2021 (5) TMI 730 - AT - Income Tax

Chargeability of the interest on compensation or enhanced compensation - c ompulsory acquisition of agricultural land - Exemption under section 10(37) or Income from Other Sources' under section 56 - Whether CIT (Appeals) is right in law in holding that the interest received by the Assessee under section 28 of the Land Acquisition Act, 1894 during the impugned year on the compulsory acquisition of agricultural land is in the nature of compensation and exempt under section 10(37) and is not chargeable to tax under the head Income from Other Sources' under section 56 of the Income Tax Act, 1961?- HELD THAT - As noticed that a similar issue having identical facts has already been decided in the case of ITO vs. Shri Lakshmi Chander Gupta (HUF) 2021 (2) TMI 883 - ITAT CHANDIGARH no valid ground to interfere with the findings given by the Ld. CIT(A). Appeals of the department are dismissed.

Summary

Issues:
- Taxability of interest on compensation or enhanced compensation under the Income Tax Act, 1961

Analysis:
The Department filed two appeals against separate orders of the Ld. CIT(A), Panchkula, dated 30/10/2019 and 31/10/2019. The appeals were disposed of together due to the same assessee being involved. The primary issue revolved around the taxability of interest received under section 28 of the Land Acquisition Act, 1894, during the relevant year on the compulsory acquisition of agricultural land. The Department contended that the interest should be chargeable to tax under the head "Income from Other Sources" under section 56 of the Income Tax Act, 1961, disregarding the exemption under section 10(37). The Ld. CIT(A) had ruled in favor of the assessee, citing previous judgments and the nature of the compensation received. The Department challenged this decision, seeking to set aside the Ld. CIT(A)'s order and restore that of the Assessing Officer.

During the proceedings, it was noted that a similar issue had been addressed in a previous case involving Shri Lakshmi Chander Gupta (HUF), wherein the ITAT Chandigarh Bench 'A' had ruled in favor of the assessee. The Ld. Sr. DR acknowledged the similarity of facts between the present case and the earlier decision. The ITAT Chandigarh Bench 'A' had considered the taxability of interest on enhanced compensation under section 28 of the Land Acquisition Act, 1894, and had relied on judgments of the Hon'ble Supreme Court and coordinate Benches to support its decision. The ITAT upheld the Ld. CIT(A)'s order in the previous case, emphasizing that interest on enhanced compensation is to be treated as part of the compensation itself and is taxable in the year of receipt.

The ITAT, in the current case, reiterated the findings of the previous decision and upheld the Ld. CIT(A)'s order, dismissing the Department's appeal. The ITAT found no reason to interfere with the Ld. CIT(A)'s decision, as it was based on the precedents set by the Hon'ble Supreme Court and coordinate Benches. The ITAT also affirmed the deletion of the penalty imposed under section 271(1)(c) by the Assessing Officer, as the quantum addition had been deleted. Ultimately, both appeals by the Department were dismissed, following the principles established in previous judgments and maintaining consistency in the interpretation of tax laws related to interest on compensation or enhanced compensation.