2017 (6) TMI 1275 - AT - Income Tax

Income from other sources u/s 56 - treating the net interest being the amount of interest u/s 28 of the Land Acquisition Act, 1894 as chargeable to tax - Held that - The amount of interest received by the assessee is chargeable to tax in the year of receipt in view of insertion of clause (viii) to section 56(2) by the Finance No. (2) Act 2009 w.e.f 01.04.2010. This provision read with section 145A(b) makes it clear that interest received by assessee on compensation or an enhanced compensation shall be deemed to the income of the year in which it is received. CIT(A) has rightly set out and relied on in the case of Manjeet Singh (HUF) vs. UOI (2015 (12) TMI 1123 - PUNJAB & HARYANA HIGH COURT) being the jurisdictional High Court. In view of foregoing discussion, CIT(A) was right in treating the amount as chargeable to tax. - Appeal filed by the assessee is dismissed.

Summary

Issues:
Treatment of interest received under section 28 of the Land Acquisition Act as chargeable to tax under section 56 of the Income-tax Act for Assessment Year 2013-14.

Analysis:
The appeal pertains to the treatment of net interest received under section 28 of the Land Acquisition Act as chargeable to tax under section 56 of the Income-tax Act. The Assessing Officer added the interest amount to the total income after allowing a deduction of 50% towards expenses. The CIT(A) upheld this decision, leading to the assessee's appeal. The key contention was whether the interest received is taxable in the year of receipt.

Upon examination, it was found that the interest received by the assessee falls under the purview of section 56(2)(vii) of the Income-tax Act. The insertion of clause (viii) to section 56(2) by the Finance Act 2009 clarified that interest on compensation or enhanced compensation is deemed income in the year of receipt. The CIT(A) correctly relied on the judgment of the Hon’ble Punjab and Haryana High Court in a relevant case as the jurisdictional High Court. Therefore, the interest amount was rightly treated as chargeable to tax.

In conclusion, the Tribunal dismissed the appeal filed by the assessee, affirming the decision to treat the interest received under section 28 of the Land Acquisition Act as taxable under section 56 of the Income-tax Act for the Assessment Year 2013-14. The judgment was delivered on 7th June 2017 by Shri R.S. Syal, Vice President of the Appellate Tribunal ITAT Delhi.