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2019 (1) TMI 1712 - AT - Income TaxExemption u/s. 10(37) - taxability of interest received on enhanced compensation - interest u/s. 28 of the Land Acquisition Act, 1894, which was held to be part of compensation in the case of Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT - applicability of sections 145A(b), 56(2)(viii) and 57(iv) - HELD THAT - We find that the assessee s case is squarely covered in her favour by the decision of Surinder Kumar v. DCIT Ors. 2018 (10) TMI 1754 - ITAT CHANDIGARH wherein the ITAT after following the decision of Hon ble Supreme Court in the case of Ghanshyam HUF held that interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable. - Decided in favour of assessee.
Issues:
1. Taxability of interest received on enhanced compensation under the Income Tax Act, 1961. 2. Applicability of sections 145A(b), 56(2)(viii), and 57(iv) of the Income Tax Act, 1961. Issue 1: Taxability of interest received on enhanced compensation under the Income Tax Act, 1961: The appeal was filed by the assessee against the order of the ld. CIT(A)- Faridabad for the assessment year 2010-11. The assessee received enhanced compensation from the Land Acquisition Officer, which included an interest component. The Assessing Officer, relying on sections 57(iv) and 56(2)(viii) inserted by the Finance Act, 2009, taxed 50% of the interest received in the year of receipt. The ld. CIT(A) upheld the decision, concluding that the assessee is liable to tax on 50% of the interest amount received. The assessee contended that the interest received on the compulsory acquisition of land under section 28 of the Land Acquisition Act is in the nature of compensation and not taxable under the head of income from other sources. The ITAT, Delhi, referred to various decisions, including the Hon'ble Supreme Court's judgment in the case of Ghanshyam HUF, and held in favor of the assessee, allowing the appeal. Issue 2: Applicability of sections 145A(b), 56(2)(viii), and 57(iv) of the Income Tax Act, 1961: The Assessing Officer invoked sections 145A(b), 56(2)(viii), and 57(iv) of the Income Tax Act, 1961 to tax 50% of the interest received on compensation or enhanced compensation in the year of receipt. The ld. CIT(A) also upheld this decision. However, the ITAT, Delhi, referred to the decision of a co-ordinate Bench of ITAT, Chandigarh, which followed the Hon'ble Supreme Court's judgment in the case of Ghanshyam HUF and other related decisions. The ITAT held that the interest received on the compulsory acquisition of land under section 28 of the Land Acquisition Act is considered compensation and is exempt under section 10(37) of the Income Tax Act. Consequently, the ITAT allowed the appeal of the assessee based on the legal precedents and the interpretation of relevant provisions. In conclusion, the ITAT, Delhi, allowed the appeal of the assessee, ruling that the interest received on enhanced compensation from the Land Acquisition Officer is in the nature of compensation and exempt under section 10(37) of the Income Tax Act. The decision was based on legal precedents, including the judgment of the Hon'ble Supreme Court in the case of Ghanshyam HUF, and other related decisions.
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