Compulsory acquisition compensation exempt under land acquisition law was not taxable as long-term capital gain

Compensation received on compulsory acquisition of land was held not taxable as long-term capital gain where the award fell within section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The Tribunal applied the CBDT circular stating that compensation exempt from income-tax under that provision is not taxable under the Income-tax Act, 1961, even if the land is non-agricultural and no separate exemption is claimed under the Income-tax Act. The Revenue's challenge to the exemption was rejected, and the addition towards long-term capital gain was not sustained.

---

---

Issues: Whether compensation received on compulsory acquisition of land was taxable as long-term capital gain, or exempt in view of the applicable statutory provisions and CBDT circular.

Analysis: The compensation arose from compulsory acquisition of land covered by the land acquisition regime under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The Tribunal noted the CBDT circular clarifying that compensation received in respect of an award or agreement exempt from levy of income-tax under section 96 of that Act is not taxable under the Income-tax Act, 1961, even where the compensation relates to non-agricultural land and even if no separate exemption is available under the Income-tax Act. The Tribunal also accepted that the order of the first appellate authority was reasoned and that the Revenue's challenge to the exemption could not be sustained.

Conclusion: The compensation received on compulsory acquisition was not taxable, and the addition made towards long-term capital gain was not justified. The Revenue's challenge failed.

Ratio Decidendi: Compensation received for compulsory acquisition of land that is exempt from levy of income-tax under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 is not taxable under the Income-tax Act, 1961 merely because no separate exemption provision is invoked thereunder.

---