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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI RAVISH SOOD & SHRI ARUN KHODPIA
आदेश / ORDER
PER RAVISH SOOD, JM:
1. The captioned appeals filed by the respective assessee companies are directed against the orders passed by the Pr. Commissioner of Income Tax, Raipur-1 (for short “Pr. CIT”) u/s. 263 of the Income Tax Act, 1961 (for short ‘the Act’) dated 11.02.2022 and 02.03.2022, which in turn arises from the respective orders passed by the Assessing Officers u/s.143(3) of the Act, dated 10.10.2019 for A.Y. 2017-18. As a common issue is involved in the captioned appeals, the same are being taken up and disposed of by way of a consolidated order.
2. We shall first take up the appeal filed by the assesse company, viz. Heritage Buildcon Pvt. Limited in 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.
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 situated at Abhanpur, Bhatgaon, Nimora, were acquired under the National Highway Authority of India Act, 1956 (“NHAI Act,” for short). It was observed by him that the assessee company had claimed a capital gain of Rs.3.41 crore (approx.) arising on the transaction described above of transfer of land as exempt u/s. 10(37) of the Act AND u/s.96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (“RFCTLARR Act,” for short). However, the Pr. CIT did not find favor with the claim mentioned above of the assessee company. The Pr. CIT was of the view that as exemption contemplated u/s.10(37) of the Act was available only to individual and HUF assessee; therefore, the assessee being a private limited company on the said count itself, was not entitled to claim an exemption under the said statutory provision. Apart from that, he observed that as per the CBDT Circular No. 5/2005 dated 15.07.2005, as the claim of exemption u/s. 10(37) of the Act could only be raised if, inter alia, the land acquired was during the period of 2 years immediately preceding the date of transfer was being used for agricultural purposes by the assessee, i.e., HUF or individual or a parent of his, therefore, for the said reason also, the assesse company was not eligible for deduction under the aforesaid statutory provision.
Apropos the claim of the assessee for exemption u/s.96 of the RFCTLARR Act 2013, the Pr. CIT was of the view that as the lands of the assessee company were acquired under the NHAI Act, 1956, i.e., an enactment specified in the “Fourth Schedule” of the RFCTLARR Act, 2013, therefore, as per Section 105 of the Act, the assessee was disentitled for seeking exemption described above from income tax. The Pr. CIT, to support his conviction above, had also drawn support from Para-3, Page 6 of the award passed in the case of the assessee company by the competent authority, wherein it was mentioned that those families whose land has been acquired under NHAI Act, 1956 would not be entitled to Rehabilitation and Resettlement Entitlements as the acquired land was not the primary source of livelihood of those families (kutumb).
Apart from that, the Pr. CIT relied on the OM dated 06th June 2019 of 6. CBDT, New Delhi, wherein as per Section 105(1) of the RFCTLARR Act 2013, application of any of the sections of the said Act 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 assesse 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.
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 an award /agreement under the RFCTLARR Act, 2013 was exempt from levy of income tax u/s. 96 of the said Act, and the same would not be taxable under the provisions of the Income Tax Act, 1961, even if there is no specific provision of exemption for such compensation under the Income Tax Act, 1961; (iii) that the RFCTLARR Act 2013 applied to the lands acquired under the NHAI Act, 1956; and (iv) that though the Central Government had not issued any notification in terms of sub-section (3) of Section 105 of the RFCTLARR Act 2013, in the exercise of the powers conferred by sub-section (1) of Section 113 of the RFCTLARR Act 2013, it had issued an order to neutralize the effect of sub-section (3) of Section 105, pursuant whereto, the benefit of exemption u/s. 96 of the RFCTLARR Act 2013 could not be taken away for want of notification within one year from the Central Government u/s105(3) of the Act. For the sake of clarity, the replies that the assessee filed before the Pr. CIT are culled out as under: “Reply dated 24/09/202 It has the reference to above notice whereby your honour has proposed to revise the order passed u/s.263. Brief facts of the case is as under :
1. 1. The land of the assessee company was compulsorily acquired by The National Highway Authority of India (NHAI) under the Rights to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (the RFCTLARR Act).
1. The assessee claimed the resultant capital gain as exempt in terms of Section 96 of the RFCTLARR Act and on the strength of circular No.36/2016 dt:25/10/2016 issued by the CBDT. A copy of the circular is annexed at Page-1 to 2.
Your honor has observed that the order passed by the AO is erroneous in so far as it is prejudicial to the interest of revenue, on four counts and our humble submission in respect of each one is as under: 1. Section 10 (37) is not applicable in case of the company assessee as it applies to individual and HUF only. OUR SUBMISSION The assessee has not claimed exemption u/s 10(37). It has claimed exemption u/s 96 of the RFCTLARR Act which has been supported by Circular No.36/2016 dt.25/10/2016. The relevant portion of the circular is reproduced herein under: “……………..the matter has been examined by the Board and it is hereby 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 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 sub- section (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 with section 105(3) of that Act. [ Reference to para 4.1 at page no. 4 of the notice.] OUR SUBMISSION: Humbly submitted that it is not disputed that the Central Government has not issued any notification in terms of sub section (3) of section 105. However the Central Government has not issued any notification in terms of sub-section (3) of Section 105. However the Central Government has, in exercise of the powers conferred by sub section (1) section 113 of the RFCTLARR Act, 2013 issued order to neutralize the effect of sub section (3) of Section 105. Hence the benefit conferred by Section 96 of the Act shall not be taken away for want of notification u/s.105(3) within one year. Copy of Section 113 of the RFCTLARR Act dt. 28.08.2015 [F No.13011/01/2014-LRD] issued by the Ministry of Rural Development is annexed at Page No.19 and 20 to 21. Kindly appreciate that the Central Government had considered this issue and wanted to extend the benefits available to the land owners under the RFCTLARR Act and in view of this, the above referred order has been issued by the Central Government in order to remove the difficulties faced by the land owners. Therefore, it is submitted that the benefits conferred u/s 96 of the RFCTLARR Act shall not be taken way in the absence of notification in terms of sub-section (3) of section 105 and the assessee company has claimed exempt on the strength of the Circular No 36/2016 as referred above. The AO is correct in granting the exemption as such.
1. Reliance is placed on the ruling of ITAT Agra Bench in the case of Jagdish Arora Vs. /TO [ 2021 1 147 taxmann.com 728, wherein the benefit u/s 96 if RFCTLARR Act, 2013 has been denied in the absence of notification as referred in section 105(3). OUR SUBMISSION: Humbly submitted that our submission in Point no. II shall do the needful. In view of this, it is submitted that the ruling in the above case shall not apply in the case of the assessee.
1. The benefits of Rehabilitation and Resettlement Entitlements as mentioned in the Second Schedule of the RFCTLARR Act cannot be extended to those families whose land has been acquired under the National Highway Act, 1956 as the acquired land is not primary source of livelihood those/oily. Kindly refer Para 4.3 at Page no. 5 of the notice. OUR SUBMISSION: Humbly submitted that compensation for land acquisition as mentioned 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 reaffirmed by the Division Bench of the court. Copy of judgment is placed at page no. 22 to 31. In view of the above facts and considering the legal matrix _of the case, your honour is requested to drop the revision proceedings u/s 263 and oblige. A power of attorney is enclosed at 32. Reply dated 23/11/2021 It has the reference to above submitted whereby your honor has given notice for hearing u/s 263. Humbly that the assessee has furnished a written submission in respect of this issue on 06/09/2021 and it has been uploaded on the departmental online portal on 24/09/2021. Further to our earlier submission, it is submitted as under:
1.
Brief facts of the case is that some pieces of lands of the assessee company were compulsorily acquire by the National Highway Authority of India (NHAI) under the Rights to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ( the RFCTLARR Act) which became applicable with effect from 01/01/2014. Various dates in respect of the acquisition under the provisions of National Highways Authority Act, 1956, are furnished in a chart enclosed herewith at Page no.
1. All the statutory formalities relating to the compulsory acquisition of lands have been made only after the commencement of the RFCTLAAR Act, 2013, i.e. after 01/01/2014 only. All the relevant documents pertaining thereto are enclosed at Page no. 2 to 26. All these documents were furnished before the AO during assessment and these have been considered by the AO.
2. Kindly appreciate that the judgment of Hon'ble Agra Bench of ITAT in case of Jadish Arora Vs. C/T, on which reliance has been placed is factually different from the facts of the assessee and point of differences are as under : a. In that case, Hon'ble Agra Bench has held that the assessee r could not produce anything with reference to sub-section (3) of Section 105 and Therefore, the assessee is not entitled to the exemption. However, here t113 tossee has furnished the order issued by the Central Government u/s. 113 to nullify the effect of sub-section (3) of Section 105. b. Secondly Hon'ble Agra Bench has found that, though the award was passed on 24/02/2014 and cheques were received on 27/01/2015, in that case, the assessee was entitled to receive it prior to applicability of the RFCTLAAR Act, 2013 i.e. 01/01/2014, and therefore, the compensation 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.
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 faced by the persons whose lands have been acquired under the enactments specified in the Fourth Schedule to the said Act. Humbly submitted that the powers of the Central Government as provided in section 113 shall prevail over the provisions of section 105, and hence the compensation received for compulsory acquisition of lands under the enactments specified in the Fourth Schedule to the said Act shall not be taxable in accordance with - section 96 of the said Act and in terms of Circular No.36/2016 dated 25.10.2016. Your honour is requested to drop the revision proceedings u/s.263 and oblige.
Reply dated 25/11/2021 Further to our online submission dt.24.09.2021 and 23.11.2021, it is submitted as under:
1. 1. That Ministry of Road Transport and Highways, Government of India came out with comprehensive guidelines [NO. NH- 11011/30/2015-LA, dated 28th December, 2017] for lands acquired under the RFCTLAAR Act, 2013. A copy of the same is enclosed herewith.
2. Kindly appreciate that Para 4 in page no. 1, 2 and 3 of the guidelines as aforesaid, makes it clear that the lands acquired by National Highways Authorities under the provisions of the RFCTLAAR Act, 2013 shall be governed by the provisions of the RFCTLAAR Act, 2013. According to Section 96 of the said Act, the income arising out of it shall be exempt from income tax.
3. Further, it has been clarified in that non issuance of any notification terms of section 105(3) shall not disentitle the land owner from the exemption granted under section 96 because the Government of India has taken care of these situation and issued ORDER in terms of section 113 of the RFCTLAAR Act, 2013 on 28/08/2015. Para 4.3 and 4.4 at page no. 2 and 3 of the guidelines reads as under : 4.3 It is clear from a reading of the above that requisite action in compliance of Section 105(3) was taken within one year's time with the promulgation of Ordinance No. 9 of 2014 dated 31.12.2014. This position continued with the issuance of two Ordinance in 2015, which was thereafter followed by the Removal of Difficulties Order” without any break in time. As such operation of the provision of the RFCTLAAR Act, 2013, which came into effect from 01.01.2014, has been given effect in respect of the enactments specified in the Fourth Schedule (including the NH Act, 1956) with effect from 01.01.2015, in compliance of sub-section (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 acquisition under the NH Act, 1956, i.e. the enactment specified at Sr. No.7 in the Fourth Schedule to the RFCTLARR Act, 2013, w.e.f. 01.01.2015.
The process of compulsory acquisition of land acquired by the National Highway Authority started on 22/06/2015, i.e. after 01/01/2015 and therefore no income tax shall be levied on any award or agreement made under, the RFCTLAAR Act, 2013 in accordance with provisions of section 96 of the said Act supported by Circular no. 36 / 2016 dt. 25/10/2016 issued by the CBDT.”
The Pr. CIT, after deliberating at length on the contentions advanced by the assessee, was, however, not persuaded to subscribe to the same. Referring to the OM dated 06.06.2019, it was observed by Pr. CIT that the assessee company had failed to comment on the specific exclusion of the applicability of the provisions of the RFCTLARR Act, 2013 to the Acts mentioned in the “Fourth Schedule.” The Pr. CIT held a conviction that as the A.O had failed to appreciate the provisions of the RFCTLARR Act, 2013 and had summarily accepted the assessee’s claim of exemption concerning capital gain on the transfer of the lands, therefore, the same had rendered his order as erroneous in so far as it was prejudicial to the interest of the revenue u/s.263 of the Act for the following reasons: “1. Section 10 (37) is not applicable in case of the company assessee as it applies to individual and HUF only. 2. The Central government has not issued notification in terms of sub- section (3) of Section 105 of the RFCTLARR Act, 2013 within one year from the date of commencement of that Act in respect of acquisition made under the National Highways Act and as such assessee is not entitled to exemption under RFCTLARR Act read with section 105(3) of that Act. [ Reference to parr 4.1 at page no. 4 of the notice] 3. The benefit of rehabilitation and Resettlement Entitlements as, mentioned in the second Schedule of the RFCTLARR Act cannot be extended to those families whose lands has been acquired under the National Highway Act, 1956 as the acquired land is not primary source of livelihood of those family. Kindly refer Para 4.3 at Page no. 5 of the notice.4. 4. Further, the CBDT, New Delhi has issued Notification dated 06.06.2019 and clarified the issue that section 96 of the RFCTLARR Act, 2013 is not applicable to the cases where acquisition has been made by 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.
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.
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.
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?
As observed by us hereinabove, the Pr. CIT believed that the A.O. while concluding as hereinabove, had failed to appreciate the provisions of the RFCTLARR Act 2013, which provides otherwise. Elaborating on his view described above, Pr. CIT held a conviction that as sub-section (1) of Section 105 of the RFCTLARR Act 2013 carved out an exception to the applicability of all the provisions of the said Act to the 13 enactments relating to land acquisition specified under the “Fourth Schedule,” therefore, the compensation received by the assessee company on acquisition of its lands under the NHAI Act, 1956 (i.e., an enactment mentioned in the “Fourth Schedule”), was, thus, not eligible for exemption from levy of income-tax as provided in Sec. 96 of the RFCTLARR Act 2013. Apart from that, the Pr. CIT observed that the Central government had not issued any notification in terms of sub-section (3) of Section 105 of the RFCTLARR Act, 2013, within one year from the date of commencement of that Act concerning an acquisition made under the NHAI Act, 1956; therefore, the assessee was not entitled to any exemption concerning the determination of compensation in accordance with the First Schedule, and rehabilitation and resettlement in accordance with the Second and Third Schedule as would otherwise be available under the RFCTLARR Act, 2013. The Pr. CIT, to fortify his conviction that no tax exemption was open to the assessee company u/s.96 of the RFCTLARR Act, 2013, had drawn support from the Notification dated 06.06.2019 issued by the CBDT, New Delhi. Referring to the Notification above dated 06.06.2019 (supra), it was observed by the Pr. CIT that the same clarified that Section 96 of the RFCTLARR Act, 2013 would not apply to the cases where acquisition has been made under the enactments mentioned in the “Fourth Schedule” of the RFCTLARR Act, 2013. Based on his observations above, Pr. CIT was of the view that as the lands in the case of the assesse company were acquired under the NHAI Act, 1956, i.e., an enactment mentioned in the “Fourth Schedule” of the RFCTLARR Act, 2013, therefore, no exemption concerning the taxability of the compensation received by the assessee was available under the RFCTLARR Act, 2013.
We have thoughtfully considered the issue in the present appeal. Before proceeding any further, we deem it fit to cull out the provisions of the RFCTLARR Act, 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 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.
(4) A copy of every notification proposed to be issued under sub-section (3), shall be laid in draft before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in disapproving the issue of the notification or both Houses agree in making any modification in the notification, the notification shall not be issued or, as the case may be, shall be issued only in such modified form as may be agreed upon by both the Houses of Parliament.”
Section 113 : “ (1) If any difficulty arises in giving effect to the provisions of this Part, the Central Government may, by order, make such provisions or give such directions not inconsistent with the provisions of this Act as may appear to it to be necessary or expedient for the removal of the difficulty: Provided that no such power shall be exercised after the expiry of two years from the commencement of this Act. (2) Every order made under this section shall be laid, as soon as may be after it is made, before each House of Parliament.”
Section 96 of the RFCTLARR Act, 2013 provides that 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. A plain reading of Section 96 on a standalone basis, though, supports the assessee's claim that compensation received on the acquisition of its lands under the RFCTLARR Act, 2013 would not be exigible for any income tax but sub- section (1) of Section 105 of the RFCTLARR Act, 2013 which has an overriding effect, therein provides that subject to sub-section (3) of Section 105, the provisions of this Act shall not apply to the enactments relating to land acquisition specified in the “Fourth Schedule.” Ostensibly, the exception carved out in sub-section (3) of Section 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 and rehabilitation and resettlement specified in accordance with Second and Third Schedule.
In our considered view, the exception carved out in sub-section (1) of Section 105 of the RFCTLARR Act, 2013 has a limited applicability, i.e., concerning the determination of the compensation and rehabilitation and resettlement under the RFCTLARR Act, 2013. By no stretch of the imagination, the same can be applied to the remaining provisions of the RFCTLARR Act, 2013. Our conviction above is fortified by the OM dated 06.06.2019 issued by the CBDT, New Delhi, wherein it has been clarified that Section 96 of the RFCTLARR Act, 2013 does not apply to the cases where acquisition has been made by entities mentioned in the “Fourth Schedule” of the RFCTLARR Act, 2013. For the sake of clarity, OM dated 06th June 2019 issued by the CBDT, New Delhi, is culled out as under (relevant extract): “2. In the matter, the Ministry of Rural Development vide Notification No. S.O. 2368(E) dated 28.08.2015 has made applicable 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 to all cases of land acquisition under the enactments specified in the Fourth Schedule to the said Act. 3. In this regard, kind attention is invited to Section 105(1) of the RFCTLARR Act, 2013 which specifically excludes the application of any section of the RFCTLARR Act, 2013 to the Acts mentioned in the Fourth Schedule. The only exception to Section 105(1) is Section 105(3) which makes only the First, Second and Third Schedule applicable to the Fourth Schedule Acts. 4. Currently for the land acquisition undertaken as per enactments specified in the Fourth Schedule of the RFCTLARR Act, 2013, no other provisions of the RFCTLARR Act, 2013 would be applicable except for the provisions 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. Accordingly, the benefit of Section 96 of the RFCTLARR Act, 2013 exempting income tax on the award would not be applicable for cases in which land acquisition is undertaken as per the enactments 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)
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, 2013, exempting income tax on the award, would not be applicable for cases in which land acquisition is undertaken as per the enactments specified in the “Fourth Schedule” to the said Act.
Admittedly, it is an undisputed fact that the lands of the assessee had been acquired under the NHAI Act, 1956. The aforesaid factual position though undisputed and can safely be gathered from a perusal of the Notification dated 13th June 2016 as per which lands of the assessee had been acquired under the NHAI Act, 1956 (1956 of 48), Pages 35-43 of APB.
Considering the aforesaid factual position, i.e., acquiring of the lands of the assessee company under NHAI Act, 1956, an enactment falling under the “Fourth Schedule” of the RFCTLARR Act, 2013, we find no infirmity in the view taken by the Pr. CIT that as per Section 96 r.w.s. 105(1) of RFCTLARR Act, 2013 r.w. OM dated 06.06.2019 of the CBDT, the compensation received by the assessee company on acquiring of its lands was not exempt under RFCTLARR Act, 2013.
Apropos the exemption from levy of income-tax available u/s.10(37) of the Act, we concur with the view of the Pr. CIT that as the same was only available to the individual and HUF, the assesse company on the said count itself, was not entitled to it. Apart from that, the pre-condition for enabling an eligible assessee for exemption u/s.10(37) of the Act, i.e., usage of land for agricultural purposes during the period of two years immediately preceding the date of transfer of the same by the assessee, i.e., HUF or individual or a parent of his is also not satisfied by the assessee. Be that as it may, it is the claim of the Ld. AR that the assesse company had at no stage during the assessment proceedings raised the claim of exemption u/s.10(37) of the Act.
Confining our adjudication to the entitlement of the assesse company for claiming exemption from income tax under the RFCTLARR Act, 2013, we are of a firm conviction, in terms of our observations recorded hereinabove, that the provisions contemplating an exemption from income 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 assesse company.
Apropos reliance placed by the Ld. AR on order passed by the Ministry of Rural Development, i.e., S.O No.2368(E) 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 under the NHAI Act, 1956 was not taxable under the RFCTLARR Act, 2013. As observed by us hereinabove, the Central Government vide its order above, i.e., S.O 2368 (E) dated 28.08.2015, had come up with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement (Removal of Difficulties), order 2015 for extending the benefits available to the land owners under the RFCTLARR Act, 2013 to such other similarly placed land owners whose lands were acquired under the 13 enactments specified in the “Fourth Schedule,” but the same is only for a limited purpose, i.e., determination of compensation in accordance with First Schedule, rehabilitation and resettlement in accordance with Second Schedule and infrastructure amenities in accordance with Third Schedule. We cannot fathom how the exemption from income tax provided in Section 96 of the RFCTLARR Act, 2013, would be available to the assessee company based on the order above. We are of the considered view that the Ld. 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.
Apropos the reliance placed by the Ld. AR on the CBDT Circular No. 36/2016 dated 25th October 2016, it would be relevant to cull out the same, as under:
Ostensibly, the CBDT Circular No.36/2016 (supra) only clarifies that no distinction had been made between compensation received for the compulsory acquisition of agricultural land and non-agricultural land in the matter of providing an exemption from income tax under the RFCTLARR Act, 2013. The CBDT had also clarified that Section 96 of the RFCTLARR Act, 2013, is more comprehensive in scope than the tax exemption provided under the existing provisions of the Income Tax Act, 1961. It has also clarified that compensation received in respect of an award or agreement which has been exempted from levy of income tax vide section 96 of the RFCLARR Act, 2013 was also not taxable under the provision of the Income Tax Act, 1961, even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961.
Once again, the Ld. AR, without appreciating the context and issue which the CBDT had clarified in its Circular No.36/2016, had wrongly pressed the same into service. As observed by us hereinabove, the CBDT Circular No.36/2016 (supra) had clarified that exemption from income tax provided in Section 96 of the RFCTLARR Act, 2013 would be equally applicable on the compensation received on compulsory acquisition of agricultural land and non-agricultural land. Also, it was further clarified that if the compensation received in respect of award or agreement which has been exempted from levy of income tax vide section 96 of the RFCTLARR Act, 2013 would also not be taxable under the provision 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 Act, 1956 would be exempt u/s.96 of the RFCTLARR Act, 2013.
We shall now deal with the judicial pronouncements/orders pressed into service by the Ld. AR, in his attempt to prove that the compensation received by the assessee company on the acquisition of its lands under the NHAI Act, 1956, would be exempt u/s.96 of the RFCLARR Act, 2013.
(A) ACIT Vs. Madaparabil Varkey Varghese & Ors., WA No.2219 of 2019 dated 11.11.2019
The Hon’ble High Court, vide its order mentioned above, had approved the view taken by the Hon’ble Single Judge in WP (C) No.1908 of 2019, dated 31.05.2019. It was observed by the Hon’ble High Court that the exemption contemplated under Section 96 of the RFCTLARR Act, 2013, does not draw any distinction between compensation received for compulsory acquisition based on the nature of the asset acquired. Also, relying on the judgment of the Hon’ble High Court of Andhra Pradesh in the case of C. Nanda Kumar Vs. Union of India, WP (C) No.7874 of 2016 and the CBDT Circular No.36/2016 dated 25.10.2016, it was observed that compensation received under an award which is exempted from levy of income tax u/s.96 of the RFCTLARR Act, 2013 shall not be taxable even if there is no specific provision of exemption for such compensation in the Income Tax Act, 1961.
At this stage, we may herein observe that the issue as to whether or not an exemption from tax, as provided in Section 96 of the RFCTLARR Act, 2013, would be available on the compensation received on the acquisition of land under enactments specified in “Fourth Schedule” was never there before the Hon’ble High Court. As the facts and issues in the case mentioned above are distinguishable as against those before us in the present appeal, the same, thus, would not carry the claim of the assesse company any further.
(B) ITO, Ward-4(5), Patna Vs. Shri Suresh Prasad, dated 04.08.2022, ITAT-Patna
Once again, we find that the order of the Tribunal mentioned above being distinguishable on facts and issues involved would not assist the case of the assessee before us. Ostensibly, the Tribunal had observed 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, 2013 shall 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. 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 non- agricultural land.
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 assesse company any further.
(C) The ACIT Vs. SV Global Mill Ltd., dated 28.01.2021, ITAT-Chennai
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 in the case mentioned above; therefore, the same being distinguishable on facts would not further the issue involved in the case of the assesse company.
(D) Shri Satish Kumar, Sangrur Vs. ITO, Chandigarh, & 1183/Chd/2019 dated 31.08.2021
The Tribunal observed that the CBDT Circular No.36/2016 dated 25.10.2016 had clarified that the compensation received in respect of award or agreement which has been exempted from levy of income tax vide section 96 of the RFCLARR Act, 2013 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. It was further observed that the CBDT Circular No.36/2016 (supra) had also clarified that no distinction had been carved out concerning the exemption of tax in Section 96 of the RFCTLARR Act, 2013, in the backdrop of the nature of the land, i.e., agricultural land or non-agricultural land in the matter of claiming exemption from income tax.
At this stage, we may herein observe that the specific issue which we are seized of, i.e., as to whether under sub-section (3) of Section 105 read along with sub-section (1) of Section 105 of the RFCTLARR Act, 2013, which is confined to extending the benefits w.r,t determination of compensation in accordance with First Schedule, rehabilitation and resettlement in accordance with Second Schedule and Third Schedule in the case of a person whose lands have been acquired under the 13 enactments specified in the “Fourth Schedule,” be so read that the same vests with such person a right to claim u/s 96 of the RFCTLARR Act, 2013 exemption from income tax of the compensation so received, had not been looked into in the case mentioned above by the Tribunal.
As the issue involved in the present appeal before us had not been looked into by the Tribunal as observed hereinabove, the same, thus, would not support the assessee's claim.
(E) Mattapalli Ram Kumar Vs. ACIT, Circle-1(1), Rajamundry, dated 16.03.2022
Relying on the CBDT Circular No.36/2016 dated 25.10.2016, it was observed by the Tribunal that income tax should not be levied on any award or agreement made (except those made under section 46) of the RFCTLARR Act, 2013. It was further observed that compensation received on compulsory land acquisition under the RFCTLARR Act, 2013, was exempted from the income tax levy.
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, dated 12.10.2022
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 05.08.2016; therefore, it was observed by the Tribunal that the provisions of the new Act would apply. The Tribunal further observed that as per Section 96 of RFCTLARR Act, 2013, the compensation the assesse received on the acquisition of its land was not chargeable to income tax.
Once again, as the issue involved in the present appeal before us, i.e., as to whether or not, as per Section 96 of the RFCTLARR Act, 2013, exemption from levy of income tax would also be available to compensation received by an assessee on compulsory acquisition of his lands under the enactments specified in the “Fourth Schedule” had not been looked into by the Tribunal in the aforesaid case; therefore, the same being distinguishable on facts would not assist the case of the assessee before us.
(G) C. Nanda Kumar Vs. Union of India, WP Nos.7874 of 2016 dated 13.03.2017 ( High Court of Andhra Pradesh)
Ostensibly, reference to the facts involved in the case above reveals that the petitioner's land was acquired in terms of the provisions of the RFCTLARR Act, 2013. As it was not the case where compensation was received by the assessee on compulsory acquisition of his lands under the 13 enactments relating to land acquisition specified in the “Fourth Schedule,” the same being distinguishable on facts would not support the claim of the assesse company.
Based on our deliberations above, we are firmly convinced that the support drawn by the Ld. AR, by referring to the aforesaid judicial pronouncements/orders, which are distinguishable on facts/issues involved, thus would not assist the case of the assessee company.
Apropos the reliance placed by the Pr. CIT on the order of the ITAT, Agra, in the case of Shri Jagdish Arora Vs. ITO, Ward-1(2), Agra, & 59/Agr/2019 dated 14.06.2021, we are of the considered view that the absence of notification issued by the Central Government in terms of sub- section (3) to Section 105 of the RFCTLARR Act, 2013, would though have a bearing on the application of the provisions of the Act relating to the determination of compensation in accordance with First Schedule, rehabilitation and resettlement in accordance with Second and Third Schedule, in the case of a person whose lands are acquired under the 13 enactments specified in the “Fourth Schedule”; but the same cannot be so construed that it confers any right of exemption 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”.
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 assesse company is dismissed in terms of our observations described above.
In the result, the assessee's appeal in for A.Y.2017-18 is dismissed in terms of our observations above.
ITA Nos. 36 & 37/RPR/2022 A.Y.2017-18 42. As the facts and issues involved in the captioned appeals remain the same as those before us in the case of the assesse above, viz. Heritage Buildcon Pvt. Ltd. in for the assessment year 2017-18; therefore, our order therein passed while disposing of the said appeal shall apply mutatis-mutandis for disposing of the captioned appeals, i.e., ITA No. (s) 36 & 37/RPR/2022 for the assessment year 2017-18. In these cases also, we uphold the order passed by the Pr. CIT u/s.263 of the Act based on the observations which we have recorded while disposing of the appeal in for A.Y.2017-18.
In the result, the appeal(s) of both the captioned assessees in & 37/RPR/2022 for A.Y.2017-18 are dismissed in terms of our observations above.
In the combined result, all the captioned appeals of the aforementioned assessee’s are dismissed in terms of our aforesaid observations. Order pronounced in open court on the 17th day of August 2023.