2019 (9) TMI 1689 - AT - Income Tax

Chargeability of interest received under the Land Acquisition Act - compulsory acquisition of land - As per assessee it is capital receipt and not chargeable to tax - whether interest which was received under section 28 of LAC Act is to be treated as part of compensation or not? - HELD THAT - Hon'ble Supreme Court in CIT Vs. Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT and in other cases had held that interest awarded under section 28 of LAC Act was in the nature of solatium and was an integral part of compensation. Also further held that interest received under section 34 of LAC Act was on account of delayed payment of compensation and was revenue receipt. Though the amounts received under sections 28 and 34 of LAC Act are termed as interest but two stands at different pedestal in so far as the Income Tax Act is concerned. Such is the proposition laid down by Pune Bench of Tribunal in Shri Madhav Pandharinath Kande Vs. ITO 2019 (7) TMI 1928 - ITAT PUNE . The Hon ble Apex Court in CIT Vs. Chet Ram (HUF) 2017 (9) TMI 1532 - SUPREME COURT talks of the year of taxability which is not in dispute. In the totality of the same, we allow the plea of assessee that interest received under section 28 of LAC Act is to be treated as part of compensation and is not to be charged as income from other sources in the hands of assessee. Thus, modified grounds of appeal raised by assessee are allowed.

Summary

Issues:
Appeals against orders of CIT(A) related to assessment year 2013-14 under section 143(3) of the Income-tax Act, 1961. Delay in filing appeals, chargeability of interest received under the Land Acquisition Act (LAC Act) as part of compensation.

Analysis:
The appeals were filed after a delay of 112 days, with the assessee attributing the delay to incorrect advice from a consultant. The Tribunal condoned the delay considering the circumstances. The main issue in the appeals was the chargeability of interest received under the LAC Act. The assessee argued that the interest should be treated as part of compensation, citing relevant legal precedents. The Revenue contended that the interest was taxable based on a Supreme Court decision in a similar case.

The Tribunal analyzed the nature of interest received under section 28 of the LAC Act. It referred to previous judgments to distinguish between interest under sections 28 and 34 of the LAC Act, emphasizing that interest under section 28 was considered part of compensation. The Tribunal agreed with the assessee's position, stating that interest under section 28 should not be treated as income from other sources. The decision was based on legal interpretations and precedents cited by both parties.

The Tribunal noted that the facts and issues in other connected appeals were similar to the lead appeal. It decided that the ruling in the lead appeal would apply to the connected appeals as well. Consequently, all the appeals of the assessee were allowed, and the order was pronounced on September 11, 2019. The judgment provided a detailed analysis of the legal principles and interpretations regarding the taxability of interest received under the LAC Act, ultimately ruling in favor of the assessee based on the specific circumstances and legal precedents cited during the proceedings.