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TMI Blog2021 (12) TMI 161X X X X Extracts X X X X X X X X Extracts X X X X ..... came vide Circular No. 36/2016 dt. 25/10/2016. From para 3 of the aforesaid Circular it would be 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 the RFCTLARR Act, 2013. Applicability of the Acquisition Act 2013 has been given effect to the NH Act 1956 w.e.f 01/01/2015 and the assessee received the compensation on 05/11/2014 23/11/2015. In the present case also the land was compulsorily acquired by NHAI therefore the compensation received by the assessee was exempted under the Income Tax Act. Since the clarificatory Circular was issued by the CBDT on 25/10/2016 i.e; after the date of filing the return by the assessee on 30/11/2015 that is why an application under section 154 of the Act was moved by the assessee. CBDT vide Circular No. 36/2016 dt. 25/10/2016 clarified that the compensation received in respect of award or agreement which has been exempt 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 provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le giving finding merely relying on judgement of the Hon'ble High Court of Rajasthan. 5. On the facts and circumstances of the case the Ld. CIT(Appeals) has erred in having confirmed the order u/s 154 passed by the Ld. A.O. in not allowing the exemption from capital gains on compulsory acquisition of assessee s land. The assessee craves leave to add to alter or amend the above grounds of appeal before the same is heard or disposed of. 4. The main grievance of the assessee relates to the exemption from the Income Tax of the compensation received on acquisition of land. 5. Facts of the case in brief are that the assessee filed the return of income on 30/11/2015 declaring an income of ₹ 1,59,97,586/- after deduction under Chapter-VIA of the Income Tax Act, 1961 (hereinafter referred to as Act ) plus agriculture income of ₹ 50,000/- and exempt income of ₹ 21,858/- under section 10 of the Act. The said return was processed under section 143(1) of the Act on 14/12/2015. Thereafter the Ld. Counsel for the assessee filed an application under section 154 of the Act on 03/01/2018 stating therein that the assessee had received compensation, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Income Exempt u/s 10 ₹ 21,858/- ₹ 21,858/- 5.1 The A.O. observed that during the year under consideration the assessee had received compensation for compulsory acquisition of his Agriculture and Commercial land as under: Sr. No. Certificate s No. Date Nature of Land Date of Receipt of compensation Total Compensation (Rs.) TDS Deducted (Rs.) Net Compensation received (Rs.) 1. 322 19.10.2015 Agriculture Land 05.11.2014 2,68,676/- - 2,68,676/- 2. 245 10.07.2015 Commercial Land 23.01.2015 1,54,53,202/- 15,45,320/- 1,39,07,882/- 5.2 The assessee appended note to the aforesaid details of the compensation received as under: Note: As per certificate from the O/o the Collector Land Acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Fair compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTALARR Act, 2013), which is exempt u/s 96 of this act but CBDT has issued circular no 36/2016 as on 25/10/2016. In original return the appellant had considered compensation received as taxable income under the head Short term Capital gain and Long term Capital gain and the above said circular was issued after the period of due date of filing of return. As soon as the appellant came to know about this circular, he has filed rectification application u/s 154 as on 03/01/2018 in which income under the head capital gain has been claimed as exempt and demand a refund of taxes paid on income taken under capital gain head as per the circular no 36/2016 dtd 25/10/2016 along with copy of the circular issued by CBDT along with original ITR with computation as well as rectified computation of income. The learned AO has rejected the application on dtd. 09/11/2018. Now present appeal has been filed for getting relief. Ground No. 2: The Impugned order is illegal and time barred as the same has not been passed within prescribed time mentioned u/s 154(8) of the Income Tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion by saying that the assessee intends his case to be decided as per the particulars which were not shown in the return of income and the assessee wants to do now is to make a fresh claim on the basis of fresh material, which is not permissible u/s 154 because the aseessee has neither claimed the relevant relief in his original return nor any return has been revised to this effect as per the relevant provisions of the law. As we have submitted earlier that the assessee has received compensation on commercial land under Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTALARR Act, 2013) during the FY 2014-15 which was clearly exempt u/s 96 of this act but as per the provisions .of I.T. Act, 1961 there is provision of exemption of capital gain on acquisition of agricultural land but there is no provision of exemption on acquisition of commercial land. As the assessee has received compensation on acquisition of commercial land during the FY 2014-15, due date to file the return was 07/09/2015 but the assessee has filed his return delayed i.e as on 30/11/2015 due to waiting any clarification from Income Tax Department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the above said circular, it is prayed that appropriate relief may kindly be granted after considering the above submissions. 6.1 The Ld. CIT(A) after considering the submissions of the assessee held that as per the provisions of section 56(2)(viii) of the Act, the income by way of interest received on compensation or on enhanced compensation referred to in Clause B of Section 145A of the act was chargeable to tax under the head Income from other sources. The relevant findings had been given in para 5 to 5.17 of the impugned order which read as under: I have carefully considered the findings of the Ld. AO, the written submissions of the Ld. AR and contextualized these to the facts of the case. The issue in dispute relates to whether the impugned transaction is exempt being covered under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013 (hereinafter RFCTLARR) made applicable from January 2014; whereas as per Sections 105 106 of the RFCTLARR r/w the 4th Schedule of the same Act; The National Highway Authority of India (NHAI), prima-facie is one the bodies covered u/s 106 of the RFCTLARR. It may also be pointed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 56(2)(vii)/57(iv)/145A(b) which covers interest on such compensation Vide 56(2)(viii) Income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A is chargeable to tax under the head 'income from other sources'. 5.6 Further, vide section 57(iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty percent of such income and no deduction shall be allowed under any other clause of this section. While there was near judicial unanimity with regards to taxability on interest u/s 34 of the land acquisition Act; interest u/s 28 of the land acquisition Act has been a matter of considerable judicial controversy. In a nutshell the controversy was that whether the award under the provisions of section 28 of Land Acquisition Act 1894 Act is in the nature of enhanced compensation and therefore exempt u/s 13(37). Or Is it the nature of interest and therefore taxable u/s 56(2)(viii) rws 57(iv) and 145A(b) The Hon'ble Supreme Court in the case of CIT v/s Ghansham (HUF) 315 ITR 1 held that interest paid on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . : 2007-08 to 2009-10 Shri Ved Pal, Vs. The ITO ITA Nos. 1419 to 1421/CHD/2016 A.Y. : 2007-08 to 2009-10 Shri Sheo Chand, Vs. The ITO A review petition against the order of the Hon'ble Supreme Court in the case of Union of India vs Hari Singh and Ors. in Civil Appeal No. 15041 of 2017 is in the process of being filed. 5.11 With the passage of the RFCTLARR Act , all compensation received qua this act are not taxable. This has been clarified by the CBDT vide its Circular NO-36/2016, Dated: October 25, 2016. The Circular makes it clear that even where there is no separate deduction allowable in the income tax Act, any compensation covered by Section 105 106 of the RFCTLARR Act, (other than compensation u/s 46 of the RFCTLARR Act) is exempt from taxation. In the instant case, what has been taxed by the Ld. AO as interest, may, if the transaction is found to be covered RFCTLARR Act; is as per the terms of Schedule 1 of the RFCTLARR Act in the nature of enhanced compensation. Further solatium within the terms of Section 31 of the RFCTLARR Act is also part of the compensation. The relevant Section 31 is reproduced as under: 31. Award of solatium. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs initiated under the Land Acquisition Act, 1894 (1 of 1894), where an award under the said section 11 has been made five years or more prior to the commencement of this Act but the physical possession of the land has not been taken or the compensation has not been paid the said proceedings shall be deemed to have lapsed and the appropriate Government, if it so chooses, shall initiate the proceedings of such land acquisition afresh in accordance with the provisions of this Act: Provided that where an award has been made and compensation in respect of a majority of land holdings has not been deposited in the account of the beneficiaries, then, all beneficiaries specified in the notification for acquisition under section 4 of the said Land Acquisition Act, shall be entitled to compensation in accordance with the provisions of this Act. 5.14 The hon'ble High Court has ruled as under The Acquisition Act of 2013 came into force on 01.01.2014, wherein Sub-section (1) of Section 105 of the Acquisition Act of 2013 provides that the provisions of this Act shall not apply to the enactments relating to land acquisition specified in the Fourth Schedule. The NH Act of1956 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement Act, 2013, relating to the determination of compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule shall apply to all cases of land acquisition under the enactments specified in the Fourth Schedule to the said Act. From the above, it is clear that the applicability of the Acquisition Act of 2013 has been given effect in respect of the enactment specified in Fourth Schedule including the NH Act of1956 with effect from 01.01.2015. However, it is to be noticed that as per Sub-section (3) of Section 105 of the Acquisition Act of 2013 (as amended), the provision of the Acquisition Act of 2013 relating to the determination of compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule have only been applied in the NH Act of 1956 and Section 24 of the Acquisition Act of 2013 is not made applicable to the acquisitions made under the NH Act of1956. In view of the above, it is held that Section 24 of the Acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 3G of the NH Act of 1956 had been announced before 01.01.2015 but the full amount of award had not been deposited by the acquiring agency with the CALA, the compensation amount would be liable to be determined in accordance with the First Schedule of Acquisition Act of 2013. It is further clarified by Clause-(c) of the above referred guidelines that where the compensation had been deposited by the acquiring agency with the CALA and the compensation amount paid to the land owners in respect of the majority of the land under acquisition on or before 31.12.2014, the acquisition process would be deemed to have been completed and settled and such cases would not be reopened. As stated earlier, in all these writ petitions, the petitioners have admitted that they have received the compensation as determined in the awards passed under Section 3G of the NH Act of 1956 and they have not disputed this fact that they received (15 of 15) the said compensation amount prior to 31.12.2014. Though, assertion is made on behalf of the petitioners in these writ petitions as well as during the course of argument that the majority of the land owners was not paid the compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule shall apply to the enactments relating to land acquisition specified in the Fourth Schedule with effect from 1st January 2015. 5.17 The provisions of Ordinance (No.9 of 2014) dated 31.12.2014 were continued further vide Ordinance (No.4 of 2015) dated 03.04.2015 and Second Ordinance dated 30.05.2015 (No.5 of 2015) and the same were valid up to 31.08.2015.Subsequently, the Department of Land Resources, Ministry of Rural Development, Government of India issued the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties) Order, 2015 vide Notification dated 28.08.2015. The said Order is reproduced below:- (1) This Order may be called the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties) Order, 2015. (2) It shall come into force with effect from the 1 st day of September, 2015. (12 of 15) (3) The provisions of Right to Fair Compensation and Transparency in Land Acquisition, Rehabilita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was signed by the counsel of the assessee, it was submitted that the assessee duly authorized the counsel through Power of Attorney which was also furnished before the Ld. CIT(A), copy of which is placed at page no. 21 of the assessees paper book. It was emphasized that the A.O. never demanded the Power of Attorney, therefore it was not furnished before him. It was stated that the Ld. Counsel for the Assessee would not suo-moto file an application with the department unless authorized by the assessee. It was pointed out that the Power of Attorney was dt. 02/01/2018 and the application under section 154 of the Act was filed on 03/01/2018 therefore the said application was valid and has to be acted upon. It was submitted that even the rectification can be made by A.O and the Ld. CIT(A) of their own notion and the signature of assessee are not required. It was further submitted that the A.O. had not asked the assessee for furnishing of power of attorney before dismissing the application under section 154 of the Act and that the A.O. decided the issue on merit. It was stated that the assessee had given the detailed submissions on merit and also on the maintainability of application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 66 DTR 68 (Del ) Nulux Engineers Vs. DCIT in ITA No. 2073/Mum/2017 order of the Mumbai ITAT dt. 05/10/2018 8.3 The Ld. Counsel for the assessee further stated that the clarification by the CBDT by way of Circular became the law of land, therefore, on the basis of the said Circular the mistake was very much rectifiable particularly when the Board Circular is binding on all the offices of the department. The reliance was placed on the judgment of the Hon'ble Punjab Haryana High Court in the case of B.S. Bajaj Sons Vs. CIT (IT Ref 104 of 1982 order dt. 05/08/1996). 8.4 It was contended that the assessee received compensation from National Highway Authority of India (NHAI in short) on 05/11/2014 23/01/2015. It was further stated that the NHAI is one of the 13 authorities covered under the fourth schedule of the RFCTLARR Act and this fact was also admitted by the Ld. CIT(A) who duly stated in para 5 at page 5 of the impugned order that The National Highway Authority of India (NHAI), prima-facie is one of the bodies covered under section 106 of the RFCTLARR and that as per Schedule 1 of the RFCTLAAR Act Compensation includes additional Compensation, solatium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. It was also stated that the NHAI is governed by National Highway Authority Act, 1988, the Clause 13 of the NH Act states that Compulsory Acquisition of Land for The Authority Any Land required by the authority for discharging its functions under this Act shall be deemed to be land needed for a public purpose and such land may be acquired for the authority under the provisions of the NH Act, 1956 . 8.7 It was further stated that Section 2 of the new Act states that the provisions of this Act relating to land acquisition, compensation, rehabilitation and resettlement shall apply, when the appropriate Government acquires land for its own use, hold and control, including for public sector undertakings and for the public purposes and shall include the following purposes namely: Sub clause (B) for infrastructure projects, which includes the following, namely; (i) All activities or items listed in the notification of the Government of India in the Department of Economic Affairs (Infrastructure Section) number 13/06/2009-INF dt. 27/03/2012, excluding private hospitals, private educational institutions and private hotels; the word public purpose in the new act means Publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RFCTLARR Act. The assessee moved the application under section 154 of the Act through his counsel on 03/01/2018 and the A.O. passed the order rejecting the application under section 154 of the Act on 14/11/2018 i.e; after 9 months 11 days. 10.1 In the present case it is not in dispute that the assessee received compensation on account of land acquired by NHAI. As per the provisions of section 96 of the RFCTLARR Act, the exemption from Income Tax and Stamp Duty would apply to an award or agreement made under the new Act which came into force on 01/01/2014. In the instant case the assessee filed its return of income on 30/11/2015 as he was waiting for the clarification from the Income Tax Department wherein the subject of exemption from Income Tax on the compensation received on commercial land might get clear and the clarification from the CBDT came vide Circular No. 36/2016 dt. 25/10/2016 which read as under: Circular No. 36/2016 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes ITA.II division, North Block, New Delhi, the 25th of October, 2016 Subject: Taxability of the compensation received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of all concerned. 5. Hindi version of the order shall follow. Sd/- (Rohit Garg) Deputy Secretary to the Government of India (F.No. 225/88/2016-ITA.II) 10.2 From para 3 of the aforesaid Circular it would be 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 the RFCTLARR Act, 2013. Now question arises as to whether the provisions of RFCTLARR Act, 2013 are applicable to the NH Act 1956 or not. In this regard the Hon'ble Rajasthan High Court in the case of Gopa Ram Vs. Union of India Ors. (supra) referred by the Ld. CIT(A), observed as under: However, the Central Government vide Ordinance (N0.9 of 2014) dated 31.12.2014 has substituted Sub-section (3) of Section 105 of the Acquisition Act of 2013, which reads as under:- (3) The provisions of this Act relating to the determination of compensation in accordance with the First Schedule, rehabilitation and resettlement in accordance with the Second Schedule and infrastructure amenities in accordance with the Third Schedule shall apply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... And Sons Vs. CIT [1996] 222 ITR 418 held as under: The circulars issued by the Central Board of Direct Taxes are binding on the officers of the Department of Income-tax. Benevolent circulars providing administrative relief to the assessee, even if they are issued subsequent to the decision by an authority under the Act, have to be taken notice of, and given effect to, if found applicable in the given facts. A circular, even if produced in the High Court for the first time during the course of hearing, has to be taken note of and the assessee will be entitled to the benefit of the circular, if found entitled, irrespective of the fact that it was not produced before the authorities below or was issued by the Central Board of Direct Taxes subsequent to the decision given by the Tribunal, Circular No. 329. Dated February 22, 1982, issued by the Board does not override the provisions of the Act. It is clarificatory in nature. It is a benevolent circular issued in favour of the assessee providing administrative relief and says that if the process involved is not merely conversion of standing trees into firewood but also manufacture of new saleable commodities, the benefit of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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