2022 (5) TMI 1026 - AT - Income Tax

Income from other sources - Interest income on enhanced land acquisition compensation as taxable under Section 56(2)(viii) r.w.s. 145A(b) - HELD THAT - We find no merit inn assessee s instant argument once the legislature has inserted Section 56(2)(viii) vide Finance Act 2009 w.e.f. 01.04.2010 holding interest received on compensation or on enhanced compensation referred to in clause (b) of Section 145A as treating the corresponding income as income from other sources. The assessee could hardly rebut the fact that the foregoing statutory provision in fact makes both interest on compensation as well as on enhanced compensation deemed as income of the year in which it is received whereas the assessment year before their lordships was 1999-2000 only. We thus hold that the CIT(A) has rightly affirmed the assessment findings assessing the impugned interest income in assessee s hands. Appellant at this stage invited our attention to the Revenue s averments in the foregoing miscellaneous application (supra) that its Tax Appeal in a connected case is pending in hon ble jurisdictional high court raising the very issue. We find no substance in assessee s instant latter request as well once it is clear that the impugned interest income is very much taxable as per the amended provision i.e. Section 56(2)(viii) r.w.s. 57(iv) r.w.s. 145A(b) applicable w.e.f. 01.04.2010. The assessee fails in its sole substantive ground as well as in the main appeal therefore.

Summary

Issues Involved:
1. Taxability of interest income on enhanced land acquisition compensation under Section 56(2)(viii) read with Section 145A(b) of the Income Tax Act, 1961.
2. Applicability of judicial precedents and legislative amendments in determining the taxability of such interest income.

Detailed Analysis:

1. Taxability of Interest Income on Enhanced Land Acquisition Compensation:
The core issue in this appeal is whether the interest income of Rs. 1,64,96,146/- received by the assessee on enhanced land acquisition compensation should be taxed under Section 56(2)(viii) read with Section 145A(b) of the Income Tax Act, 1961. The assessee contended that the interest received under Section 28 of the Land Acquisition Act is part of the enhanced value of the land and thus exempt from tax, relying on the Supreme Court's decision in CIT vs. Ghanshyamdas (HUF) and the Himachal Pradesh High Court's decision in CIT vs. Keshawadevi. The assessee further argued that since only 50% of the compensation was received and the remaining is pending before the court, the interest should not be taxed until the final judgment is delivered.

2. Applicability of Judicial Precedents and Legislative Amendments:
The CIT(A) upheld the Assessing Officer's action, referencing the Supreme Court's decision in Bikram Singh vs. Land Acquisition Collector, which held that interest on delayed payment of compensation is a revenue receipt and taxable. The CIT(A) noted that the decision in Ghanshyam (HUF) was given by a smaller bench (Two Judge Bench) compared to the larger bench (Three Judge Bench) decision in Bikram Singh, and thus, the latter prevails. Additionally, the CIT(A) referred to the Bombay High Court's decision in Shivajirao Dnyanoba Ghanwat vs. State of Maharashtra, which followed the larger bench's ruling in Bikram Singh.

The tribunal also considered the legislative amendment via Finance Act 2009, which inserted Section 56(2)(viii) effective from 01.04.2010, explicitly treating interest received on compensation or enhanced compensation as income from "other sources." This amendment further solidified the taxability of such interest income, making the assessee's reliance on earlier judicial precedents less tenable.

Conclusion:
The tribunal dismissed the assessee's appeal, affirming the CIT(A)'s decision that the interest income on enhanced land acquisition compensation is taxable under Section 56(2)(viii) read with Section 145A(b). The tribunal underscored that the legislative amendment post-2009 clearly mandates the taxability of such interest income, irrespective of the judicial precedents cited by the assessee. Consequently, the appeal was dismissed, and the order was pronounced in the open court on 28th April 2022.