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2018 (9) TMI 1468 - AT - Income TaxExemption u/s. 10(37) - Interest received u/s 28 in case of compulsory acquisition of agricultural land as nature of interest income or it is a part of enhanced compensation - Held that - It is not a case of Revenue that the assessee has not received interest u/s 28 of the Land Acquisition Act, 1894. This issue has been decided by the Hon ble Apex Court in case of Union of India Vs. Hari Singh (2017 (11) TMI 923 - SUPREME COURT) wherein it is held that on agricultural Land no tax is payable when the compensation/enhance compensation is received by the assessee as their land was agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. Therefore, the same comes under the purview of Section 28 of the Land Acquisition Act. - decided in favour of assessee
Issues:
1. Whether interest received under Section 28 of the Land Acquisition Act is taxable as interest income or part of enhanced compensation. Analysis: The appeal was filed against the order passed by CIT (A) for the Assessment Year 2013-14. The grounds of appeal included the rejection of the appeal by the CIT (A) against the order passed by the AO, the treatment of interest received under Section 28 of the Land Acquisition Act, and the addition of a specific amount. The Assessing Officer observed that interest on enhanced compensation was received but not disclosed in the return, leading to an addition to the income. The CIT (A) confirmed this addition, leading to the appeal. The issue revolved around whether interest under Section 28 is taxable as interest income or part of enhanced compensation. The AR argued that interest under Section 28 should be considered as enhanced compensation and not taxable as interest income. They cited a decision of the Hon'ble Apex Court in a related case. The DR, on the other hand, relied on the orders of the Assessing Officer and CIT (A). The Tribunal noted that the issue was whether the compensation received for agricultural land under Section 28 of the Land Acquisition Act is taxable. The Tribunal referred to a decision by the Bangalore Tribunal and the Hon'ble Gujarat High Court, which held that interest under Section 28 is part of compensation and not taxable as interest income. The Tribunal allowed the appeal of the assessee based on the legal precedents cited. The Tribunal's decision was based on the interpretation that interest under Section 28 is akin to compensation and should not be treated as interest income. They relied on the decisions of the Hon'ble Apex Court and the Hon'ble Gujarat High Court to support their conclusion. The Tribunal found no grounds to interfere with the CIT (A)'s decision to allow exemption under Section 10(37) of the Act on the interest received under Section 28 of the Land Acquisition Act. Consequently, the appeals of the revenue were dismissed, and the appeal of the assessee was allowed. The Tribunal's decision was in line with the legal interpretations provided by the higher courts and previous tribunal decisions on similar issues.
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