2018 (4) TMI 1524 - AT - Income Tax

Deemed income - Taxability of interest received from the Land Acquisition Officer u/s 28 of the Land Acquisition Act on enhanced compensation - assessed as income from other sources u/s 57(iv) r/w sections 56(viii) read with Section 145A (b) - as an alternate plea, the assessee has claimed that the compensation/interest was not received in his individual capacity but the same had accrued to the HUF which was comprised of him, his wife and his four sons - Held that - During the course of proceedings before us, no documentary evidence was placed before us to corroborate this claim of the assessee. As adjudication of this issue is germane to the entire controversy, it is essential that it is established beyond doubt as to who were the actual recipients of the compensation/interest and in whose hands would this amount be assessed. Therefore, without going into the merits of the case, in the interest of justice, we restore the file to the office of the Assessing Officer with the direction to examine the issue afresh after determining as to who was the recipient of the compensation/interest i.e. whether the assessee was the recipient or whether it was the HUF who had received the compensation/interest. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Taxability of interest received from the Land Acquisition Officer on enhanced compensation.
2. Classification of the acquired land as agricultural or non-agricultural.
3. Claim that the interest accrued to the HUF and not the individual assessee.

Issue 1: Taxability of Interest on Enhanced Compensation:
The appeal was filed against the order of the Ld. CIT (Appeals) upholding the taxability of interest amounting to ?64,39,705 received from the Land Acquisition Officer under section 28 of the Land Acquisition Act on enhanced compensation. The Assessing Officer assessed 50% of the enhanced compensation as taxable income, leading to the addition of the aforementioned amount. The appellant contended that the interest should not be taxed under section 56(2)(viii) as it was part of the enhanced compensation, relying on Supreme Court decisions. The ITAT found that the issue of who received the compensation/interest was crucial. As the claim that it accrued to the HUF and not the individual was not previously raised, the case was remanded to the Assessing Officer to determine the actual recipient for proper assessment.

Issue 2: Classification of Acquired Land:
The appellant argued that the land acquired was agricultural and thus exempt under section 10(37) of the Income Tax Act. The Ld. CIT (Appeals) held that the land was not agricultural based on a representation by the DDA. The appellant presented evidence to support the agricultural nature of the land, including representations and court orders. The ITAT did not delve into this issue due to the remand on the primary issue of interest taxability.

Issue 3: Interest Accrual to HUF:
As an alternate plea, the appellant claimed that the interest accrued to the HUF, not the individual, and requested further inquiry on this matter. The ITAT acknowledged this new argument and remanded the case to the Assessing Officer to ascertain the actual recipient of the compensation/interest, emphasizing the importance of taxing the correct person under the statute.

In conclusion, the ITAT allowed the appeal for statistical purposes, remanding the case to the Assessing Officer to determine the recipient of the compensation/interest for accurate assessment. The judgment highlighted the necessity of establishing the correct recipient for tax purposes, ensuring justice and proper application of tax laws.