2019 (4) TMI 263 - AT - Income Tax

Revision u/s 263 - interest received u/s 28 of the Land Acquisition Act is part of enhanced compensation or taxable as other sources - assessee claimed whole of the interest exempt as capital gains earned from sale of rural agricultural land - CIT held that the assessment order passed by the AO u/s 143(3) having failed to add 50% of the interest income as per the provisions of Section 56(2)(viii), 57(iv) and 145A(b) under the head income from other sources and having not properly examined the facts of the case and accepted the version of the assessee without due examination - HELD THAT - There is no error in the order of the AO treating the interest received by them u/s 28 of the LAA,1894, as compensation following the proposition laid down by the apex court in GHANSHYAM (HUF) 2009 (7) TMI 12 - SUPREME COURT . We set aside the order passed by the ld. Pr. CIT u/s 263. - Decided in favour of assessee

Summary

Issues:
Taxability of interest received under section 28 of the Land Acquisition Act, 1894 as 'income from other sources' in the assessment year 2013-14.

Analysis:
The appeal was filed by the assessee against the order passed by the Principal Commissioner of Income Tax, Hisar under section 263 of the Income Tax Act, 1961. The issue revolved around the taxability of interest received on enhanced compensation under section 28 of the Land Acquisition Act, 1894. The Principal Commissioner held that the interest received was taxable as 'income from other sources' based on various legal precedents, including a decision by the Hon'ble Punjab & Haryana High Court. The Principal Commissioner set aside the assessment order and directed the Assessing Officer to add 50% of the interest income to the assessed income of the assessee.

During the hearing, the counsel for the assessee argued that subsequent decisions by the Hon'ble Apex Court reaffirmed that interest received under section 28 of the Land Acquisition Act was in the nature of compensation and not taxable as 'income from other sources'. The counsel also referenced a Co-ordinate Bench decision of the ITAT Chandigarh Benches which supported the assessee's position. The ITAT noted that in a similar group of cases, the ITAT had allowed the appeal of the assessee, following the Apex Court's decision in the case of Hari Singh. The ITAT found merit in the contention of the assessee and set aside the order of the Principal Commissioner under section 263 of the Act. The appeal of the assessee was allowed based on the legal principles established by the Apex Court.

In conclusion, the ITAT Chandigarh Benches held that the interest received under section 28 of the Land Acquisition Act, 1894 was in the nature of compensation, following the legal precedent set by the Apex Court. The ITAT set aside the order of the Principal Commissioner and allowed the appeal of the assessee, as the legal position established by the Apex Court was considered binding. The decision in the group of cases with similar facts was applied to the present case, resulting in the allowance of the appeal of the assessee.