Land acquisition compensation exemption applied to solatium received under the RFCTLARR framework, deleting the tax addition.

Compensation, including solatium, received for compulsory acquisition of land under the National Highways Act was treated as exempt from income tax because section 96 of the RFCTLARR Act, 2013 and CBDT Circular No. 36/2016 were held applicable on the facts. The award was made on 07.11.2014, but payment was actually received on 18.05.2015, and the matter was treated as covered by an earlier coordinate bench decision on identical facts. The resulting tax addition was deleted.

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Issues: Whether compensation, including solatium, received for compulsory acquisition of land under the National Highways Act, 1956 was exempt from tax by virtue of section 96 of the RFCTLARR Act, 2013 and CBDT Circular No. 36/2016.

Analysis: The award had been made on 07.11.2014, but the compensation was actually received only on 18.05.2015. The issue was treated as covered by the earlier coordinate bench decision on identical facts, and the Tribunal also noted the legal position that the RFCTLARR Act, 2013 applies to land acquired under the National Highways Act where the compensation situation falls within the relevant statutory framework. On that basis, the exemption under section 96 and the clarificatory circular were held applicable to the compensation received in the present case.

Conclusion: The compensation received by the assessee for compulsory acquisition of land was exempt from income tax, and the addition made by the Assessing Officer was deleted.

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