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2021 (2) TMI 883 - AT - Income TaxCharacterization of income - interest received u/s 28 of the land acquisition Act, 1894 on the compulsory acquisition of agricultural land - exemption u/s 10(37) of the IT Act or income from other sources u/s 56 - CIT(A) held that the interest received is in the nature of compensation and exempt u/s 10(37) - HELD THAT - CIT(A) has decided the issue involved in this appeal in favour of the assessee by following the ratio laid down by the Hon ble Supreme Court in the case of CIT vs. Ghanshyam 'HUF' 2009 (7) TMI 12 - SUPREME COURT and SOM NATH 2018 (7) TMI 2051 - ITAT CHANDIGARH and and in a group case of Surinder Kumar 2018 (10) TMI 1754 - ITAT CHANDIGARH - no reason to interfere with the findings of the Ld. CIT (A) - Decided against revenue.
Issues Involved:
1. Taxability of interest received under Section 28 of the Land Acquisition Act, 1894. 2. Applicability of Section 10(37) of the Income Tax Act, 1961 for exemption on interest received on enhanced compensation. 3. Interpretation of Section 56(2)(viii), Section 57(iv), and Section 145A of the Income Tax Act, 1961. 4. Consideration of precedents and judicial decisions relevant to the case. Detailed Analysis: 1. Taxability of Interest Received under Section 28 of the Land Acquisition Act, 1894: The core issue revolves around whether the interest received on enhanced compensation under Section 28 of the Land Acquisition Act is taxable as income from other sources or as part of the compensation. The Assessing Officer (AO) added ?3,43,68,408 to the assessee's income, treating the interest as taxable under the head "income from other sources" per Section 56(2)(viii) of the Income Tax Act, 1961. The AO allowed a deduction of 50% under Section 57(iv). 2. Applicability of Section 10(37) of the Income Tax Act, 1961: The assessee argued that the interest received on enhanced compensation is exempt under Section 10(37) of the Act, referring to the Supreme Court judgment in the case of Ghanshyam HUF (315 ITR 1). The Commissioner of Income Tax (Appeals) [CIT(A)] agreed with the assessee, holding that the interest received under Section 28 of the Land Acquisition Act is in the nature of compensation and thus exempt under Section 10(37). 3. Interpretation of Section 56(2)(viii), Section 57(iv), and Section 145A of the Income Tax Act, 1961: The Revenue contended that the CIT(A) erred in law by not considering the amendments to Sections 56(2), 57(iv), and 145A applicable from the assessment year 2010-11. These amendments stipulate that interest on compensation or enhanced compensation is taxable under "income from other sources" and subject to a 50% deduction under Section 57(iv). 4. Consideration of Precedents and Judicial Decisions: The CIT(A) based its decision on the Supreme Court's ruling in Ghanshyam HUF and other coordinate bench decisions, which classified interest under Section 28 as part of the compensation. The Revenue cited the Punjab and Haryana High Court's decisions in Manjeet Singh vs. UOI and CIT vs. Prem Singh, which held that such interest is taxable under Section 56 as income from other sources. However, the Tribunal upheld the CIT(A)'s decision, emphasizing the Supreme Court's distinction between interest under Sections 28 and 34 of the Land Acquisition Act. Interest under Section 28 is considered an accretion to the value of the land and thus part of the compensation, whereas interest under Section 34 is for undue delay and not part of the compensation. Conclusion: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that interest received under Section 28 of the Land Acquisition Act is in the nature of compensation and exempt under Section 10(37) of the Income Tax Act. The Tribunal's decision was guided by the Supreme Court's rulings and the consistent stance of coordinate benches, which treated such interest as part of the enhanced compensation rather than as income from other sources. The Tribunal found no contrary legal precedents to warrant interference with the CIT(A)'s findings.
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