2018 (3) TMI 471 - AT - Income Tax

Interest on enhanced compensation u/s 28 of the Land Acquisition Act - provisions of section 56(2)(viii) applicability - Held that - Hon ble Himanchal Pradesh High Court in the case of CIT vs. Keshwa Devi 2011 (8) TMI 679 - HIMACHAL PRADESH HIGH COURT which after relying upon the judgment of Hon ble Supreme Court in the case of Ghanshyam, HUF (2009 (7) TMI 12 - SUPREME COURT) has held that interest received u/s 28 of the Land Acquisition Act on enhanced compensation is not interest u/s 34 but is in the nature of compensation and therefore, was not taxable as interest. - Decided against revenue

Summary

Issues:
- Appeal against CIT(A) order relating to assessment year 2011-12
- Violation of section 56(2)(viii) of the Income Tax Act
- Taxability of interest on enhanced compensation u/s 28 of the Land Acquisition Act

Analysis:
1. The appeal was filed by the Revenue against the CIT(A) order concerning the assessment year 2011-12, raising concerns about the violation of section 56(2)(viii) of the Income Tax Act. The Revenue argued that the interest on enhanced compensation u/s 28 of the Land Acquisition Act received by the assessee was not exempt as per the provisions of the Income Tax Act. The Assessing Officer's order was favored by the Revenue, emphasizing the non-exemption of the interest received.

2. The AR, representing the assessee, contended that the CIT(A) had thoroughly considered the matter, citing the Supreme Court's decision in a relevant case. The AR highlighted that the interest received by the assessee under section 28 of the Land Acquisition Act was deemed as part of compensation and not taxable. The AR heavily relied on the CIT(A)'s order, emphasizing the detailed findings presented.

3. Upon hearing both parties and examining the evidence, it was noted that the assessee received compensation along with interest on enhanced compensation under sections 28 and 34 of the Land Acquisition Act. The assessee claimed that the interest was in the nature of additional compensation and not taxable as interest. The CIT(A) extensively analyzed the issue, referring to relevant court judgments, and concluded that the interest received under section 28 was part of compensation and not taxable as interest. The CIT(A)'s decision was supported by the High Court's judgment and the Supreme Court's ruling in a similar case.

4. The findings of the CIT(A) were deemed valid, and the Revenue's appeal was dismissed. The judgment highlighted the clear distinction between interest under sections 28 and 34 of the Land Acquisition Act, affirming that interest received under section 28 was to be treated as part of compensation. The judgment provided a detailed explanation based on legal provisions and court decisions, ultimately upholding the CIT(A)'s decision in favor of the assessee.

5. In conclusion, the Revenue's appeal was dismissed, and the judgment was pronounced in open court on 07/03/2018. The detailed analysis considered the legal aspects, interpretations of relevant sections, and precedents set by higher courts to support the decision in favor of the assessee regarding the taxability of interest on enhanced compensation under the Land Acquisition Act.