DHARMAVIR KUMAR,PATNA vs. DC/AC CIRCLE 4, PATNA
Facts
The assessee received compensation of Rs. 4,71,91,650 for compulsory acquisition of agricultural land for the construction of a National Highway. The Assessing Officer (AO) added this compensation to the assessee's income under Section 50C of the Income Tax Act, 1961, as the assessee failed to provide documentary evidence for claiming exemption. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the compensation received for compulsory acquisition of land under the National Highways Act, 1956, is exempt from income tax as per Section 96 of the RFCTLARR Act, 2013, and CBDT Circular No. 36/2016. Section 50C is not applicable in cases of compulsory acquisition as stamp duty is not involved.
Key Issues
Whether the compensation received for compulsory acquisition of agricultural land is taxable under Section 50C of the Income Tax Act, 1961, or exempt under Section 96 of the RFCTLARR Act, 2013.
Sections Cited
50C, 48, 49, 10(37), 194LA, 37, 96
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “PATNA” BENCH, PATNA
IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH, PATNA BEFORE SHRI DUVVURU RL REDDY, VP AND SHRI RAJESH KUMAR, AM
ITA No.70/PAT/2025 (Assessment Year:2016-17) Dharmavir Kumar DC/ACIT, Circle-4, C/o Naseeb Prasad, Income Tax Department, Lok PaithaniNathpur,Narayan Chak, Nayak Jai Prakash Bhavan, New Vs. Phulwari. Dak Bunglow Road, Bihar-800002 Patna-800001, Bihar (Appellant) (Respondent) PAN No. AVZPK4382P Assessee by : Shri Sudeep Sinha, AR Revenue by : Shri Md. A.H. Chowdhary, DR Date of hearing: 26.11.2025 Date of pronouncement: 09.12.2025
O R D E R Per Rajesh Kumar, AM:
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 18.12.2024 for the AY 2016-17.
The assessee has raised following grounds of appeal:-
“1. For that the Ld. CIT(A) has erred both in law and on facts. 2. For that the Ld. CIT(A) has erred in confirming the addition of compensation of Rs.4,71,91,650 in the hands of the appellant u/s 50C of the Income Tax Act, 1961 under the head capital gains. 3. For that section 50C is not a charging section. It simply says what would be the full consideration for the purpose of section 48 of the Income Tax Act, 1961 to compute the income chargeable under head capital gains. 4. For that section 48 is the charging section and section 50C is just procedural in nature as to what would be the full value of consideration for the purpose of section 48
2.2. In the appellate proceedings, the learned CIT (A) dismissed the appeal of the assessee. The learned CIT (A) did not adjudicate the issue by admitting the documents filed by the assessee as additional evidences under Rule 46A of the Income Tax Rules, 1962 and thus dismissed the appeal of the assessee.
2.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee owned an agricultural land situated in the village Nathupur, Phulwari, Patna, which was acquired by the Ministry of Road Transport, National Highway, New Delhi, vide notification dated 14.01.2013, which was published in the
2.4. That in order to provide clarity, the CBDT through its Circular No. 36/2016 issued on 25.10.2016 reiterating that compensation received in respect of award or agreement which is exempt from levy of income tax vide section 96 of RFCTLARR Act and shall also not be taxable under the provisions of Income Tax Act, 1961.That while allowing exemption from income tax under section 96 of RFCTLARR Act, 2013 it does not matter whether the land is agricultural or non- agricultural. The provisions of section 96 of the said Act is wider in scope and does not make any distinction between compensation received for compulsory acquisition for agricultural land and non- agricultural land in the matter of providing exemption from income tax. That a copy of the Gazette notification issued by the Ministry of Road Transport & Highways notifying, the list of lands, including the land of the appellant, to be compulsorily acquired under the National Highways Act, 1956 is avaible in the paper book. Therefore, when the land has been clearly acquired under the NH Act, 1956, the provisions of RFCTLARR Act, 2013 will be applicable, as explained in the
2.5. We have also perused the CBDT circular, copy of which is available at page no.31 of the Paper Book, which is extracted below: -
“ ITA.II division, North Block, New Delhi, the 25th of October, 2016 Subject: 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')-reg Under the existing provisions of the Income-tax Act, 1961 ('the Act"), an agricultural land which is not situated in specified urban area, is not regarded as a capital asset. Hence, capital gains arising from the transfer (including compulsory acquisition) 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 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 has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified 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. 4. The above may be brought to the notice of all concerned.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 09.12.2025.
Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (VICE PRESIDENT) (ACCOUNTANT MEMBER) Patna, Dated: 09.12.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy// sSr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Patna
