2022 (9) TMI 708 - AT - Income Tax

Nature of receipts - Taxability of the compensation received by the land owners for the land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ('RFCTLAAR Act') - HELD THAT - It is seen that the Government had compulsorily acquired the land of the assessee vide Award dated 15.01.2014 whereas the compensation cheque was dated 20.03.2015. It is also not in dispute that this land was acquired by the National Highways Authority of India in terms of section 3(A)(1) of the National Highway Act, 1956 for the purpose of widening of National Highway No. 64 on the stretch of land from KM 5.700 to KM 209.55 on Patiala Sangrur Bhatinda Section in District Sangrur in the state of Punjab. It is also not in dispute that vide Notification No. SO1138 (E) dated 03.05.2013, the Central Government had duly published the Notification regarding the acquisition and had also specified that the said land was to vest absolutely in the Central Government free from all encumbrances. The facts in this case are identical to the facts in the case of DCIT Vs. Shri Ram Gopal 2022 (7) TMI 256 - ITAT CHANDIGARH held that the compensation on such compulsorily acquired land was exempt from taxation. In this case, the Division Bench had duly taken note of the fact that land had been acquired from about 3000 land owners and only 636 land owners had been disbursed compensation till 31.12.2014 and the majority of land owners were given payments after 31.11.2014 i.e. after the date of coming into operation of the RFCTLARR Act. CIT(A) was not justified in confirming the action of the A.O. in not accepting the claim of the assessee for exemption of the compensation received on compulsory acquisition of land acquired by the Land Acquisition Officer from Income Tax In the present case also, although the date of award is prior to 31.12.2014, the cheque for compensation was received after first January 2015 and, therefore, the order of the Division Bench of the ITAT in the case of DCIT Vs. Ram Gopal (supra) would squarely cover the case of this assessee as well. Also see another case i.e. of Shri Satish Kumar, Sangrur and Other 2021 (12) TMI 161 - ITAT CHANDIGARH - Thus allow the appeal of the assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Taxability of compensation received on compulsory acquisition of land.
3. Taxability of additional compensation as interest under Section 56.

Issue-wise Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The assessee filed an appeal with a delay of 204 days, citing medical reasons and the COVID-19 pandemic as causes for the delay. The Tribunal considered the medical condition of the assessee's husband and the Supreme Court's extension of the limitation period due to the pandemic. The Tribunal deemed it appropriate to condone the delay, stating, "no assessee would benefit by delaying the filing of appeal except at her or his own peril," and admitted the appeal for regular hearing.

2. Taxability of Compensation Received on Compulsory Acquisition of Land:
The primary issue was whether the compensation received for the compulsory acquisition of land by the National Highways Authority of India (NHAI) was taxable. The assessee argued that the compensation was exempt under Section 10(37) of the Income Tax Act, in light of CBDT Circular No. 36/2016, which clarified that compensation received under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act) is exempt from tax.

The Tribunal noted that the facts of the case were identical to previous cases where compensation received under similar circumstances was deemed exempt. Specifically, the Tribunal referred to the case of DCIT Vs. Shri Ram Gopal, where it was held that compensation for compulsorily acquired land was exempt from taxation. The Tribunal reiterated that "all compensations received qua this Act are not taxable," and emphasized that the CBDT Circular No. 36/2016 extended the exemption to all types of land, not just agricultural land.

3. Taxability of Additional Compensation as Interest under Section 56:
The assessee also contested the addition of Rs. 1,05,918/- under the head "income from other sources" on account of 50% of interest received on compensation. The Tribunal observed that the CBDT Circular and judicial precedents clarified that solatium and interest are part of the compensation and thus exempt from tax under the RFCTLARR Act. The Tribunal cited previous judgments, including the case of Shri Satish Kumar, Sangrur, which held that compensation received under the RFCTLARR Act, including solatium and interest, is exempt from income tax.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the compensation received for the compulsory acquisition of land by NHAI was exempt from tax under the RFCTLARR Act and CBDT Circular No. 36/2016. The Tribunal also held that the interest received as part of the compensation was similarly exempt. The order pronounced that the appeal of the assessee stands allowed.