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2020 (5) TMI 465 - HC - Income TaxExemption from income-tax under the RFCTLARR Act Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - compensation received for compulsory acquisition of agricultural land and non-agricultural land - compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act - HELD THAT - There is force and merit in the submissions. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 came into force with effect from 01.01.2014. It is a matter of record that the parties to the lis; viz., the petitioner and the acquisition authority, for the purpose of coming out the way development had in unison agreed to acquire and give the land on the basis of certain conditions in fixing the market value. Petitioner, in lieu, thereof received 80% of the amount, i.e., ₹ 43,51,786/-. I would not be commenting on the claim of the petitioner with regard to the balance amount, as the matter is subjudice in this Court. The language of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, do not leave any doubt in the mind that if the land is either acquired or the result of an agreement, it could not fall within the mischief of Income Tax Act, in other words, exemption is liable to be granted. Central Board of Direct Tax vide the Circular No.36/2016 dated 25.08.2016 came out with a clarification that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961 - Thus assessment and demand notice cannot sustain and are hereby quashed. Decided in favour of assessee.
Issues:
Assessment order and demand notice challenged under the Income Tax Act, 1961. Analysis: The petitioner contested the assessment order and demand notice issued by the Income Tax Department regarding the acquisition of land for various projects. The petitioner, as the owner of the land, had a portion acquired for road expansion, and compensation was determined under the Old Land Acquisition Act. The petitioner argued that the acquisition was governed by the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, and an agreement was reached for compensation. The petitioner received 80% of the amount, with the remaining 20% pending. The petitioner claimed that the compensation should be exempted under Section 96 of the 2013 Act, not falling under the Income Tax Act's purview. The petitioner cited Circular No.36/2016, indicating non-taxability of non-agricultural land under the Income Tax Act. The Income-tax Standing Counsel acknowledged the circular but contended that the construction on the land did not meet the criteria for exemption from Capital gains. After hearing both parties, the Court found merit in the petitioner's arguments. The Court noted the agreement between the petitioner and the acquisition authority, emphasizing that the compensation received should be exempt under Section 96 of the 2013 Act. The Court highlighted the wider scope of exemption under the 2013 Act compared to the Income Tax Act, as clarified in Circular No.36/2016. The Court held that the assessment order and demand notice were unsustainable in law, quashing them accordingly. The Court disposed of the writ petition in favor of the petitioner, citing the inconsistency between the circular and the Assessing Officer's assessment. This judgment emphasizes the importance of aligning land acquisition compensation with the provisions of the relevant Acts to determine tax liability accurately. The Court's decision to quash the assessment order and demand notice underscores the need for adherence to legal provisions and clarifications issued by competent authorities to avoid erroneous tax assessments.
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