2023 (6) TMI 1070 - AT - Income Tax

Exemption u/s 10(37) - interest received by the assessee on enhanced compensation u/s 28 of the Land Acquisition Act 1984 - whether taxable being part of compensation? - HELD THAT - As authorities below have treated interest received by the assessee on enhanced compensation u/s 28 of the Land Acquisition Act 1984 as Income from other sources and denied exemption u/s 10(37) of the Act. The facts and circumstances of the present case are identical and similar to the case of Ram Kishan I 2020 (12) TMI 1244 - ITAT DELHI wherein Tribunal categorically held that the interest received by the assessee u/s 28 of the Land Acquisition Act 1984 on enhanced compensation is part and parcel of the compensation if the agricultural land of the assessee has been acquired under compulsory acquisition and thus the same is exempt income u/s 10(37) of the Act. Appeal of the assessee is allowed.

Summary

Issues involved:
1. Condonation of delay in filing appeal before the Tribunal.
2. Taxability of interest on enhanced compensation under the Income Tax Act.

Condonation of Delay:
The appeal was filed by the assessee against the order of the Ld. NFAC, New Delhi, relating to Assessment Year 2018-19. The assessee sought condonation of delay of 161 days in filing the appeal before the Tribunal. The assessee, an uneducated farmer with limited computer knowledge, stated that the delay was due to not being aware of the dismissal of the appeal by NFAC until December 2022. The Tribunal, after considering the submissions, found the cause shown by the assessee to be bona fide and sufficient. Citing the case of Paras Rice Mills vs. CIT, the Tribunal allowed the application, condoned the delay, and admitted the appeal for hearing.

Taxability of Interest on Enhanced Compensation:
The main ground raised by the assessee was the addition of Rs. 20,07,526 as 50% of interest on enhanced compensation received under the Land Acquisition Act, 1894, held to be taxable under section 56(2)(viii) of the Income Tax Act, 1961. The assessee argued that the interest received on enhanced compensation should be exempt under section 10(37) of the Act. The Sr. DR, however, contended that such interest should be treated as 'Income from other sources' and not exempt under section 10(37). The Tribunal considered various judgments and precedents, including the case of Ram Kishan, where it was held that interest on enhanced compensation under section 28 of the Land Acquisition Act is part of compensation and should be treated as tax-free under section 10(37) if the transfer is of agricultural land. Following this proposition, the Tribunal directed the AO to delete the addition, thereby allowing the appeal of the assessee.

Conclusion:
The Tribunal allowed the appeal of the assessee, condoning the delay in filing the appeal and directing the deletion of the addition of interest on enhanced compensation, holding it to be exempt under section 10(37) of the Income Tax Act.