determination of the compensation, rehabilitation and resettlement applicable to cases of land acquisition under the enactments specified in the Fourth Schedule to the RFCTLARR Act;
And whereas, the notification envisaged under subsection (3) of Section 105 of the RFCTLARR Act was not issued, and the RFCTLARR (Amendment) Ordinance, 2014 (9 of 2014) was promulgated on 31st December, 2014, thereby, inter-alia, amending Section 105 of the RFCTLARR Act to extend the provisions of the Act relating to the determination of the compensation and rehabilitation and resettlement to cases of land acquisition under the enactments specified in the Fourth Schedule to the RFCTLARR Act; And whereas, the RFCTLARR (Amendment) Ordinance, 2015 (4 of 2015) was promulgated on 3rd April, 2015 to give continuity to the provisions of the RFCTLARR (Amendment) Ordinance, 2014; And whereas, the RFCTLARR (Amendment) Second Ordinance, 2015 (5 of 2015) was promulgated on 30th May, 2015 to give continuity to the provisions of the RFCTLARR (Amendment) Ordinance, 2015 (4 of 2015);
And whereas, the replacement Bill relating to the RFCTLARR (Amendment) Ordinance, 2015 (4 of 2015) was referred to the Joint Committee of the Houses for examination and report and the same is pending with the Joint Committee;
As whereas, as per the provisions of article 123 of the Constitution, the RFCTLARR (Amendment) Second Ordinance, 2015 (5 of 2015) shall lapse on the 31st day of August, 2015 and thereby placing the land owners at the disadvantageous position, resulting in denial of benefits of enhanced compensation and rehabilitation and resettlement to the cases of land acquisition under the 13 Acts specified in the Fourth Scheduled to the RFCTLARR Act as extended to the land owners under the said Ordinance;
And whereas, the Central Government considers it necessary to extend the benefits available to the land owners under the RFCTLARR Act to similarly placed land owners whose lands are acquired under the 13 enactments specified in the Fourth Schedule; and accordingly the Central Government keeping in view the aforesaid difficulties has decided to extend the beneficial advantage to the land owners and uniformly apply the beneficial provisions of the RFCTLARR Act, relating to the determination of compensation and rehabilitation and resettlement as were made applicable to cases of land acquisition under the said enactments in the interest of the land owners; Now, therefore, in exercise of the powers conferred by sub-section (1) of Section 113 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013), the Central Government hereby makes the following Order to remove the aforesaid difficulties, namely:--
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1. (1) This Order may be called the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties) Order, 2015.
(2) It shall come into force with effect from the 1st day of September. 2015.
2. The provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, relating to the determination of compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule shall apply to all cases of land acquisition under the enactments specified in the Fourth Schedule to the said Act.
[F. No. 13011/01/2014-LRD] K.P. KRISHNAN, Addl. Secy."
17. As such from the bear reading of paragraph 2 of the above order it is clear that provisions of the RFCTLARR Act 2013, relating to determination of compensation will apply to all cases of land acquisition under the enactments specified in the Fourth Schedule to the said Act. So we are of the opinion that the above order of the "Ministry of Rural Development", addresses the issue raised by the Ld DR.
18. Now we refer to the Hon'ble Chhattisgarh High Court decision in the case of Sanjay Kumar Baid [2025] 178 taxmann.com 446 (Chhattisgarh), where in an identical issue, the Hon'ble court after examining all the relevant notifications and orders has opined in paragraph 18 and 19 of the order as follows (relevant para reproduced):
"18. In view of the above-stated legal position, it is held that once compensation is determined under the provisions of the RFCTLARR Act, as a necessary corollary, the benefits flowing from the provisions of the said Act, including exemptions from income tax, stamp duty and 12 I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 fees contemplated under Section 96 of the RFCTLARR Act, would also have to be made applicable. If the benefit flowing from Section 96 is not given to the land-losers whose lands have been acquired under the Act of 1956, it would mean that the land-losers under the enactments specified in the Fourth Schedule are subjected to discrimination and this would be against the intent of the Union of India in issuing the 2015 Order and it would be contrary to the principles of law laid down by the Supreme Court in Tarsem Singh's case (supra), Tarsem Singh's case (supra) and P. Nagaraju's case (supra). More particularly, Section 103 of the RFCTLARR Act makes it clear that the provisions of the RFCTLARR Act are in addition to and not in derogation of any other law.
19. For the foregoing reasons, we are of the considered opinion that Section 96 of the RFCTLARR Act providing for exemption from income tax, stamp duty and fees would also be applicable to the land acquired under the Act of 1956 and to the compensation paid by the NHAI and consequently, the assessee would not be liable to pay income tax on the amount of compensation paid to him against the acquisition of his land under the Act of 1956. Consequently, the substantial question of law is answered in favour of the assessee and against the Revenue and it is held that the compensation received against acquisition of land from the NHAI is not eligible to tax under Section 96 of the RFCTLARR Act.
19. Now we refer to the Hon'ble Karnataka High Court [2023] 153 taxmann.com 685 (Karnataka) [31-05-2023] where the Hon'ble court while examining the provisions of section 194L of the Act 61, in the matter of TDS on land compensation has observed in respect of the provisions of the RFCTLARR Act 2013 as follows:
(Relevant paragraphs 17 to 23 are reproduced):13
I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 "17. A perusal of the above provisions would indicate that any person responsible for paying to the resident any sum being in the nature of compensation or enhanced compensation, or consideration or enhanced consideration on account of compulsory acquisition of immovable property other than agricultural land at the time of payment of such sum, has to deduct an amount equivalent to 10% as income tax and deposit the same with the concerned authority to the account of the assessee.
18. The second proviso clearly makes out an exemption or exception as regards payment made in respect of award or agreement which has been exempted from levying of income tax.
The proviso does not make any difference between agricultural or non-agricultural land. The exemption in terms of second proviso applies in its entirety when the land has been acquired and compensation is covered under section 96 of the Act of 2013.
19. Section 96 of the Act of 2013 reads as under:
"Section 96: No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same."
20. A perusal of section 96 of the Act of 2013 would make it abundantly clear that no income tax or stamp duty shall be levied on any award or agreement made under the Act except under section 46.
21. Section 46 of the Act of 2013 reads as under:
46. Provisions relating to rehabilitation and resettlement to apply in case of certain persons other than specified persons.
(1) Where any person other than a specified person is purchasing land through private negotiations for an area equal to or more than such limits, as may be notified by the appropriate Government, considering the relevant State specific factors and circumstances, for which the payment of Rehabilitation and Resettlement Costs under this Act is required, he shall file an application with the District Collector notifying him of-
(a) intent to purchase;14
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(b) purpose for which such purchase is being made;
(c) particulars of lands to be purchased.
(2) It shall be the duty of the Collector to refer the matter to the Commissioner for the satisfaction of all relevant provisions under this Act related to rehabilitation and resettlement. (3) Based upon the Rehabilitation and Resettlement Scheme approved by the Commissioner as per the provisions of this Act, the Collector shall pass individual awards covering Rehabilitation and Resettlement entitlements as per the provisions of this Act. (4) No land use change shall be permitted if rehabilitation and resettlement is not complied with in full.
(5) Any purchase of land by a person other than specified persons without complying with the provisions of Rehabilitation and Resettlement Scheme shall be void ab initio: Provided that the appropriate Government may provide for rehabilitation and resettlement provisions on sale or purchase of land in its State and shall also fix the limits or ceiling for the said purpose. (6) If any land has been purchased through private negotiations by a person on or after the 5th day of September, 2011, which is more than such limits referred to in sub-section (1) and, if the same land is acquired within three years from the date of commencement of this Act, then, forty per cent. of the compensation paid for such land acquired shall be shared with the original land owners."
22. A reading of section 46 of the Act of 2013 would indicate that it relates to purchase of land through private negotiations, which necessarily means otherwise than through acquisition. This being so since the purchase price is fixed as per private negotiation and not by fixing of compensation under an award to be passed by following the parameters laid down under the Act of 2013.
23. Thus, any land acquired and compensation paid in terms of an award passed under the Act of 2013, in terms of section 96 of the Act of 2013, the compensation payable thereunder would not attract any income tax or stamp duty in terms of section 96 of the Act of 2013 which is reinforced by the second proviso to section 194 L of the Act." 15
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20. Now we refer to the decision of the Hon'ble Calcutta High Court in the case of PCIT v. Durgapur Projects Ltd. (2023)454 ITR 367/ 333 CTR 158/ 227 DTR 35 (Cal)(HC) where the Hon'ble court while examining various other issues has also discussed about the provisions of the Acquisition Act 2013 and the CBDT circular No 36/2016 in paragraph 11 of the order which are reproduced below:
"11. Coming back to the taxability of the compensation received by the assessee for the lands compulsory acquired under the 2013 Act, it is relevant to take note of the circular issued by the CBDT dated 25.10.2016 in Circular No. 36/2016. It was pointed out that under the existing provisions of the Income Tax Act an agricultural land which is not situated in specified urban area is not regarded as a capital asset and hence capital gain arising from the transfer (including compulsory acquisition) of such agricultural land is not taxable. It is further stated that Finance (No. 02) Act, 2004 inserted Section 10(37) in the Act from 01.04.2005 to provide specific exemption to capital gains arising to an individual or a HUF from compulsory acquisition of an agricultural land situated in specified urban limited subject to fulfillment of certain conditions. Thus, it was ordered that the compensation received from the compulsory acquisition of an agricultural land is not taxable under the Income Tax Act subject to the fulfillment of certain conditions for specified urban land. It was further stated that the 2013 Acquisition Act came into effect from 01.01.2014 and Section 96 inter alia provides that income tax shall not be levied on any award or agreement made except those made under Section 46 of the said Act. Therefore, it was directed that compensation for compulsory acquisition of land under the 2013 Acquisition Act except those made under Section 46 of the said act is exempted from the levy of income tax. Further it was ordered that as no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income tax under 2013 Acquisition Act, the exemption provided under Section 96 of the 2013 Acquisition Act is wider in scope than the tax exemption provided under the existing provisions of the Income Tax Act, 1961. It was pointed out that this aspect has created 16 I.T.A. No. 677/Asr/2024 Assessment Year: 2016-17 uncertainty in the matter of taxability of compensation received on compulsory acquisition of land especially those relating to acquisition of non-agricultural land. This matter was examined by the CBDT and it was clarified that compensation received in respect of award or agreement which has been exempted from the levy of income tax under Section 96 of the 2013 Acquisition Act shall also not be taxable under provisions of the Income Tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961. The said Circular No. 36 of 2016 would come to the aid and assistance of the assessee and the compensation received by the assessee on account of the compulsory acquisition of land under the 2013 Acquisition Act is exempt from the tax.
21. Similarly, we find that identical views has are also been laid down by the Hon'ble Apex Court in the case of UOI v. Tarsem Singh [Civil Appeal No. 7064 of 2019, dated 19-9 2019] where it has been held by the Apex Court that the provisions of RFCTLARR Act, 2013 are applicable to land acquired under National Highway Act and the compensation has to be calculated and paid in accordance with the provisions of RFCTLARR Act, 2013. 10.
22. Similarly , the Chandigarh Bench of the ITAT in the case of Satish Kumar v. ITO [IT Appeal No. 1182 (Chd.) of 2019, dated 31-8-2021] [PB 22- 42] observed that the compensation as received by the assessee on 05.11.2014 and 23.11.2015 under National Highway Act on compulsory acquisition of land by NHAI has been held to be exempt u/s 96 of the RFCTLARR Act vide circular no 36/2016 dt. 25.10.2016 following the orders of Rajasthan High court in the case of Gopa Ram v. UOI [S.B. Civil Writ Petition No. 12746 of 2017 & othrs, dated 22-1 2018]. 17
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23. The Hon'ble Punjab & Haryana HC in the case of NHAI v. Modan Singh and Others and other group cases in FAQ 756-2022 vide order dated 11.04.2023 has held that the RFCTLAAR Act 2013 would apply to cases wherein award has been awarded prior to 31.12.2024 but compensation is not paid yet till 31.12.2014, even though the said acquisitions have been done under the NHAI Act. 1956.
24. In the instant case before us the compensation has been received by the assessee duly credited in bank on 15th May, 2015, under the National Highway Act '56, on compulsory acquisition of land by NHAI and is thus held to be exempt u/s 96 of the RFCTLARR Act 2013, vide CBDT circular no 36/2016 dt. 25.10.2016.
25. As such, the addition made by the AO on account of compensation is deleted and the claim of exemption of the assessee is allowed in respect of the same, (excluding the interest portion) fifty percentage of which is already subject to tax u/s 56(2).
26. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court as on 20.03.2026
Sd/- Sd/-
(Dr. Dipak P. Ripote) (Udayan Dasgupta)
Accountant Member Judicial Member
*GP/Sr.PS*
Copy of the order forwarded to:
(1) The Appellant:
(2) The Respondent:
(3) The CIT concerned
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Assessment Year: 2016-17
(4) The Sr. DR, I.T.A.T
True Copy
By Order