The Chhattisgarh High Court (Bilaspur Bench) has held that land acquisition compensation from NHAI, determined per the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act), is exempt from income tax by virtue of Section 96 of the Income Tax Act. Accordingly, the Court directed the AO to pass orders in line with this legal position, ensuring the appellant received the exemption as sought.
The Division Bench comprising Justice Sanjay K. Agrawal and Justice Sanjay Kumar Jaiswal observed that once compensation is determined under the RFCTLARR Act framework, the corresponding benefits, such as exemption from income tax, stamp duty, and fees under Section 96, automatically follow and must be extended to affected parties. Reference was made to the 2015 order of the Ministry of Rural Development, which mandated that landowners whose property is acquired under the National Highways Act, 1956 (included in the Fourth Schedule of the RFCTLARR Act) must receive compensation and benefits on par with those under the RFCTLARR Act, 2013.
The Bench underscored that denying such tax exemption to land-losers under the National Highways Act, while granting it to others covered by the RFCTLARR Act, amounts to discrimination and contradicts both the intent of the Union Government as per the 2015 Order and the binding principles laid down by the Supreme Court.
Speaking for the Bench, Justice Agrawal emphasized that the RFCTLARR Act’s provisions for the determination of compensation (First Schedule), rehabilitation (Second Schedule), and infrastructure amenities (Third Schedule) apply to all enactments specified in its Fourth Schedule, including the National Highways Act. The Bench, therefore, concluded that Section 96’s exemption from income tax squarely applies to compensation for land acquired under the National Highways Act, and the Assessing Officer must ensure the benefit is granted in such situations.
Briefly, in this case, the appellant had received Rs. 73.58 lacs as compensation for the compulsory acquisition of his land by the National Highways Authority of India (NHAI) under the National Highways Act, 1956. He initially declared this compensation as taxable income under Short Term Capital Gains in his 2017–18 tax return and paid applicable taxes, which were processed by the tax authorities. Later, realising that the compensation should be exempt from income tax under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act), the appellant sought a refund through rectification. His request was rejected by the AO, and such rejection was confirmed by both the CIT(A) and the ITAT.
Cases Relied On:
Union of India and another v. Tarsem Singh and others – (2019) 9 SCC 304
National Highways Authority of India v. P. Nagaraju alias Cheluvaiah and another – (2022) 15 SCC 1
Union of India and another v. Tarsem Singh and others – 2025 SCC OnLine SC 235
Appearances:
Advocates Apurv Goyal and Nikhilesh Begani, for the Appellant/ Taxpayer
Advocates Ajay Kumrani and Amit Chaudhari, for the Respondent/ Revenue
