2021 (12) TMI 161 - AT - Income Tax

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

Shri Satish Kumar, Smt. Urmila Garg C/o Snagrur Surgical and Laproscope Centre Versus The ITO Ward Sangrur, Sangrur

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 ... Exemption from the Income Tax of the compensation received on acquisition of land - whether the impugned transaction is exempt being covered under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 - (RFCTALARR Act, 2013) ? - whether the provisions of RFCTLARR Act, 2013 are applicable to the NH Act 1956 or not? - HELD THAT:- In the present case it is not in dispute that the assessee received compensation on account of land acquired by NHAI. As per the provisions of section 96 of the RFCTLARR Act, the exemption from Income Tax and Stamp Duty would apply to an award or agreement made under the new Act which came into force on 01/01/2014. In the instant case the assessee filed its return of income on 30/11/2015 as he was waiting for the clarification from the Income Tax Department wherein the subject of exemption from Income Tax on the compensation received on commercial land might get clear and the clarification from the CBDT came vide Circular No. 36/2016 dt. 25/10/2016. From para 3 of the aforesaid Circular it would be clear that 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 the RFCTLARR Act, 2013. Applicability of the Acquisition Act 2013 has been given effect to the NH Act 1956 w.e.f 01/01/2015 and the assessee received the compensation on 05/11/2014 & 23/11/2015. In the present case also the land was compulsorily acquired by NHAI therefore the compensation received by the assessee was exempted under the Income Tax Act. Since the clarificatory Circular was issued by the CBDT on 25/10/2016 i.e; after the date of filing the return by the assessee on 30/11/2015 that is why an application under section 154 of the Act was moved by the assessee. CBDT vide Circular No. 36/2016 dt. 25/10/2016 clarified that the compensation received in respect of award or agreement which has been exempt from levy of Income Tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income Tax Act, 1961 even if there is no specific provisions of exemption for such compensation in the Income Tax Act, 1961. In the said Circular it is also clarified that no distinction had been made towards compensation received for compulsory acquisition of agricultural land and non agricultural land in the matter of providing exemption from Income Tax under the RFCTLARR Act. In the instant case the assessee received compensation for compulsory acquisition of commercial land during the F.Y. 2014-15 which was exempted under section 96 of the RFCTLARR Act, as clarified by the CBDT Circular No. 36/2016 dt. 25/10/2016. We therefore considering the totality of the fact as discussed hereinabove are of the view that the Ld. CIT(A) was not justified in confirming the action of the A.O. in not accepting the claim of the assessee for exemption of the compensation received on compulsory acquisition of land acquired by the Land Acquisition Officer from Income Tax. Accordingly the appeal of the assessee is allowed. 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.