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2023 (4) TMI 1323 - AT - Income TaxIncome from Other Sources u/s 56(2) - interest received u/Sec. 28 of the Land Acquisition Act, 1894 - assessee s case before us is that such an interest income is part of the land acquisition compensation itself and not taxable - HELD THAT - It transpires that the instant issue of taxability of the assessee s interest income received under section 28 of the Act is covered in assessee s favour as per the hon ble high court s Bombay bench Shri Rupesh Rashmikant Shah Versus Union of India Ors. 2019 (8) TMI 518 - BOMBAY HIGH COURT holding that the same is not taxable under section 56(2)(viii) of the Act as against the Revenue s contentions that the Aurangabad bench of the very hon ble jurisdictional high court has taken a divergent view against the taxpayer in Shivajirao and Others Vs. State 2013 (8) TMI 1160 - BOMBAY HIGH COURT Faced with the situation, we are of the opinion that it is the Bombay and not Aurangabad bench of the hon ble jurisdictional high court whose decision would prevail in the given facts and circumstances as the assessee, his land/capital asset forming subject matter of compulsory acquisition as well as situs of the Assessing Officer who has framed assessment before us are covered within its territorial jurisdiction notified from time to time. We thus quote PCIT Vs. ABC Paper Limited 2022 (8) TMI 863 - SUPREME COURT and decide the instant sole substantive ground as well as the main appeal is assessee s favour.
Issues Involved:
1. Taxability of interest income received under Section 28 of the Land Acquisition Act. 2. Applicability of Section 56(2)(viii) of the Income Tax Act, 1961. Summary: Issue 1: Taxability of Interest Income Received Under Section 28 of the Land Acquisition Act The core issue in this appeal is whether the interest income of Rs.1,62,24,632/- received by the assessee under Section 28 of the Land Acquisition Act, 1894, is taxable as "income from other sources" under Section 56(2)(viii) of the Income Tax Act, 1961. The assessee argued that this interest income is part of the land acquisition compensation and should not be taxable, citing the Supreme Court's decision in Ghanshyam (HUF) Vs. CIT [2009] 315 ITR 1 (SC). The Revenue, however, relied on the tribunal's coordinate bench's order in Basweshwar Mallikarjun Bidwe Vs. ITO, which upheld the taxability of such interest income under Section 56(2)(viii). The tribunal noted that post the Ghanshyam judgment, a statutory amendment via the Finance (No.2) Act, 2009, effective from 01-04-2010, explicitly provided that interest received on compensation or enhanced compensation is chargeable to income-tax under "income from other sources." Issue 2: Applicability of Section 56(2)(viii) of the Income Tax Act, 1961 The tribunal examined various judicial precedents, including the Punjab & Haryana High Court's decision in Manjet Singh (HUF) Karta Manjeet Singh Vs. Union of India, which upheld the taxability of interest under Section 28 of the Land Acquisition Act as per Section 56(2)(viii). The tribunal also considered the Bombay High Court's decision in Shivajirao S/o Dnyanoba Ghanwat & Ors. VS. The State of Maharashtra & Ors., which supported the taxability of such interest income. However, the tribunal acknowledged conflicting views within the jurisdictional High Court benches. The Bombay bench held that such interest is not taxable under Section 56(2)(viii), whereas the Aurangabad bench took a contrary position. Conclusion: Given the conflicting judgments within the jurisdictional High Court, the tribunal decided to follow the Bombay bench's decision, which is favorable to the assessee. It held that the interest income received under Section 28 of the Land Acquisition Act is not taxable under Section 56(2)(viii) of the Income Tax Act. The tribunal allowed the assessee's appeal, stating that the decision of the Bombay bench of the jurisdictional High Court would prevail in this case. Final Order: The assessee's appeal for Assessment Year 2015-16 is allowed, and the interest income received under Section 28 of the Land Acquisition Act is not taxable under Section 56(2)(viii) of the Income Tax Act. The order was pronounced in the open Court on 27th April, 2023.
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