2019 (8) TMI 1424 - AT - Income Tax

Taxability of receipt of interest on enhanced compensation which was received by assessees on account of acquisition of their lands - capital or revenue receipt - HELD THAT - It is an admitted fact that the assessees had received interest u/s 28 of Land Acquisition Act on enhanced compensation. The Hon ble Supreme Court in the case of CIT vs Ghansham (HUF) 2009 (7) TMI 12 - SUPREME COURT has clearly held that interest received by the assessee in view of section 28 of Land Acquisition Act 1894 is part of the compensation and therefore was not taxable. The Hon ble Delhi Bench of the Tribunal in the case of Shri Opinder Singh Virk 2019 (5) TMI 676 - ITAT DELHI has dealt with the decision of the Hon ble Supreme Court in the case of Chet Ram (HUF) 2017 (9) TMI 1532 - Supreme Court as well as the case laws of Ghanshyamdas and after analysing the same has again held that interest receipt on enhanced compensation u/s 28 of the Land Acquisition Act is in the nature of compensation. - Decided in favour of assessee

Summary

Issues Involved:
1. Taxability of interest received on enhanced compensation under Section 28 of the Land Acquisition Act.
2. Condonation of delay in filing appeals.

Detailed Analysis:

Condonation of Delay:
The appeals involved a delay of 70 and 170 days in filing, which the assessees attributed to their ignorance and lack of access to legal advice. The Ld. AR requested condonation of delay, citing substantial justice and the uneducated status of the assessees. The Ld. DR did not object, and the delay was condoned.

Taxability of Interest on Enhanced Compensation:
The central issue was the taxability of interest received under Section 28 of the Land Acquisition Act. The Ld. AR argued that the Hon'ble Supreme Court in the case of Ghanshyam (HUF) had settled that such interest is part of compensation and not taxable. This position was further supported by the Supreme Court's decision in UOI vs Hari Singh & Ors.

Arguments by the Revenue:
The Ld. DR contended that the CIT(A) had considered various case laws and distinguished the Ghanshyam (HUF) case, thereby supporting the taxability of the interest received.

Tribunal's Findings:
The Tribunal reviewed the material and found that the assessees had received interest under Section 28 of the Land Acquisition Act. It relied on the Supreme Court's ruling in CIT vs Ghanshyam (HUF) which held that such interest is part of the compensation and not taxable. The Tribunal also referenced its own decision in the case of Shri Opinder Singh Virk and Shri Manish Yadav, which reaffirmed that interest on enhanced compensation under Section 28 is in the nature of compensation.

Further Judicial Precedents:
The Tribunal cited the Hon'ble Chandigarh Bench's decision in the case of Manjit Singh, which followed the Supreme Court's ruling in Hari Singh, reinforcing that interest under Section 28 is part of enhanced compensation and not taxable.

Conclusion:
The Tribunal concluded that the interest received under Section 28 of the Land Acquisition Act is part of the compensation and exempt from tax under Section 10(37) of the Income Tax Act. It directed the Assessing Officer to refund the TDS amount deducted on this interest. The appeals of the assessees were allowed, and the Tribunal found no infirmity in the CIT(A)'s orders, thereby dismissing the Revenue's appeals. The order was pronounced in the open court on 14/08/2019.