Land acquisition annuity treated as part of statutory compensation and exempt from income tax under the rehabilitation framework.

Annuity received by a landowner under the rehabilitation and resettlement framework linked to compulsory acquisition is treated as part of the statutory land acquisition award. The 2013 land acquisition law recognises rehabilitation and resettlement entitlements, including annuity, within the compensation scheme, and section 96 bars income tax on any award or agreement under that Act. The CBDT circular states that compensation exempt under this provision is not taxable under the Income-tax Act even without a separate exemption there. On that basis, the annuity is treated as a non-taxable monetary benefit flowing from the award rather than a separate taxable receipt.

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Issues: Whether annuity received by a landowner under the rehabilitation and resettlement policy connected with compulsory acquisition of land is exempt from income tax as part of the award under the land acquisition regime.

Analysis: The annuity was examined in the context of the rehabilitation and resettlement framework under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The statutory scheme shows that rehabilitation and resettlement entitlements form part of the land acquisition award, and annuity is specifically recognised among those entitlements. Section 96 of the 2013 Act bars levy of income tax on any award or agreement under that Act, and the CBDT circular clarifies that compensation exempt under that provision is not taxable under the Income-tax Act, 1961 even if no separate exemption exists thereunder. On that basis, the annuity was treated as a quantifiable monetary benefit flowing from the award and not as a separately taxable receipt.

Conclusion: The annuity was held to be exempt from income tax and the addition was unsustainable.

Ratio Decidendi: Amounts received as rehabilitation and resettlement entitlements, including annuity paid under the compulsory acquisition compensation framework, form part of the statutory award and are not taxable where the governing land acquisition statute exempts the award from income tax.

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