Land acquisition compensation exemption extended to National Highways acquisitions; bona fide delay justified liberal condonation for return filing.

Compensation for land acquired under the National Highways Act, 1956 was treated as falling within the beneficial compensation regime of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, so Section 96 was held to bar income tax and tax deduction at source on such compensation. The CBDT clarification and the proviso to Section 194LA were noted as supporting that position. On delay in filing returns, the expression "genuine hardship" under Section 119(2)(b) was applied liberally, and a bona fide explanation based on ill health and death of the assessee justified condonation so the return could be received and processed.

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Issues: (i) Whether Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 applies to compensation payable for land acquired under the National Highways Act, 1956 and whether such compensation is exempt from income tax and tax deduction at source under the Income-tax Act, 1961; (ii) Whether refusal to condone the delay in filing the income tax returns under Section 119(2)(b) of the Income-tax Act, 1961 was justified.

Issue (i): Whether Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 applies to compensation payable for land acquired under the National Highways Act, 1956 and whether such compensation is exempt from income tax and tax deduction at source under the Income-tax Act, 1961

Analysis: The compensation was paid after the commencement of the 2013 Act. The Court held that the National Highways Act, 1956 falls within the enactments covered by the Fourth Schedule and that the later ordinances, removal-of-difficulties order, notifications and governmental clarifications extended the beneficial compensation regime of the 2013 Act to acquisitions under the National Highways Act, 1956. On that basis, Section 96, which bars levy of income tax on awards or agreements made under the 2013 Act, was held applicable to such compensation. The CBDT circular clarifying that compensation exempted under Section 96 would not be taxable under the Income-tax Act, 1961, and the later insertion of the proviso to Section 194LA, reinforced this position.

Conclusion: The issue was answered in favour of the assessee. Compensation for land acquired under the National Highways Act, 1956 is exempt from income tax and tax deduction at source.

Issue (ii): Whether refusal to condone the delay in filing the income tax returns under Section 119(2)(b) of the Income-tax Act, 1961 was justified

Analysis: The delay was linked to the assessee's ill health and subsequent demise, and the legal heir sought relief as the compensation itself was claimed to be exempt. The Court applied the settled approach that the expression "genuine hardship" in Section 119(2)(b) must receive a liberal and justice-oriented construction, and that condonation is meant to enable adjudication on merits where the delay is not deliberate or mala fide. The explanation for delay was treated as bona fide and sufficient.

Conclusion: The refusal to condone delay was unjustified. The application under Section 119(2)(b) deserved to be allowed.

Final Conclusion: The impugned order was unsustainable in law, the exemption claim succeeded, and the delay in filing the return was directed to be condoned so that the return could be received and processed in accordance with law.

Ratio Decidendi: Where compensation for land acquisition under the National Highways Act, 1956 is governed by the beneficial regime of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, the statutory exemption from income tax extends to such compensation, and a bona fide explanation showing genuine hardship warrants liberal condonation of delay under Section 119(2)(b) of the Income-tax Act, 1961.

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