2019 (7) TMI 1928 - AT - Income Tax

Exemption u/s 10(37) - compensation and interest u/s. 28 of Land Acquisition Act on account of compulsory acquisition of land - AR submitted that the interest received u/s. 28 of the L.A. Act is capital in nature and hence is not taxable - HELD THAT - The Co-ordinate Bench of Tribunal in the case of Dnyanoba Shajirao Jadhav 2018 (2) TMI 105 - ITAT PUNE after considering the judgment of Commissioner of Income Tax Vs. Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT and Bikram Singh Ors. Vs. Land Acquisition Collector Ors. 1996 (9) TMI 6 - SUPREME COURT held that the interest awarded u/s. 28 of the L.A. Act is in the nature of solatium and is integral part of compensation. The said interest is in the nature of capital receipt and hence not exigible to tax under the provisions of Income Tax Act. Whereas, interest received u/s. 34 of the L.A. Act is on account delayed payment of compensation and is a revenue receipt. Though the amount received u/s. 28 and u/s. 34 of the L.A. Act are termed as interest however they stand on different pedestal in so far as the provisions of Income Tax Act are concerned. In the instant case, it is not disputed by the Revenue that the amount received by the assessee as interest is u/s. 28 of the L.A. Act. Therefore, entire amount is exempt from tax being capital receipt. We find merit in the contention of the assessee. Hence, the impugned order is set aside and the appeal of assessee is allowed.

Summary

Issues:
1. Condonation of delay in filing appeal
2. Taxability of interest received under section 28 of the Land Acquisition Act

Condonation of Delay in Filing Appeal:
The appeal was filed 112 days late, and the assessee sought condonation of delay citing medical exigencies. The Tribunal referred to the Supreme Court's ruling in the case of Ram Nath Sao @ Ram Nath Sahu and Others Vs. Gobardhan Sao and Others, emphasizing that the acceptance of explanations for delay should be the norm. The Tribunal noted that no negligence or lack of bonafide intent was imputed to the assessee. Relying on various decisions, including the Apex Court's stance on liberal acceptance of explanations for delay, the Tribunal condoned the 112-day delay and admitted the appeal for hearing on merits.

Taxability of Interest Received under Section 28 of the Land Acquisition Act:
The assessee, an agriculturist, received compensation and interest under section 28 of the Land Acquisition Act. The Assessing Officer taxed the interest but granted partial relief under section 57(iv) of the Income Tax Act. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to consider the interest actually received by the assessee. The assessee contended that the interest under section 28 is capital in nature and hence not taxable. The Tribunal analyzed the nature of interest under section 28 vis-a-vis section 34 of the Land Acquisition Act, citing precedents. It concluded that interest under section 28 is a capital receipt and exempt from tax. As the Revenue did not dispute that the interest received was under section 28, the entire amount was deemed exempt. Consequently, the impugned order was set aside, and the appeal of the assessee was allowed.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee on the taxability of interest received under section 28 of the Land Acquisition Act. The Tribunal highlighted the distinction between capital and revenue receipts in determining the taxability of such interest. The judgment emphasized adherence to legal precedents and the specific provisions of the Income Tax Act in deciding the tax treatment of receipts arising from land acquisition.