Compulsory acquisition compensation and agricultural land tax exemption require factual verification before capital gains liability is ined.

An assessee's delay in filing the appeal was condoned because it was attributable to incorrect professional advice and pursuit of the wrong forum, and relevant additional evidence was admitted as bearing on the core dispute. On the tax issue, compensation for compulsory acquisition of agricultural land under the National Highways Act, 1956 was considered capable of exemption under section 96 of the 2013 land acquisition law, and agricultural land outside the statutory urban limits was noted as not constituting a capital asset under section 2(14)(iii) of the Income-tax Act. As the factual foundation had not been examined, the matter was remanded to the Assessing Officer for verification and fresh consideration of exemption and capital gains taxability.

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Issues: (i) Whether the delay in filing the appeal and the application for additional evidence deserved to be entertained. (ii) Whether compensation received on compulsory acquisition of agricultural land under the National Highways Act, 1956 was exempt from income tax and whether the land ceased to be a capital asset so as to exclude the receipt from capital gains tax.

Issue (i): Whether the delay in filing the appeal and the application for additional evidence deserved to be entertained.

Analysis: The delay was found to have occurred because the assessee had acted on incorrect professional advice and had pursued the wrong forum before approaching the Tribunal. The Tribunal adopted a liberal, justice-oriented approach to condonation. The documents sought to be produced were also found relevant to the core controversy and were admitted as additional evidence.

Conclusion: The delay was condoned and the additional evidence was admitted.

Issue (ii): Whether compensation received on compulsory acquisition of agricultural land under the National Highways Act, 1956 was exempt from income tax and whether the land ceased to be a capital asset so as to exclude the receipt from capital gains tax.

Analysis: The Tribunal accepted the legal position that compensation paid for acquisition under the National Highways Act, 1956 can fall within the exemption in section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, and also noted that agricultural land outside the statutory urban limits would not constitute a capital asset under section 2(14)(iii) of the Income-tax Act, 1961. As the factual foundation for these claims had not been examined below, the Tribunal considered it appropriate to restore the matter for verification.

Conclusion: The matter was remanded to the Assessing Officer to verify the facts and, if the claims are established, to treat the compensation as exempt and not chargeable under capital gains.

Final Conclusion: The appeal succeeded only to the extent of remand and verification, with the assessee obtaining the opportunity to substantiate the exemption and non-taxability claims before the Assessing Officer.

Ratio Decidendi: An assessee may raise a bona fide additional legal claim before the Tribunal, and compensation for compulsory acquisition of land may be exempt where the governing acquisition law and the character of the land attract the statutory exclusion, subject to factual verification on remand.

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