Chhattisgarh High Court: No Income Tax on Land Compensation from NHAI
Thank you for reading this post, don't forget to subscribe!A recent landmark ruling by the Chhattisgarh High Court has granted a full income tax exemption on the ₹73 lakh compensation a taxpayer received for land acquired by the National Highways Authority of India (NHAI). This decision provides significant relief to landowners and sets a crucial legal precedent.
The Court’s Rationale
The verdict rests on a straightforward principle of fairness and uniformity. The court clarified that the tax exemption provision in Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act) must apply to all compulsory land acquisitions, even if they are carried out under a different law, such as the National Highways Act, 1956.
The court reasoned that denying the exemption to a landowner whose property was acquired for a highway project would be discriminatory. It cited a Central Government order from 2015 which aimed to extend the benefits of the 2013 Act to other statutes, ensuring that affected landowners are treated as a single, homogenous group entitled to just and untaxed compensation.
The Specifics of the Case
The case involved a taxpayer named Sanjay, who initially paid ₹24 lakh in tax on the ₹73 lakh compensation he received from the NHAI. Upon realizing that the compensation might be exempt under the RFCTLARR Act, he sought a refund. After his claim was denied by tax authorities, he took the matter to court and successfully argued for the exemption.
As Lalan Gupta, a Partner at Shardul Amarchand Mangaldas & Co., noted, the ruling correctly recognizes that “compulsory acquisition is not a voluntary transaction but an enforced loss.” By upholding the tax exemption, the court ensures that landowners are not “penalised merely because their property was acquired under a different statute.”
The final judgment directed the assessing officer to implement the order, establishing legal certainty for the tax treatment of such compensation moving forward. This decision reinforces the intent of the 2013 Act to protect affected landowners and simplify the legal process for future cases.
