2021 (6) TMI 459 - AT - Income Tax

LTCG on compulsory acquisition - compensation received in lieu of land compulsorily acquired by the government - compensation received to appellant against the acquisition taken exempt in the return of income filed being received to appellant as per RFCTLARR Act - HELD THAT - It is abundantly clear that no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under RFCTLARR Act. The exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax exemption provided under the existing provisions of Income-tax Act, 1961. This clearly meets the argument of the assessing officer the CIT(A) that exemption under the RFCTLARR Act , are even applicable to non-agricultural. The reading of the provisions of section 105(3) read with fourth schedule made it abundantly clear that the provisions of RFCTLARR Act2013, shall be applicable to the enactments mentioned in fourth schedule, if, the central government, within one year of passing of the Act, issues the notification in that regard mentioning therein that RFCTLARR Act 2013shall apply with such exceptions or modifications to enactment namely The National Highways Act, 1956 (48 of 1956). In the absence of notification the benefit under section 96 of RFCTLARR Act 2013, cannot be extended to the assessee. In our view the exemption is required to be specifically granted by the statute and it cannot be inferred or drawn. It is the duty of the assessee to make out his case unequivocally, if wanted to get the benefit of exemption that the exemption provided under section 96 of the RFCTLARR Act 2013 is applicable to the assessee.Therefore, the assessee is not liable to pay income tax for long-term capital gain. Needful has not been done by the assessee either before the lower authority or before us. As mentioned by the assessing officer in the assessment order, the acquisition award under the National Highway authority act 1956 was passed on 24.2.2014, though cheques were received on 27/1/2015. In our considered opinion, the chargeability of the income is required to be determined in accordance with section 4 and 5 of the Income Tax Act 1961 - Decided against assessee.

Summary

Issues Involved:
1. Applicability of RFCTLARR Act for exemption on capital gains.
2. Classification of land as a capital asset.
3. Timing and applicability of tax exemption based on acquisition date.

Detailed Analysis:

1. Applicability of RFCTLARR Act for exemption on capital gains:
The primary issue was whether the compensation received for the compulsory acquisition of land by the government is exempt from capital gains tax under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act (RFCTLARR Act). The assessee argued that the land was acquired under the RFCTLARR Act, thus exempting the compensation from capital gains tax as per the CBDT Circular No. 36/2016. However, the authorities contended that the land was acquired under the National Highway Act, 1956, not the RFCTLARR Act. The tribunal noted that the acquisition proceedings commenced and concluded under the National Highway Act, 1956, and no notification was issued by the central government extending the benefits of the RFCTLARR Act to acquisitions under the National Highway Act. Consequently, the exemption under section 96 of the RFCTLARR Act could not be applied.

2. Classification of land as a capital asset:
The CIT(A) determined that the land in question was not agricultural and thus classified it as a capital asset. The appellant's claim that the land was agricultural and situated within urban limits was rejected. The tribunal upheld this classification, noting that the land was not used for agricultural purposes in the preceding two years before the acquisition, as required under section 10(37) of the Income Tax Act, 1961, for agricultural land to be exempt from capital gains tax.

3. Timing and applicability of tax exemption based on acquisition date:
The tribunal examined the timing of the acquisition and the applicability of the RFCTLARR Act. The acquisition award was passed on 24.02.2014 under the National Highway Act, 1956, and cheques were issued on 27.01.2015. The tribunal referenced a previous decision in the case of Shri Krishna Kumar Sharma, which established that the RFCTLARR Act did not apply to acquisitions completed before its enactment date of 01.01.2014. The tribunal concluded that the cut-off date for determining taxability is the date when the compensation is accrued, not when it is received. Since the award was passed before the RFCTLARR Act came into effect, the compensation was taxable as long-term capital gain.

Conclusion:
The tribunal dismissed both appeals, affirming that the compensation received by the assessee for the compulsory acquisition of land under the National Highway Act, 1956, is taxable as long-term capital gain. The RFCTLARR Act's exemptions were deemed inapplicable due to the timing of the acquisition and the absence of specific notifications extending its benefits to the National Highway Act.