2012 (10) TMI 477 - HC - Income Tax

Interest granted to the land owner on enhanced amount of compensation - Calculated on year to year basis or in the year in which the amount is actually credited to the landowner - Held that - As decided in CIT, Faridabad Versus Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT interest is different from compensation as interest paid on the excess amount under Section 28 depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for the delay in making payment. As the amount in question is to be treated as part of compensation itself and is not to be treated as interest. Therefore, the question of law framed above does not survive any more.

Summary

Issues:
Calculation of interest under Section 28 of the Land Acquisition Act, 1894 for tax purposes.

Analysis:
The main issue in this case revolves around the calculation of interest granted to the landowner under Section 28 of the Land Acquisition Act, 1894 for tax computation. The court highlighted the question of whether the interest should be calculated on a year-to-year basis or in the year when the amount is credited to the landowner. However, the court noted that the Apex Court had already pronounced that the interest under Section 28 is considered a part of compensation and should be taxed as such. The judgment emphasized the distinction between interest under Section 28, which is part of the enhanced compensation, and interest under Section 34, which is for the delay in payment after the compensation amount is determined.

The court referred to a specific judgment by the Apex Court in Commissioner of Income Tax, Faridabad versus Ghanshyam, (HUF), (2009) 8 SCC 412, which clarified the difference between interest and compensation under the Land Acquisition Act. The court highlighted that interest under Section 28 is an accretion to the value of the land acquired and is considered part of the enhanced compensation. Additionally, the court emphasized that the receipt of enhanced compensation, including interest under Section 28, is taxable in the year of receipt as per the provisions of the Income Tax Act, 1961.

Based on the aforementioned legal principles and the judgment of the Apex Court, the High Court concluded that the amount granted under Section 28 of the Land Acquisition Act is to be treated as part of compensation and not as interest. Therefore, the court held that the question of law regarding the calculation of interest for tax purposes does not survive anymore. Consequently, the court disposed of the appeal in line with the Apex Court's judgment, directing the Assessing Officer to proceed accordingly without any order as to costs.