Compensation for NHAI land acquisition exempt from Income Tax under RFCTLARR Act - Tribunal decision

The Tribunal held that compensation received for land acquisition by NHAI is exempt from Income Tax under Section 96 of the RFCTLARR Act, as per CBDT Circular No. 36/2016. The Tribunal allowed the appeal, finding the CIT(A) unjustified in denying the exemption claim. It deemed the Section 154 application valid and the untimely rectification order invalid.

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Issues Involved:
1. Applicability of Section 24 of the Land Acquisition Act, 2013 to acquisitions under the National Highways Act, 1956.
2. Applicability of Section 96 of the Land Acquisition Act, 2013, which exempts compensation from Income Tax, to acquisitions under the National Highways Act, 1956.
3. Validity of the application under Section 154 of the Income Tax Act, 1961, for rectification of mistakes.
4. Consideration of the CBDT Circular No. 36/2016 dated 25/10/2016 in the context of exemption from Income Tax for compensation received under the RFCTLARR Act, 2013.
5. Timeliness of the rectification order passed by the Assessing Officer under Section 154 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Applicability of Section 24 of the Land Acquisition Act, 2013:
The Tribunal noted that the Ld. CIT(A) held that Section 24 of the Acquisition Act, 2013, is not applicable to acquisitions made under the NH Act, 1956. This conclusion was based on the judgment of the Hon'ble Rajasthan High Court in the case of Gopa Ram vs. Union of India & Ors., which clarified that Section 24 does not apply to the NH Act, 1956. The Tribunal agreed with this interpretation, stating that the provisions of the Acquisition Act of 2013 relating to the determination of compensation and other benefits apply to the NH Act of 1956 with effect from 01/01/2015, but Section 24 does not.

2. Applicability of Section 96 of the Land Acquisition Act, 2013:
The Ld. CIT(A) also held that Section 96 of the Land Acquisition Act, which exempts compensation from Income Tax, is not applicable to land acquisitions covered by the NH Act. The Tribunal examined the provisions of the RFCTLARR Act and the CBDT Circular No. 36/2016, which clarified that compensation received under the RFCTLARR Act is exempt from Income Tax. The Tribunal concluded that the compensation received by the assessee for the compulsory acquisition of land by NHAI is exempt from Income Tax under Section 96 of the RFCTLARR Act, as clarified by the CBDT Circular.

3. Validity of the Application under Section 154:
The Tribunal addressed the issue of the validity of the application under Section 154 of the Income Tax Act, 1961, for rectification of mistakes. The Assessing Officer had rejected the application on the grounds that it was not signed by the assessee and was filed beyond the prescribed time limit. The Tribunal noted that the application was filed through the authorized representative of the assessee and that the Power of Attorney was furnished before the Ld. CIT(A). The Tribunal held that the application was valid and maintainable, as the Ld. CIT(A) had dealt with the issue on merit without adversely commenting on the signing of the application by the representative or the timeliness of the application.

4. Consideration of the CBDT Circular No. 36/2016:
The Tribunal emphasized the importance of the CBDT Circular No. 36/2016, which clarified that compensation received under the RFCTLARR Act is exempt from Income Tax. The Tribunal noted that the Circular is binding on the Income Tax Authorities and must be given effect to, even if issued after the filing of the return. The Tribunal referred to the judgment of the Hon'ble Punjab & Haryana High Court in the case of B.S. Bajaj & Sons Vs. CIT, which held that benevolent circulars providing administrative relief to the assessee must be taken notice of and given effect to.

5. Timeliness of the Rectification Order:
The Tribunal addressed the issue of the timeliness of the rectification order passed by the Assessing Officer under Section 154 of the Income Tax Act, 1961. The Tribunal noted that the application under Section 154 was filed on 03/01/2018, and the order rejecting the application was passed on 14/11/2018, which was beyond the prescribed time limit of six months. The Tribunal held that the rectification order was not passed within the time allowed under Section 154(8) of the Act and was therefore invalid.

Conclusion:
The Tribunal concluded that the compensation received by the assessee for the compulsory acquisition of land by NHAI is exempt from Income Tax under Section 96 of the RFCTLARR Act, as clarified by the CBDT Circular No. 36/2016. The Tribunal allowed the appeal of the assessee, holding that the Ld. CIT(A) was not justified in confirming the action of the Assessing Officer in not accepting the claim of the assessee for exemption of the compensation received. The Tribunal also held that the application under Section 154 was valid and maintainable and that the rectification order was not passed within the prescribed time limit. The appeal of the assessee was allowed.

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