Land acquisition compensation exemption applies to non-agricultural land under the 2013 regime and CBDT clarification.

Compensation received on compulsory acquisition of land under the National Highways acquisition framework was held exempt from income-tax because section 96 of the 2013 land acquisition regime applies to awards and agreements made under that Act, except those under section 46. CBDT Circular No. 36/2016 clarified that the exemption is not limited to agricultural land and extends to non-agricultural land as well. The relevant acquisition scheme under section 105(3) brought the 2013 Act framework into operation for the compensation, so the disallowance of exemption was unsustainable.

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Issues: Whether compensation received for compulsory acquisition of land under the National Highways regime was exempt from income-tax in view of section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and CBDT Circular No. 36/2016 dated 25.10.2016.

Analysis: The compensation in question arose from compulsory acquisition by NHAI. The statutory scheme under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, particularly section 96, grants income-tax exemption to awards or agreements made under that Act, except those under section 46. The Board's Circular No. 36/2016 clarified that such exemption is not confined to agricultural land and extends equally to non-agricultural land. The reasoning also accepted that the applicable acquisition regime under section 105(3) of the 2013 Act brought the relevant compensation framework into operation for acquisitions under the National Highways Act, 1956, and that a clarificatory benevolent circular must be given effect to where applicable.

Conclusion: The compensation received by the assessee was exempt from income-tax, and the disallowance of the exemption was unsustainable.

Final Conclusion: The appeals succeeded because the compensation received on compulsory acquisition of land was held to be outside the income-tax charge in the facts of the case.

Ratio Decidendi: Compensation received under the 2013 land acquisition regime, as clarified by a binding benevolent circular, is exempt from income-tax even where the acquired land is non-agricultural, provided the statutory conditions for exemption are satisfied.

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