2023 (3) TMI 978 - AT - Income Tax

Interest received u/s 28 of Land Acquisition Act , 1894 - addition u/s 56(2)(viii) r.w.s. 57(iv) and 145A of the Income Tax Act - interest in enhanced compensation of land - HELD THAT - As the issue is already settled by the Hon ble Apex Court in the case of Ghanshyam HUF 2009 (7) TMI 12 - SUPREME COURT wherein it was held that interest received under section 28 of the LAC Act would not fall within the ambit of the expression interest .Revenue s appeal stands dismissed.

Summary

Issues Involved:
1. Taxability of interest received u/s 28 of the Land Acquisition Act, 1894.
2. Treatment of interest as income from other sources.

Summary:

Issue 1: Taxability of Interest Received u/s 28 of the Land Acquisition Act, 1894
The Revenue appealed against the deletion of the addition made by the Assessing Officer (AO), who had taxed the interest received by the assessee u/s 28 of the Land Acquisition Act, 1894, as "income from other sources." The AO's decision was based on the amended provisions of the Income-tax Act, which allow for such interest to be taxed after a 50% deduction in the year of receipt. However, the CIT (Appeals) found that the issue was already settled by the Hon'ble Supreme Court in the case of Ghanshyam HUF [2009 (9) SCC 412], which held that interest received u/s 28 of the Land Acquisition Act is not in the nature of interest but an accretion to the compensation and thus forms part of the compensation. The CIT (A) cited several case laws and judgments, including those of the Hon'ble Supreme Court and various ITAT benches, to support this conclusion.

Issue 2: Treatment of Interest as Income from Other Sources
The CIT (A) rejected the AO's treatment of the interest as "income from other sources" by emphasizing that the interest received u/s 28 of the Land Acquisition Act is part of the enhanced compensation and not merely interest. The CIT (A) referenced multiple decisions, including those of the Hon'ble Supreme Court in cases like Union of India vs. Hari Singh & others and CIT vs. Ghanshyam HUF, which clarified that such interest is to be treated as compensation. The CIT (A) also referred to various ITAT decisions that consistently ruled in favor of the assessee, treating the interest as part of the compensation and not as income from other sources.

Conclusion:
The ITAT upheld the CIT (A)'s order, finding no infirmity in its well-reasoned decision. The ITAT dismissed the Revenue's appeal and the assessee's cross-objection, which was supportive of the CIT (A)'s order, as infructuous. The order was pronounced in the open court on 17th March 2023.