Compensation for compulsory land acquisition is exempt from income-tax, while agricultural income claims may need fresh verification.

Agricultural receipts claimed as income were not finally accepted because the ownership and use of the lands, and the Forms J standing in the director's name, required fresh verification; the issue was remanded to the Assessing Officer for further enquiry. Compensation for compulsory acquisition of land by NHAI was held exempt from income-tax under section 96 of the RFCTLARR Act, 2013, read with the amended section 105(3), and the addition was deleted. The Tribunal also relied on CBDT Circular No. 36 of 2016, which confirms that such acquisition compensation is not taxable under the Income-tax Act, 1961.

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Issues: (i) Whether the addition made by treating agricultural income as unexplained income under section 68 required deletion or further verification. (ii) Whether compensation received on compulsory acquisition of land by NHAI was exempt from income-tax under the RFCTLARR Act, 2013.

Issue (i): Whether the addition made by treating agricultural income as unexplained income under section 68 required deletion or further verification.

Analysis: The assessee produced fresh evidence before the first appellate authority and also relied on documents before the Tribunal to support the agricultural receipts. The record, however, showed that the ownership and use of agricultural and commercial lands required verification, and the Forms J were found in the name of the director rather than the assessee-company. The Tribunal therefore found that the factual basis for the claim had not been conclusively established and that proper verification by the Assessing Officer was necessary.

Conclusion: The issue was restored to the Assessing Officer for fresh verification and was not finally allowed on merits; the assessee obtained only limited relief.

Issue (ii): Whether compensation received on compulsory acquisition of land by NHAI was exempt from income-tax under the RFCTLARR Act, 2013.

Analysis: Section 96 of the RFCTLARR Act, 2013 grants exemption from income-tax on awards made under that Act, and the amended section 105(3), effective from 01.01.2015, removed the earlier requirement of a notification for the Fourth Schedule enactments. The Tribunal also relied on CBDT Circular No. 36 of 2016, which clarifies that compensation for compulsory acquisition under the RFCTLARR Act is not taxable under the Income-tax Act, 1961 even for non-agricultural land. On that basis, the compensation received for NHAI acquisition was treated as falling within the statutory exemption.

Conclusion: The compensation was held exempt and the addition was deleted.

Final Conclusion: The matter ended with limited remand on the agricultural-income issue, while the exemption claim relating to land-acquisition compensation was accepted in full.

Ratio Decidendi: Compensation awarded on compulsory acquisition of land under the RFCTLARR Act, 2013 is exempt from income-tax under section 96, and the exemption extends to acquisitions under enactments in the Fourth Schedule after the amended section 105(3) became operative.

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