2023 (8) TMI 1617 - AT - Income Tax

Compensation for compulsory land acquisition under National Highway Act governed by RFCTLARR Act 2013 provisions

ITAT Amritsar held that compensation received for compulsory land acquisition under National Highway Act, 1956 was governed by RFCTLARR Act, 2013 ... LTCG arising from Compulsory Acquisition of Land under the National Highway Act, 1956 - HELD THAT:- Hon’ble Supreme court in the case of UOI vs. Tarsem Singh others [2019 (9) TMI 1480 - SUPREME COURT] observed that the provisions of RFCTLARR Act, 2013 are applicable to land acquired under national highway Act and the compensation has to be calculated and paid in accordance with the provisions of RFCTLARR Act, 2013. As in the case of NHAI v. Modan Singh and Others [2023 (4) TMI 1396 - PUNJAB AND HARYANA HIGH COURT] wherein it has been held that the RECTLAAR Act, 2013 would apply to cases wherein award has been awarded prior to 31.12.2014 but compensation is not paid yet till 31.12.2014, even though the said acquisitions have been done under the NHAI Act, 1956. In the instant case, it is a matter of record that the award of compensation was not paid yet till 31.12.2014 and was paid only on 19.05.2015 as evident from bank statement Thus, we hold that the decision of Ld. CIT(A) is infirm and perverse to the facts on record. Accordingly, we set aside the impugned order, and as such, the addition is deleted. Decided in favour of assessee. 1. ISSUES PRESENTED and CONSIDEREDThe core issue considered in this judgment is whether the assessee is eligible for exemption from Long Term Capital Gains (LTCG) tax on compensation received from the compulsory acquisition of land under the National Highways Act, 1956, by relying on Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act), and the clarificatory Circular No.36/2016 dated 25-10-2016.2. ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework primarily involves the interpretation of Section 96 of the RFCTLARR Act, 2013, which provides exemption from income tax for compensation received under the Act. The applicability of this section to acquisitions under the National Highways Act, 1956, is central to the dispute. The Tribunal also considered Circular No.36/2016, which provides clarification on the applicability of tax exemptions under the RFCTLARR Act.Court's Interpretation and ReasoningThe Tribunal examined whether the compensation received by the assessee for land acquired under the National Highways Act could be exempted under the RFCTLARR Act. The Tribunal noted that the compensation was received after the RFCTLARR Act came into force, and the Ministry of Road Transport & Highways had clarified that certain provisions of the RFCTLARR Act apply to acquisitions under the National Highways Act.Key Evidence and FindingsThe Tribunal considered the following key evidence: The notification for land acquisition was issued on 04.02.2014, and the award was given on 07.11.2014, but the compensation was paid on 19.05.2015.The Ministry of Road Transport & Highways' letter dated 28.12.2017, which stated that compensation for acquisitions under the National Highways Act, where awards were not announced or compensation was not paid by 31.12.2014, should be calculated as per the RFCTLARR Act.Judicial precedents, including decisions from the Supreme Court and various High Courts, confirming the applicability of the RFCTLARR Act to acquisitions under the National Highways Act.Application of Law to FactsThe Tribunal applied the legal principles to the facts of the case, concluding that since the compensation was paid after the RFCTLARR Act came into force, the exemption under Section 96 of the RFCTLARR Act was applicable. The Tribunal distinguished the present case from others where compensation was received before the RFCTLARR Act's applicability date.Treatment of Competing ArgumentsThe Tribunal addressed the arguments presented by the Assessing Officer and the CIT(A), who had denied the exemption based on earlier precedents and the timing of the award. The Tribunal found these arguments unpersuasive in light of the Ministry's clarification and the timing of the compensation payment.ConclusionsThe Tribunal concluded that the assessee was entitled to the exemption under Section 96 of the RFCTLARR Act for the compensation received, as the payment was made after the relevant provisions became applicable.3. SIGNIFICANT HOLDINGSCore Principles EstablishedThe Tribunal established that compensation received for land acquired under the National Highways Act could be exempt from income tax under Section 96 of the RFCTLARR Act if the payment was made after the Act's provisions became applicable. The Tribunal emphasized the importance of considering the timing of the payment and the Ministry's clarifications.Final Determinations on Each IssueThe Tribunal held that the compensation received by the assessee was exempt from LTCG tax. The Tribunal set aside the orders of the CIT(A) and the Assessing Officer, allowing the appeals of the assessee.In conclusion, the Tribunal's decision underscores the applicability of the RFCTLARR Act's tax exemption provisions to land acquisitions under the National Highways Act, provided the compensation is paid after the relevant provisions come into force.