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2017 (11) TMI 370 - AT - Income TaxAddition of interest received on enhanced compensation as Income from other sources u/s 56(2)(viii) r.w.s 145A(b) - whether the interest paid under the provisions of section 28 of LA Act is part of the enhanced compensation or is it taxable as interest income? - Held that - Interest received u/s 28 of the Land Acquisition Act is not exempt under the act as it could not partake the character of compensation for acquisition of agricultural land. It is held that the interest received on enhanced compensation in the appellant s case is liable to tax under the head income from other sources. Accordingly, the grounds of appeal raised by the assessee are dismissed.
Issues Involved:
1. Taxability of interest received on enhanced compensation under Section 28 of the Land Acquisition Act. 2. Whether such interest is taxable as "Income from other sources" under Section 56(2)(viii) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Taxability of Interest Received on Enhanced Compensation: The core issue in these appeals is whether the interest received on enhanced compensation under Section 28 of the Land Acquisition Act is taxable as income. The assessee argued that such interest should be exempt as it forms part of the compensation for the acquisition of agricultural land. Analysis: - The Assessing Officer (AO) added ?41,84,185/- to the total income of the assessee, treating it as taxable under Section 56(2)(viii) after allowing a 50% deduction under Section 57(l)(v). - The CIT(A) confirmed the AO's decision, stating that the interest received on enhanced compensation is taxable as "Income from other sources." Judicial Precedents: - The Hon'ble Supreme Court in CIT vs. Ghansham (HUF) held that interest paid under Section 28 of the Land Acquisition Act is part of the enhanced value of the land and not merely interest for delayed payment. - The Punjab & Haryana High Court in Manjeet Singh (HUF) Karta Manjeet Singh vs. Union of India and Ors. held that the interest received under Section 28 of the Land Acquisition Act is taxable as income from other sources under Section 56 of the IT Act. 2. Whether Such Interest is Taxable as "Income from Other Sources": The Tribunal examined whether the interest under Section 28 of the Land Acquisition Act should be treated as "Income from other sources" under Section 56(2)(viii) of the Income Tax Act. Analysis: - The Tribunal noted that the issue has been debated in various judicial forums, including the Hon'ble Supreme Court and High Courts. - The Hon'ble Supreme Court in Ghansham (HUF) differentiated between interest under Section 28 (part of enhanced compensation) and Section 34 (interest for delay in payment). - The Punjab & Haryana High Court in Manjeet Singh (HUF) upheld that interest under Section 28 is taxable under Section 56 as "Income from other sources." Relevant Legal Provisions: - Section 28 of the Land Acquisition Act allows the court to award interest on excess compensation. - Section 34 of the Land Acquisition Act deals with interest for delayed payment of compensation. - Section 56(2)(viii) of the Income Tax Act includes income by way of interest received on compensation or on enhanced compensation as "Income from other sources." Tribunal's Conclusion: - The Tribunal concluded that the interest received under Section 28 of the Land Acquisition Act is taxable as "Income from other sources" under Section 56(2)(viii) of the Income Tax Act. - The Tribunal dismissed the appeals of the assessee, affirming the CIT(A)'s decision that the interest received on enhanced compensation is taxable. Final Judgment: - The appeal in ITA No. 141/DEL/2017 for the assessment year 2013-14 was dismissed. - The Tribunal applied the same reasoning to the other three appeals (ITA Nos. 1388, 1390, and 1392), dismissing them as well. Pronouncement: - The order was pronounced in the open court on 11.10.2017.
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