2022 (5) TMI 1056 - AT - Income Tax

Taxability of a sum received as interest on enhanced compensation - Exemption u/s. 10(37) - interest received u/s 28 of the Land Acquisition Act from Government, on delayed Award of compensation on compulsory acquisition of agricultural land - whether taxable as income of the assessee from other sources? - HELD THAT - On perusal of the order of the Tribunal in the case of Jagmal Singh Vs. ITO 2018 (9) TMI 1468 - ITAT DELHI find that the issue in appeal has been decided in favour of the assessee holding that interest received by the assessee under Section 28 of the LA Act is part of enhanced compensation and exempt under Section 10(37) . Thus interest received under Section 28 of the LA Act by the assessee is part of enhanced compensation and is not liable for Income tax. Accordingly, the Assessing Officer is directed to delete the addition made while computing the income of the assessee. - Decided in favour of assessee.

Summary

Issues:
Whether interest received under Section 28 of the Land Acquisition Act from the Government on delayed Award of compensation on compulsory acquisition of agricultural land is taxable as income of the assessee from other sources.

Analysis:
The appeals were filed by different assesses of the same family against orders of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The common issue in all appeals was the taxability of interest received under Section 28 of the Land Acquisition Act as income from other sources. The counsel for the assessee argued that a previous Tribunal decision had ruled in favor of the assessee, holding that such interest is part of enhanced compensation and not taxable. The Departmental Representative also acknowledged that the issue had been decided in favor of the assessee by the Tribunal.

The Tribunal reviewed the previous decision and noted that interest received under Section 28 of the Land Acquisition Act is considered part of enhanced compensation and exempt under Section 10(37) of the Income Tax Act. The Tribunal referred to various legal precedents, including a case before the Hon'ble Gujarat High Court, to support its conclusion that such interest is not taxable under the head "income from other sources." The Tribunal emphasized that the interest received is an accretion to compensation and forms part of the compensation, hence not falling within the ambit of taxable interest as per the relevant provisions of the Income Tax Act.

Based on the legal analysis and precedents cited, the Tribunal held that the interest received under Section 28 of the Land Acquisition Act by the assessee is part of enhanced compensation and is not liable for income tax. Consequently, the Assessing Officer was directed to delete the addition made while computing the income of the assessee. The Tribunal allowed all the appeals of the assessee, affirming the decision that the interest received under Section 28 of the Land Acquisition Act is not taxable as income from other sources.

In conclusion, the Tribunal dismissed the revenue's appeals, stating that the facts were identical to previous cases where the issue had been decided in favor of the assessee. The Tribunal upheld the decision that the interest received under Section 28 of the Land Acquisition Act is part of enhanced compensation and not subject to income tax. The orders of the Commissioner of Income Tax (Appeals) allowing exemption under Section 10(37) of the Act on the interest received by the assessee were upheld, with no grounds found to interfere with the impugned orders.