Compensation Received From NHAI For Acquisition Of Land Not Taxable: Chhattisgarh High Court

Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 provides that no income tax or stamp duty shall be levied on any award or agreement made under the Act.

Justices Sanjay K. Agrawal and Sanjay Kumar Jaiswal stated that once compensation is determined under the provisions of the RFCTLARR Act, as a necessary corollary, the benefits flowing from the provisions of the said Act, including exemptions from income tax, stamp duty and fees contemplated under Section 96 of the RFCTLARR Act, would also have to be made applicable.

The assessee/appellant had received compensation on account of the compulsory acquisition of his land from the National Highways Authority of India (NHAI) under the National Highways Act, 1956.

It is the case of the assessee that, realising that the agricultural land had been acquired under the Act of 1956, the compensation so paid was liable to be exempted from payment of income tax in light of Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

The assessee moved a rectification application before the Income Tax Officer which was rejected holding that the land has been acquired by the NHAI under the Act of 1956 and the Act of 1956 being falling under the list of enactments specified in the Fourth Schedule, the same would be precluded from the RFCTLARR Act as per the provisions of Section 105(1) of the RFCTLARR Act.

Therefore, the compensation received by the assessee from the NHAI would not be exempted from taxation under the provisions of Section 96 of the RFCTLARR Act.

Feeling aggrieved against the order passed by the Assessing Officer, the assessee preferred an appeal before the CIT(A), challenging the said order, which was dismissed. The ITAT confirmed the order passed by CIT(A).

The bench noted that the Central Government issued order dated 28-8-2015 holding that the provisions of the RFCTLARR Act relating to 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.

The bench further stated that the provisions of the RFCTLARR Act with regard 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 are made applicable to the enactments specified in the Fourth Schedule and for the purposes of determining compensation, the RFCTLARR Act is applicable.

"Section 96 of the RFCTLARR Act providing for exemption from income tax, stamp duty and fees would also be applicable to the land acquired under the Act of 1956 and to the compensation paid by the NHAI and consequently, the assessee would not be liable to pay income tax on the amount of compensation paid to him against the acquisition of his land under the Act of 1956," opined the bench.

In view of the above, the bench allowed the appeal.

Case Title: Sanjay Kumar Baid v. Income Tax Officer

Case Number: TAXC No. 176 of 2025

Counsel for Appellant/Assessee: Mr. Apurv Goyal and Mr. Nikhilesh Begani

Counsel for Respondent/Department: Mr. Ajay Kumrani, Advocate on behalf of Mr. Amit Chaudhari

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