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TMI Blog2023 (8) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... tax on any award received under RFCTLARR Act, 2013 in light of the overriding effect of Section 105(1)(5) r.w. OM dated 06.06.2019 issued by the CBDT would not be available to the assessee company. AR has misconstrued the order above, i.e., S.O 2368 (E) dated 28.08.2015, which has a limited scope of extending the benefits available to the land owners under the RFCTLARR Act, 2013 to similarly placed land owners whose lands were acquired under the 13 enactments specified in the Fourth Schedule, i.e., those concerning the determination of compensation in accordance with First Schedule, rehabilitation and resettlement in accordance with Second Schedule and infrastructure amenities in accordance with Third Schedule. CBDT Circular No.36/2016 clarifies is that the compensation received on compulsory acquisition of agricultural land and non-agricultural land under the RFCTLARR Act, 2013 would be similarly placed, AND that if the compensation received on compulsory acquisition of land is exempt u/s. 96 of the RFCTLARR Act, 2013, the same would not be taxable even if there is no specific exemption provision for such compensation in the Income Tax Act, 1961. Once again, we are unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eritage Buildcon Pvt. Limited in ITA No.35/RPR/2022 for the assessment year 2017-18, wherein the impugned order has been assailed on the following grounds of appeal before us: 1. That on the facts and circumstances of the case and in law, the order passed by the Principal Commissioner of Income Tax, Raipur-1, u/s. 263 of the Income Tax Act, 1961, setting aside the assessment framed u/s. 143(3) of the Act as erroneous and prejudicial to the interest of the revenue, is without jurisdiction and bad in law, and therefore, liable to be quashed. 2. That the appellant reserves the right to add, alter or modify any ground of appeal. 3. Succinctly stated, the assessee company, engaged in the real estate business, had e-filed its return of income for A.Y.2017-18 on 30.10.2017, declaring an income of Rs. Nil. The A.O. framed assessment vide his order passed u/s. 143(3) of the Act, dated 10.10.2019 accepting the assessee s returned income as such. 4. After the culmination of the assessment proceedings, the Pr. CIT, Raipur-1, called for the assessment records of the assessee company. On perusal of the record, it was observed by the Pr. CIT that lands of the assessee company situat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct was excluded explicitly concerning enactments mentioned in the Fourth Schedule. He further observed that the only exception to Section 105(1) of the RFCTLARR Act 2013 was carved out in Section 105(3) of the RFCTLARR Act 2013, as per which only First, Second and Third schedules applied to the Fourth Schedule Acts. Based on his observations above, Pr. CIT held a conviction that as the A.O by failing to appreciate the provisions of the RFCTLARR Act 2013, had wrongly accepted the assessee s claim for exemption of capital gain of Rs. 3.41 crore (approx.) on the transfer of the lands above, which were acquired u/s. NHAI Act, 1956; therefore, the order passed by him was rendered as erroneous insofar as it was prejudicial to the interest of the revenue u/s. 263 of the Act. Accordingly, the Pr. CIT put the assessee company to Show cause and called upon it to explain why the order passed u/s 143(3) of the Act, dated 10/10/2019, may not be revised u/s 263 of the Act. 7. In reply, it was the claim of the assessee, viz. (i) that it had not claimed any exemption u/s. 10(37) of the Act; (ii) that as per CBDT Circular No.36/2016 dated 25.10.2016, any compensation received in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been exempt from levy of income tax vide Section 96 of the RFCTLARR Act shall also not be taxable under the provisions of the Income Tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961. It is submitted that the A.O has duly considered this and allowed the exemption. Further submitted that the RFCTLARR Act applies to the land acquired under the National Highway Act, 1956 and copy of order issued by the Government of India (Order No.11011/30/2015-LA dt. 13.01/2016) to this effect is enclosed at Page No. 3 to 4. Hon'ble Chennai Bench of ITAT has held that not only the compensation received for compulsory acquisition of land under the RFCTLARR Act but also its interest for delayed payment is exempt from income tax, even in case of corporate assessee. Copy of judgment is placed at page no. 5 to 18. The Central government has not issued notification in terms of subsection (3) of Section 105 of the RFCTLARR Act, 2013 within one year from the date of commencement of that Act respect of acquisition made under the National Highways Act and as such assessee is not entitled to exemption under RFCTLARR Act read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in the First Schedule is quite different from the benefits of Rehabilitation and Resettlement Entitlements as mentioned in the Second Schedule of the RFCTLARR Act. All the above para says is that those family whose primary source of livelihood is not land, shall not be entitled to the benefits of Rehabilitation and Resettlement Entitlements as mentioned in the Second Schedule of the RFCTLARR Act. It is submitted that the assessee company has received the compensation only as mentioned in the First Schedule and NOT the Rehabilitation and Resettlement Entitlements as mentioned in the Second Schedule of the RFCTLARR Act. Humbly submitted that there is no error in the order passed by the AO and therefore the order is not erroneous in so far as prejudicial to the interest of the revenue. There is neither any factual error nor any legal error in the order. In any case, the view taken by the AO is not untenable. Further reliance is placed on the judgment of Hon'ble Kerala HC in which it has been held that compensation received for compulsory acquisition of land under the RFCTLARR Act is exempt from income tax. The judgment of Hon'ble Single Judge has been reaffirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensation received is not exempt u/s 96 of the RFCTLAAR Act, 2013 in accordance with section 4 and 5 of the Income Tax Act. But in this case, the assessee became entitled to receive the compensation only after commencement of the RFCTLAAR Act, 2013. Various dates are given in brief facts of the case of the case above. Copy of the aforesaid judgment is enclosed at Page No.27 to 31. Therefore, in view of the above, it is submitted that the ruling in the above case shall not apply in the case of the assessee. The facts are quite different in both the cases and your honour is requested to consider this. 3. Further reliance was placed on O.M. dt.06/06/2019 (page no. para 4.4 of page no. 5 and 6 of the notice dt. 16/08/2021. In this respect it is Humbly submitted that the above O.M. dt. 06/06/2019 refers the ORDER issued by the Ministry of Rural Development vide Notification No. S.O. 2368 (E) dt. 28/08/2015, a copy of which is placed in page no. 20 and 21 in our submission. The aforesaid order is issued in terms of section 113 which provide the Central Government power to remove difficulties and therefore, the Central Government has issued the order for removal of difficulties f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of Section 105 of the RFCTLAAR Act, 2013. 4.4 Following the notification of the aforesaid Ordinances, the Ministry of Road Transport Highways issued a letter dated 29.04.2015 whereby the select provisions of the RFCTLAAR Act, 2013 were applicable to the NH Act,1956 with effect from 01.01.20157A conjoint reading of the aforesaid shows that the Ordinance (Amendment) remained in force till 31 August 2015. 'Removal of Difficulties Order' was issued by the Department of Land Resources on 28th August 2015, which took effect from 01.09.2015. However, since the date of application of the selected relevant provisions of the RFCTLARR Act, 2013 to the NH Act, 1956 was 01.01.2015 in terms of the Ordinance (Amendment) No. 9 of 2014, it remains an unambiguous and accepted position that the provisions of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement 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 have been made applicable to all cases of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entities mentioned in the' Fourth Schedule of RFCLARR Act, 2013. In this case, land acquisition has been made by the NHAI which is an entity mentioned in fourth schedule of RFCTLARR Act, 2013. Accordingly, the Pr. CIT set aside the order passed by the A.O u/s. 143(3) dated 10.10.2019 and directed him to decide the matter afresh after conducting necessary inquiries and affording adequate opportunity to the assessee. 9. The assessee being aggrieved with the order of the Pr. CIT u/s. 263 of the Act dated 11.02.2022 has carried the matter in appeal before us. 10. We have heard the ld. Authorized representatives of both parties, perused the orders of the lower authorities and the material available on record and considered the judicial pronouncements they had pressed into service to drive home their respective contentions. 11. Controversy involved in the present appeal lies in a narrow compass, i.e., as to whether or not the A.O had erred in law and facts of the case in concluding that award received by the assessee company on the acquisition of its lands under the NHAI Act, 1956 was not liable to be saddled with tax liability under the Income Tax Act, 1961? 12. As o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013, which would have a strong bearing on the adjudication of the issue. Section 96, Section 105, and Section 113 of the RFCTLARR Act, 2013 reads as under: Section 96: Exemption from income tax, stamp duty, and fees No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same. Section 105 : (1) Subject to sub-section (3), the provisions of this Act shall not apply to the enactments relating to land acquisition specified in the Fourth Schedule. (2) Subject to sub-section (2) of section 106, the Central Government may, by notification, omit or add to any of the enactments specified in the Fourth Schedule. (3) The Central Government shall, by notification, within one year from the date of commencement of this Act, direct that any of the provisions of this Act relating to the determination of compensation in accordance with the First Schedule and rehabilitation and resettlement specified in the Second and Third Schedules, being beneficial to the affected families, shall apply to the cases of land acquis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 105 of the Act is in the context that the provisions of RFCTLARR Act, 2013, relating to the determination of compensation in accordance with the First Schedule, rehabilitation and resettlement specified in the Second and Third Schedule, to the extent the same are beneficial to the affected families whose lands had been acquired, would apply to the cases of land acquisition under the enactments specified in the Fourth Schedule ; or shall apply with such exceptions or modifications that do not reduce the compensation or dilute the provisions of this Act relating to compensation or rehabilitation and resettlement as may be specified in the notification, as the case may be. In sum and substance, the only exception to the applicability of the enactments relating to the land acquisitions under the enactments specified in the Fourth Schedule can be traced in sub-section (3) to Section 105 of the RFCTLARR Act, 2013), which too had been made dependent upon the issuance of a notification by the Central Government within one year from the date of commencement of this Act, but the same applies only in the context of the determination of compensation in accordance with First Schedule an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in the Fourth Schedule to the said Act. However, the provisions of Section 10(37) of the Income Tax Act, 1961 would continue to exempt any compensation or consideration received on transfer of agricultural land by way of compulsory acquisition subject to conditions specified therein. 5. The issue regarding taxability of compensation received on compulsory acquisition of agricultural and non agricultural land as per the provisions of the RFCTLARR Act, 2013 has already been clarified vide circular No.36/2016 dated 25.10.2016 of CBDT. (emphasis supplied by us) 16. Based on our observations above, it is clear beyond doubt and supported by the OM dated 06.06.2019 of the CBDT, New Delhi, that no provisions of the RFTCLARR Act, 2013, except for provisions relating- to determination of the 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 would apply to the enactments relating to land acquisition specified in the Fourth Schedule. Also, as spelled out in OM dated 06.06.2019 (supra), the benefit of Section 96 of the RFCTLARR Act, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 28.05.2015, wherein in the exercise of powers conferred by sub-section (1) of Section 113 of the RFCTLARR Act, 2013 (30 of 2013), the Central Government to extend the benefits to the land owners under the RFCLARR Act, 2013 to similarly placed owners whose lands were acquired under the 13 enactments specified in Fourth Schedule, had passed an order i.e., the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Removal of Difficulties), order 2015 w.e.f. 01.09.2015. As per the order mentioned above, the provisions of the RFCTLARR 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 applied to all the cases of land acquisition specified in Fourth Schedule . For the sake of clarity, the aforesaid S.O. 2368 (E) dated 28.08.2015 is culled out as under: We are unable to comprehend how the order mentioned above, i.e., S.O 2368 (E) (supra), would support the claim of the assessee company that the award received by it on the acquisition of its lands u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion] of such agricultural land is not taxable. Finance (No, 2] Act, 2004 inserted section 10(37) in the Act from 01.04.2005 to provide specific exemption to the capital gains arising to an Individual or a HUF from compulsory acquisition of an agricultural land situated in specified urban limit, subject to fulfilment of certain conditions. Therefore, compensation received from compulsory acquisition of an agricultural land is not taxable under the Act (subject to fulfilment of certain conditions for specified urban land). 2. The RFCTLARR Act which came into effect from 1st January, 2014, in section 96, inter alia provides that income-tax shall not be levied on any award or agreement made [except those made under section 46) under the RFCTLARR Act Therefore, compensation received for compulsory acquisition of land under the RFCTLARR Act (except those made under section 46 of RFCTLARR Act), is exempted from the levy of income-tax. 3. As 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, the exemption provided under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of Income Tax Act, 1961, even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961. Nothing is discernible from the CBDT Circular No.36/2016 (supra) from where it would be gathered that compensation received by the assessee company on the acquisition of its lands under enactments relating to land acquisition specified in the Fourth Schedule would be eligible for tax exemption u/s. 96 of the RFCTLARR Act, 2013. All that the CBDT Circular No.36/2016 (supra) clarifies is that the compensation received on compulsory acquisition of agricultural land and non-agricultural land under the RFCTLARR Act, 2013 would be similarly placed, AND that if the compensation received on compulsory acquisition of land is exempt u/s. 96 of the RFCTLARR Act, 2013, the same would not be taxable even if there is no specific exemption provision for such compensation in the Income Tax Act, 1961. Once again, we are unable to comprehend how the CBDT Circular No. 36/2016 (supra), which is absolutely in a different context /subject matter, would advance the claim of the assessee company that the compensation received on the acquisition of its lands under the NHAI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific provision of exemption for such compensation in the Income Tax Act, 1961. Also, it was clarified that no distinction had been carved out for claiming tax exemption in Section 96 of the RFCLARR Act, 2013, in the backdrop of the nature of the land, i.e., agricultural land or nonagricultural land. 28. As the facts and issues involved in the present appeal are distinguishable compared to those involved in the case mentioned above, the same would not carry the case of the assessee company any further. (C) The ACIT Vs. SV Global Mill Ltd., ITA No.2684/CHNY/2019 dated 28.01.2021, ITAT-Chennai 29. The issue before the ITAT was whether interest on enhanced compensation was taxable or exempt u/s 96 of the RFCTLARR Act, 2013. Referring to Section 3(i) of the RFCTLARR Act, 2013, it was observed by the Tribunal that interest on enhanced compensation would qualify for exemption u/s 96 of the RFCTLARR Act, 2013. As the issue before us, i.e., as to whether or not the exemption u/s. 96 of the RFCTLARR Act, 2013 is available for the compensation received on the acquisition of lands under the enactments specified in Fourth Schedule, was neither raised nor looked into by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FCTLARR Act, 2013, was exempted from the income tax levy. 34. Once again, as the issue involved in the present appeal before us, i.e., whether or not, as per Section 96 r.w Sec. 105(1) of the RFCTLARR Act, 2013, exemption from levy of income tax would also be available w.r.t compensation received by an assessee on compulsory acquisition of its lands under the 13 enactments specified in the Fourth Schedule had not been looked into by the Tribunal in the case above, therefore, the same being distinguishable on facts would not assist the case of the assessee before us. (F) DCIT- 27(1) Vs. M/s. Ganga Developers, ITA No.2328/Mum/2021 dated 12.10.2022 35. The issue before the Tribunal was whether compensation received by the assessee under Section 11 of the Land Acquisition Act, 1894 and not an award under the RFCTLARR Act, 2013, would be eligible for tax exemption u/s. 96 of RFCTLARR Act, 2013. The Tribunal observed that as per Section 24 of RFCTLARR Act, 2013, when no award u/s. 11 of the Land Acquisition Act, 1894 had been made, the provisions of the new act relating to the determination of the compensation shall apply. As the award in the case before them was made on 05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under Section 96 of the RFCTLARR Act, 2013 to an assessee from levy of income tax on the compensation received by him on acquisition of his land under the 13 enactments specified in the fourth schedule . 40. We, thus, in terms of our observations above, are of the considered view that, as observed by the Pr. CIT, and rightly so, as the A.O had grossly erred in law and facts of the case in construing the provisions of the RFCTLARR Act, 2013 while framing assessment in the case of the assessee company, and had summarily accepted its aforesaid claim for exemption from tax, therefore, the same had rendered the order passed by him u/s. 143(3) of the Act dated 10.10.2019 as erroneous in so far it was prejudicial to the interest of the revenue u/s. 263 of the Act. Accordingly, in terms of our observations above, we uphold the well-reasoned order passed by the Pr. CIT u/s. 263 of the Act. Thus, the Ground of appeal No.1 raised by the assessee company is dismissed in terms of our observations described above. 41. In the result, the assessee's appeal in ITA No.35/RPR/2022 for A.Y.2017-18 is dismissed in terms of our observations above. ITA Nos. 36 37/RPR/2022 A.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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