Compulsory Acquisition Compensation Exempt Under RFCTLARR Act: ITAT Amritsar

Surinder Kumar Vs ITO (ITAT Amritsar)

The Amritsar Bench of the Income Tax Appellate Tribunal (ITAT), in Surinder Kumar Vs ITO, held that compensation received on compulsory acquisition of land under the National Highways Act, 1956 was exempt from income tax under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act). The dispute concerned Assessment Year 2016-17, in which the Assessing Officer had assessed income of ₹2,05,93,010 despite the assessee’s revised return declaring ₹26,98,530. The assessee had received compensation of ₹1,95,15,868 and solatium of ₹58,54,760, aggregating to ₹2,53,70,628. The Assessing Officer denied exemption because the acquisition was undertaken under the National Highways Act rather than directly under the RFCTLARR Act.

The Tribunal examined the chronology of acquisition, noting that the notification was issued on 4 February 2014, the award was announced on 7 November 2014, and compensation was actually received on 18 May 2015. It considered CBDT Circular No. 36/2016 dated 25 October 2016 and the applicability of Section 96 of the RFCTLARR Act to compensation arising from acquisitions under other enactments. The Tribunal relied on the Supreme Court’s decision in Union of India Vs Tarsem Singh, the Punjab and Haryana High Court’s ruling in NHAI Vs Modan Singh, and the coordinate Bench decision in Ranjit Singh Vs ITO. It also referred to Satish Kumar Vs ITO and Gopa Ram Vs Union of India. The Tribunal found that the assessee’s circumstances were materially similar to those considered in Ranjit Singh, particularly because the compensation had remained unpaid on 31 December 2014.

Accordingly, the Tribunal held that the compensation received by the assessee on compulsory acquisition of land was exempt from income tax by virtue of Section 96 of the RFCTLARR Act, 2013, read with CBDT Circular No. 36/2016. It deleted the addition of ₹2,05,93,010 and allowed the assessee’s appeal. However, the separate ground concerning additional compensation of ₹41,142 was dismissed as not pressed, following the assessee’s concession in view of the Punjab and Haryana High Court decisions in Shivaji Roy and Manjit Singh. The order was pronounced on 9 October 2024 in ITA No. 29/Asr/2024.

Cases Discussed

• Ranjit Singh v. ITO and Ranjit Poultry Farm v. DCIT — ITA Nos. 91/Asr/2023 and 135/Asr/2023, ITAT Amritsar, 30.08.2023
• Union of India v. Tarsem Singh & Others — Civil Appeal No. 7064/2019, Supreme Court, 19.09.2019
• Satish Kumar v. ITO — ITA No. 1182/Chd/2019, ITAT Chandigarh
• NHAI v. Modan Singh & Others — FAO No. 756/2022, Punjab and Haryana High Court, 11.04.2023
• Gopa Ram v. Union of India — Rajasthan High Court, 22.01.2018
• Raghavan Nair v. ACIT — [2018] 89 taxmann.com 212 (Kerala High Court)
• Shivaji Roy and Manjit Singh — Punjab and Haryana High Court, cited concerning additional compensation

FULL TEXT OF THE ORDER OF ITAT AMRITSAR

The captioned appeal has been filed by the assessee against the order of the ld. CIT(A) National Faceless Appeal Centre (NFAC), Delhi dated 04.01.2024 which is arising out of the Assessment Order u/s 143(3) dated

12.12.2018 passed by ITO, Ward-2(1), Bathinda in respect of Assessment Year: 2016-17.

2. The assessee has raised the following grounds of appeal:

“1. The Ld. CIT(A), NFAC has erred on facts and law in confirming the action of the AO of assessing the income of the assessee at Rs. 2.0593c 10/- as against the income Rs. 2698530/- declared in the revised Return of Income filed on 23.06.2017.

2. The Ld. CIT(A) NFAC has not adjudicated the claim of exemption of the assessee, from Long Term Capital Gains, arising from compulsory acquisition of land underr National Highway Act, 1956, by relying on Section 96 of the RFCTLARR Act, 2013 and clarificatory Circular no. 36/2016 (F. No. 225/88/2016-ITA.II Dated 25.10.2016, despite the fact that the detailed written submissions have been filed during the course of hearing before the CIT(A) NFAC.

3. The Ld. CIT (A) NFAC has not followed the binding decision of the Amritsar Bench of ITAT in the case of Ranjit Singh & Ranjit Poultry Farm [ITA no. 91/Asr/2023 & 135/Asr/2023] in which the Hon’ble Bench has already held vide orders dt. 30.08.2023 that the compensation received by the assessee arising from compulsory acquisition of land under National Highway Act 1956 is exempt and the above stated facts were brought on record in the submissions uploaded during the course of appellate proceedings.

4. The Ld. CIT (A), NFAC has erred on facts and law in rejecting the claim of exemption of Rs.41,142/- received as additional compensation compulsory acquisition  of land under National Highway Act, 1956, by relying on Section 96 of the RFCTLARR Act, 2013 and clarificatory Circular no. 36/2016 (F. No. 225/88/2016-ITA.II Dated 25.10.2016.

5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed of.”

3. At the outset, the ld. counsel for the appellant conceded the issue challenged in ground no. 4 of appeal as it was decided against the assessee in the judgment delivered by Hon’ble Punjab & Haryana High Court in the case of Shivaji Roy and Manjit Singh. Accordingly, this ground is not pressed by the ld. AR, and thus, it is dismissed as not pressed.

4. The appellant assessee has raised a sale issue in ground nos. 1 to 3, challenging therein the action of the ld. CIT(A) in confirming the addition of Rs.2,05,93,010/-.

4.1 The ld. AR submitted that the AO has rejected assessee’s claim of an exemption against Long Term Capital Gains, arising from  compulsory acquisition  of land underr National Highway Act, 1956 by relying on section 96 of the RFCTLARR Act, 2013 and clarificatory Circular no. 36/2016 (F.No.225/88/2016-ITA.II) dated 25.10.2026, despite the fact that the detailed written submissions have been filed during the course of hearing and ignoring the binding decision of ITAT Amritsar co-ordinate Bench in the case of Ranjit Singh & Ranjit Poultry Farm (ITA No. 91/Asr/2023 & 135/Asr/2023) wherein the Hon’ble Bench vide orders dated 30.08.2023has held that compensation received by the assessee being arising out of compulsory acquisition of land under r National Highway Act, 1956 as exempted.

5. The ld. AR has contended that on identical facts, it is covered matter in favour of the assessee by the judgment delivered by co-ordinate Amritsar Bench in the case of Sh. Ranjit Singh v. ITO, Ward-1, Bathinda in ITA No. 91/Asr/2023 dated 30.08.2023. The ld. AR has filed a comparison Chart on facts, illustrating that how the issue involved in the present appeal is covered matter, as under:

ITA No. 29/ASR/2024 ASSTT. YEAR 2016-17

COMMON CHART IN THE ABOVE CASES WHICH CLEARLY ESTABLISHES THAT THE FACTS ARE SIMILAR TO THE CASE OF RANJEET SINGH VS ITO IN ITA NO. 91/ASR/2023

1. Facts in the case of Ranjeet Singh vs ITO in ITA No. 91/Asr/2023 dated 30.08.2023;

Date of announcement of award- 07.11.2014 Date of actual receipt of Award- 19.05.2015

The Hon’ble Bench in para 18 to 21 has duly held and confirmed that compensation was not paid till 31.12.2014 and was paid only on 19.05.2015 and thus provisions of RFCTLAAR Act 2013would apply as the award has not been awarded prior to 31.12.2014 by relying upon the Judgment of the Jurisdictional High Court in the case of BHAI vs Modan Singh and Others (para-18).

2. Similarly, the facts in the cases of SH. Surinder Kumar as under;

Sr. Particulars FACTS IN THE CASE OF FACTS IN THE CASE OF No. SURINDER KUMAR RANJEET SINGH

1. Assessment Year 2016-17 2016-17

which reads as under:

“This is an appeal filed by the assessee and, though, the assessee had taken various grounds of appeals but in nutshell, the grounds of appeal relates to not granting exemption in respect of long term capital gain arose from compulsory acquisition of land under the National Highway Act 1956 and ignoring the CBDT circular and many other judgments and making reliance on the only judgment of ITAT, Agra Bench, Agra. The brief facts of the case are as under: –

BRIEF FACTS

1. The residential land measuring 1093.50 Sq yards of the assessee was acquired under r National Highway Act, 1956 vide notification dated 04.02.2014 and the assessee received the following compensation through bank on 19.05.2015.

Compensation 1,95,15,868/- 30% solatium 58,54,760/- Interest 31,43,9267-

Total compensation 2,85,14,554/- Less: TDS on interest @ 10.30% 3238247-

Total amount received 2,81,90,7307-

1.1 The assessee filed his ITR for the AY 2016-17 on 29-07-2016 showing total income at Rs. 2,05,93,010/- including long term capital gains of Rs. 1,78,94,473/-. Thereafter, the assessee revised the ITR on 23-06-2017 showing total income at Rs. 26,98,530/-.

1.2 The assessee claimed the above stated amount of Rs. 2,53,70,628/- i.e. Compensation of Rs. 1,95,15,868/- and amount of Solatium received is Rs.58,54,760/- in the revised return of income as exempt from Income Tax in view of Section 96 of the RFCTLARR Act, 2013 and Circular no. 36/2016 dated 25.10.2016.

2. In the case of the Assessee, the award was given on 07.11.2014 (also stated by AO in para 4.2(i) page-7), 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 forming part of paper book Pg. 36 to 38.

3. The AO in his order has rejected the claim of the Assessee on two grounds and the same are dealt in as under:

Findings of the AO Our arguments (a) The AO has ignored the fact that since the a) The land of the compensation on account of compulsory acquisition of land has Assessee was not been received during the FY 2015-16 [i.e. 18.05.2015] the acquired under the same is taxable under Section 45(5)(a) of the Act in the RFCTLAAR Act but it previous year in which such compensation has been first was acquired under received.

NHAI Act and thus the Assessee is not eligible (b) Reliance is placed on the letter of Ministry of Transport u/sec 96 of the and Highways dated 28th December 2017 [PB 00-00]in which it RFCTLAAR Act. 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. ”

(c) Further in the letter dated 28.12.2017 issued by Ministry of Road Transport Et 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 as on 31.12.2014, the compensation would be payable in accordance with the First Schedule of the RFCTLARR Act, 2013.”

(d) The reliance was placed on the order of Chandigarh Bench of the ITAT in the case of Satish Kumar Vs. ITO in ITA NO. 1182/Chd/2019 [PB 22- 42] in which the compensation 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.

(e) The case of the assessee is covered by the orders of Rajasthan High court in the case of Gopa Ram Vs. UOI dt. 22.01.2018 [followed by Chandigarh bench of the ITAT in the case of Satish Kumar] in which it has held that the provisions of the RFCTLARR Act, 2013are applicable to National Highway Act, 1956

(f) Hon’ble Supreme court in the case of UOI vs. Tarsem Singh others dated 19.09.2019 Civil Appeal No. 7064 of 2019 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.

(g) High Court of Kerla in the case of Raghavan Nair v. ACIT – [2018] 89 taxmann.com 212 (Kerala) [PB 7-16] in which it has been held that the compensation received for compulsory acquisition of agriculture land for Kochi Metro Rail Project is exempt under section 96 of the RFCTLARR Act, 2013

(h) Reliance in this regard is also being placed onthe Judgment of the Hon’ble Punjab & HaryanaHC in the case of NHAI vs Modan Singh and Othersand other group cases in FAQ 756- 2022 orderdated 11.04.2023 wherein it has been held thatthe RFCTLAAR Act. 2013 would apply to caseswherein award has been awarded prior to 31.12.2024 but compensation is not paid yet till31.12.2014, even though the said acquisitionshave been done under the NHAI Act. 1956.

b) The AO held vide a) It is a matter of fact that the award of compensation was not para 4.8and 5 of the paid to the Assessee and it was paid only on 18.05.2015 (proof assessment order that in the form of bank statement already enclosed above)

the assessee is not In reliance we are hereby placing a judgment passed by the eligible for claiming same Hon’ble Tribunal Amritsar vide ITA No. 91/ASR/2023, ITA exemption from income No. 135/ASR/2023 In the case of Sh. Ranjit Singh Vs. Income tax on the basis of Tax Officer Ward-1, Bathinda and M/s Ranjit Poultry Farm Vs.  Circular no. 36/2016of Deputy Commissioner of Income Tax, Bathinda covering the the CBDT and u/s 96 of same issue, wherein Hon’ble Tribunal held by the bench that the RFCTLARR Act, “In the instant case, it is a matter of record that the award of 2013 and the amount of compensation in the said case was not paid till 31.12.2014 and compensation received was paid only on 19.05.2015 as evident from bank statement” by the assessee on acquisition of land is taxable under the provisions of Income Tax Act, 1961 since the notification was issued on 04.02.2014 and award was given on 07.11.2014 and the notification regarding amendment in section 105 of the RFCTLARR Act, 2013 was issued on 31.12.2014, which was applicable from 01.01.2015.

From the perusal of the above, it submitted that our case of the assessee is completely covered matter as facts already considered in case of of Sh. Ranjit Singh Vs. Income Tax Officer Ward-1, Bathinda and M/s Ranjit Poultry Farm Vs. Deputy Commissioner of Income Tax, Bathinda vide order pronounced on 30.08.2023 vide ITA No. 91/Asr/2023 & ITA No. 135/Asr/2023 as per common chart attached.”

7. Per contra, the ld. DR relied on the impugned order. The ld. DR has failed to rebut the contention of the appellant.

8. We have heard the rival contentions, perused the material on record, written submissions, the impugned order and case law cited before us. Admittedly, the appellant assessee has claimed an amount of Rs. 2,53,70,628/- (i.e. Compensation of Rs. 1,95,15,868/- and amount of Solatium received is Rs.58,54,760/-) in the revised return of income as exemption from Income Tax in view of Section 96 of the RFCTLARR Act, 2013 and Circular no. 36/2016dated 25.10.2016. In the present case, the assessee, was given award on 07.11.2014 (stated by AO in para 4.2(i) page- 7), but it is a matter of fact that the award of compensation was paid only on 18.05.2015 (Copy of bank statement, paper book Pgs. 36 to 38).

9. The Hon’ble Supreme Court in the case of UOI vs. Tarsem Singh others dated 19.09.2019 Civil Appeal No. 7064 of 2019, 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. The Chandigarh Bench of the ITAT in the case of Satish Kumar Vs. ITO in ITA NO. 1182/Chd/2019 [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 Vs. UOI dt. 22.01.2018.

11. The Hon’ble Punjab & Haryana HC in the case of NHAI vs 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.

12. It is evident from the comparative chart, on similar facts as above, that the appellant case is covered matter in favour of assessee by the co-ordinate Amritsar Tribunal Amritsar, judgment in the case of Sh. Ranjit Singh Vs. Income Tax Officer (supra) when it has been observed as follows:

In the instant case, it is a matter of record that the award of compensation in the said case was not paid till 31.12.2014 and was paid only on 19.05.2015 as evident from bank statement and it isto be exempted u/s 96 of the RFCTLARR Act.

13. In the above view, we hold that the compensation received by the appellant assessee out of compulsory acquisition of land under National Highway Authority Act is exempt from Income Tax by virtue of section 96 of RFCTLARR Act, 2013 and clarificatory Circular no. 36/2016 dated 25.10. 2016. According, the addition of Rs.2,05,93,010/- is deleted.

14. In the result, the appeal filed by the assessee is allowed.

Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 on 09/10/2024