2018 (10) TMI 351 - AT - Income Tax

Taxability of interest received under Land Acquisition Act - whether it is enhanced compensation and thereby exempt u/s.10(37) or income from other sources - Held that - The plea of the assessee is that interest received on enhanced compensation is not taxable as the said interest was received under section 28 of the Land Acquisition Act the said aspect is not clear from the perusal of the record and it is deemed fit to restore the issue back to the file of Assessing Officer for the limited purpose of verifying the claim of the assessee. In case the interest is received under section 28 of the Land Acquisition Act, then same is not taxable in the hands of the assessee and in case, the interest is received under section 34 of the Land Acquisition Act, the same is taxable in the hands of the assessee. The assessee is directed to furnish complete details before the Assessing Officer and the Assessing Officer shall decide the issue after affording reasonable opportunity of hearing to the assessee. Accordingly, grounds of appeal raised by the assessee are allowed for statistical purposes.

Summary

Issues:
Taxability of interest received under Land Acquisition Act.

Analysis:
The appeal was filed against the order of Commissioner of Income Tax (Appeals) relating to assessment year 2012-13 under section 143(3) of the Income Tax Act, 1961. The primary issue raised was the taxability of interest received under the Land Acquisition Act. The assessee contended that the interest received should be exempt under section 10(37) of the IT Act as it was part of enhanced compensation. The Assessing Officer, however, held that the interest was taxable under section 56(2)(viii) of the Act. The CIT(A) upheld this decision, relying on previous judgments.

The assessee argued that the interest received was under section 28 of the Land Acquisition Act and not under section 34, emphasizing a previous Tribunal decision supporting this claim. The Revenue, on the other hand, supported the orders of the lower authorities. The main issue before the Tribunal was the taxability of the compensation received by the assessee, which had been taxed under section 56(2)(viii) of the Act with a deduction allowed under section 57(iv). The Tribunal referred to the distinction made by the Supreme Court between interest received under different sections of the Land Acquisition Act.

The Tribunal disagreed with the CIT(A) and remanded the issue back to the Assessing Officer to determine whether the interest received fell under section 28 or section 34 of the Land Acquisition Act. The Tribunal emphasized that interest under section 28 was not taxable, while interest under section 34 was. The Tribunal directed the Assessing Officer to verify the claim of the assessee and make a decision after providing a reasonable opportunity for the assessee to be heard. Consequently, the appeal of the assessee was allowed for statistical purposes.

In conclusion, the Tribunal's decision focused on the distinction between interest received under different sections of the Land Acquisition Act, emphasizing that interest under section 28 was not taxable while interest under section 34 was. The case was remanded back to the Assessing Officer for further verification and decision-making based on the nature of the interest received.