2014 (1) TMI 1320 - AT - Income Tax

Failure to furnish details of interest on enhanced and delayed payment of compensation Held that - The decision in Commissioner of Income-tax, Faridabad Versus Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT followed - Interest is different from compensation - Interest received u/s 28 of Land Acquisition Act is to be treated as part of the compensation and therefore, is exempt - interest u/s 34 is towards delay in payment and therefore, the same is to be taxed - the ld. CIT(A) has adjudicated the issue and remitted the matter to the file of Assessing Officer only for verification of the components of interest u/s 28 & 34 thus , no interference is required in the order of the CIT(A) matter remitted back to the AO for verification Decided in favour of Revenue.

Summary

Issues:
1. Taxability of interest on enhanced compensation received by the appellant.
2. Interpretation of sections 28 and 34 of the Land Acquisition Act, 1894 regarding taxability of interest.

Analysis:
1. The appeal was against the CIT(A)'s order regarding the taxability of interest on enhanced compensation received by the appellant. The AO added Rs. 21,62,124/- to the appellant's income as interest on enhanced compensation. The appellant claimed the compensation was exempt u/s 10(37) as it was received for the compulsory acquisition of land near Santoshi Mata Mandir. However, the AO was not satisfied and taxed the interest received. On appeal, it was argued that as per the decision of the Hon'ble Supreme Court in CIT V. Ghanshyam (HUF), interest u/s 28 of the Land Acquisition Act should be treated as part of compensation and exempt from tax.

2. The ld. CIT(A) considered the Supreme Court's decision and differentiated between interest under sections 28 and 34 of the Land Acquisition Act. Interest under section 28 is part of compensation and exempt, while interest under section 34 is for delay in payment and taxable. The matter was remitted to the AO for verification of the interest components. The Tribunal found that the interest u/s 28 is exempt as part of compensation, but details were needed for proper verification. As the ld. CIT(A) had already adjudicated the issue and remitted it for verification, no further interference was required. The Tribunal directed the AO to verify the interest components and treat them as per the Supreme Court's decision in CIT V. Ghanshyam (HUF).

In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, emphasizing the need for verification of interest components under sections 28 and 34 of the Land Acquisition Act to determine taxability accurately.