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2014 (6) TMI 288 - AT - Income TaxTaxability of interest awarded Exemption u/s 10(37) - Compensation paid for acquisition of land agriculture land - Held that - The assessee is entitled to get 30% amount under the head of Solatium and also entitled to get 9% interest for the first year and thereafter at the rate of 15% for the second year upto depositing of the awarded amount - Court has also ordered for 12% increase from the date of publication of the notification u/s.4 i.e. 13.08.1992 to the date of award i.e. 10.04.1995 passed by the Land Acquisition Officer as provided u/s 23(1)(A) of the Act - all these amounts form part of the compensation Relying upon in the view of the judgement of Hon ble Supreme Court in the case of CIT vs. Ghanshyam (HUF) 2009 (7) TMI 12 - SUPREME COURT - since the case is transfer of agricultural land, therefore, this amount is exempt u/s.10(37) of the Act. The authorities ought to have given a clear finding as to how the amount would become taxable if it is forming integral part of the compensation, when transfer is of the agricultural land - the claim was not made before the authorities, but arising from the material available before the AO, requires fresh adjudication by the AO thus, the claim of the assessee is remitted back to the AO for fresh adjudication Decided in favour of Assessee.
Issues Involved:
1. Taxability of interest awarded on enhanced compensation for compulsory acquisition of agricultural land. 2. Levy of interest under Section 234B of the Income Tax Act. 3. Initiation of penalty under Section 271(1)(c) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Taxability of Interest Awarded on Enhanced Compensation: The primary issue is whether the interest awarded on the enhanced compensation for compulsory acquisition of agricultural land is taxable. The appellant contended that, in light of the Supreme Court's decision in CIT vs. Ghanshyam HUF (315 ITR 1), the interest awarded should be considered an integral part of the compensation and hence not taxable. The appellant argued that the land in question was agricultural, and thus, the amount should be exempt from tax. The Assessing Officer (AO) added Rs. 22,93,378/- as interest income on the enhanced compensation, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellant's plea to tax the interest on an accrual basis and spread it over multiple years was rejected by both the AO and the CIT(A). The Tribunal noted that the appellant had not claimed the interest as exempt under Section 10(37) before the AO or CIT(A). However, it was argued that this claim could be raised as a pure question of law based on existing records, referencing the Gujarat High Court's decision in Commissioner of Income Tax vs. Mitesh Impex. The Tribunal acknowledged the binding precedent of the Supreme Court in CIT vs. Ghanshyam HUF, which held that interest awarded under Section 28 of the Land Acquisition Act is part of the enhanced compensation and thus not taxable as interest income. The Tribunal also referred to the Civil Court's order, which included solatium and interest as part of the compensation for the compulsory acquisition. Given these considerations, the Tribunal concluded that the authorities below should have provided a clear finding on the taxability of the amount if it forms an integral part of the compensation for agricultural land transfer. The Tribunal restored the claim to the AO for fresh adjudication in light of the Supreme Court's judgment in CIT vs. Ghanshyam HUF. 2. Levy of Interest under Section 234B: The appellant contested the levy of interest under Section 234B of the Income Tax Act. The Tribunal noted that this issue is consequential in nature, meaning it depends on the outcome of the primary issue regarding the taxability of the interest on enhanced compensation. 3. Initiation of Penalty under Section 271(1)(c): The appellant also challenged the initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act. The Tribunal found this issue to be premature, as it would depend on the final determination of the taxability of the interest income. Conclusion: The Tribunal allowed the appeal for statistical purposes, directing the AO to re-examine the taxability of the interest awarded on enhanced compensation in light of the Supreme Court's judgment in CIT vs. Ghanshyam HUF. The issues regarding the levy of interest under Section 234B and the initiation of penalty under Section 271(1)(c) were deemed consequential and premature, respectively.
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