Land acquisition compensation exemption upheld under Section 96, with depreciable asset status held irrelevant to taxability.

Compensation received under an award under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 is exempt from income tax under Section 96, except for the limited exception in Section 46. The Kerala HC treated the wording of Section 96 as clear and unambiguous and held that the character of the acquired asset, including whether it was depreciable, does not affect the exemption. The court also relied on the CBDT circular and the proviso to Section 194LA of the Income-tax Act, 1961 as consistent support for this interpretation. The compensation was therefore not taxable, and the assessment based on taxability could not stand.

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Issues: Whether compensation received under an award passed under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, including compensation relating to a depreciable asset, is exempt from income tax under Section 96 of that Act.

Analysis: Section 96 of the 2013 Act was held to be clear and unambiguous and to exempt any award or enhancement made under the Act from income tax, except in the limited situation carved out by Section 46. The nature of the acquired asset was found to be irrelevant to the statutory exemption. The court also relied on the CBDT circular clarifying that compensation received under an award under the 2013 Act is not taxable, and on the proviso introduced in Section 194LA of the Income-tax Act, 1961, as supporting the same position.

Conclusion: The compensation received under the award was not liable to income tax, and the assessment made on that basis was unsustainable.

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