2023 (11) TMI 704 - AT - Income Tax

Accrual of income - Exemption u/s 10(37)- Taxability of interest received under Section 28 of the Land Acquisition Act (hereinafter referred to LA Act) from Government, on delayed Award of compensation on compulsory acquisition of agricultural land - HELD THAT - As decided in Smt Ramesh Bai vs. ITO 2022 (5) TMI 1056 - ITAT DELHI interest received under Section 28 of the LA Act by the assessee is part of enhanced compensation and is not liable for Income tax.

Summary

Issues:
The judgment involves the issue of interest/enhanced compensation adjudicated in various cases by the Tribunal, referencing judgments of the Hon'ble Supreme Court. The common issue across multiple appeals is whether interest received under Section 28 of the Land Acquisition Act is taxable as income from other sources.

Details of Judgment:
In the case of Smt. Ramesh Bai vs. ITO, Bhiwani, the Tribunal considered appeals by different assesses from the same family against orders of the Commissioner of Income Tax (Appeals) for the assessment year 2013-14. The central issue was whether interest received under Section 28 of the Land Acquisition Act from the Government on delayed compensation for compulsory acquisition of agricultural land is taxable as income. The Tribunal referred to a previous decision in Jagmal Singh Vs. ITO where it was held that such interest is part of enhanced compensation and not taxable.

The Tribunal examined the legal position and cited the decision of the Hon'ble Apex Court in the case of Union of India Vs. Hari Singh, emphasizing that on agricultural land, no tax is payable when compensation/enhanced compensation is received. The Tribunal held that interest under Section 28 of the Land Acquisition Act is exempt under Section 10(37) of the Income Tax Act. The Tribunal also referenced the decision of the Hon'ble Gujarat High Court in Movaliya Bhikhubhai Balabhai v. Income-tax OfficerTDS-1-Surat, where it was held that interest under Section 28 is an accretion to compensation and forms part of it, thus taxable under Section 45(5) of the Act.

The Tribunal further discussed the applicability of provisions like Section 145A and Section 56(2)(viii) in relation to interest received on compensation or enhanced compensation. It highlighted that interest under Section 28 of the Land Acquisition Act is not in the nature of interest but an accretion to compensation. The Tribunal upheld the decision of the Hon'ble Gujarat High Court, concluding that interest under Section 28 does not fall under "income from other sources" and is not taxable as such.

Based on the legal precedents and factual alignment with previous decisions, the Tribunal allowed the appeals of the assessee, holding that interest received under Section 28 of the Land Acquisition Act is part of enhanced compensation and not liable for income tax. The Assessing Officer was directed to delete the addition made in the computation of the assessee's income. The appeals of the assessee were allowed, maintaining consistency with previous decisions and legal interpretations.

The judgment was pronounced on 16/11/2023.