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2022 (7) TMI 391 - AT - Income TaxTaxability of interest received u/s 28 of the Land Acquisition Act, 1894 - whether interest received u/s 28 of Land Acquisition Act, 1894 is taxable u/s 56(2) (viii) read with Section 57(iv) and 145A of the Income Tax? - HELD THAT - The interest under Land Acquisition Act, is payable under two different Sections i.e. Section 34 Section 28 of Land Acquisitions Act. There is no dispute in so far as payment of interest u/s 34 of the Land Acquisition Act is concerned. Now, the question whether the interest paid under the provisions of Section 28 of Land Acquisition Act is a part of enhanced compensation or is it taxable as interest income or not. The said issue has been considered by the Hon'ble Supreme Court in the case of CIT Vs. Ghanshyam HUF 2009 (7) TMI 12 - SUPREME COURT held that the interest paid on the excess amount u/s 28 of Land Acquisition Act, 1894, depends upon a claim by the person whose land is acquired, where as interest u/s 34 of Land Acquisition Act is for delay in making payment. Interest u/s 28 of Land Acquisition Act is a part of enhanced value of land which is not the case in the matter of payment of interest u/s 34 of the Land Acquisition Act. Also see Hari Singh Ors. 2017 (11) TMI 923 - SUPREME COURT - CIT(A) has committed no error and there is no infirmity in allowing the Appeal of the assessee.
Issues:
1. Taxability of interest received under Section 28 of Land Acquisition Act, 1894. 2. Interpretation of relevant provisions of the Income Tax Act and Land Acquisition Act. 3. Applicability of judicial precedents in determining taxability of interest income. Analysis: Issue 1: Taxability of interest received under Section 28 of Land Acquisition Act, 1894 The appeal was filed by the Revenue against the order passed by CIT(A)-Hisar for Assessment Year 2016-17. The dispute revolved around the tax treatment of interest received by the assessee under Section 28 of the Land Acquisition Act, 1894. The Assessing Officer (A.O) had added a certain amount to the taxable income of the assessee based on the judgment of the Hon'ble Punjab and Haryana High Court. However, the CIT(A) allowed the appeal filed by the assessee and deleted the addition made by the A.O, leading to the Revenue's appeal. Issue 2: Interpretation of relevant provisions of the Income Tax Act and Land Acquisition Act The Department of Revenue contended that the interest received under Section 28 of the Land Acquisition Act, 1894 should be taxable as per Section 56(2)(viii) read with Section 57(iv) and 145A of the Income Tax Act. On the other hand, the assessee argued that the said interest was not taxable under the Income Tax Act. The Tribunal analyzed the provisions of the Income Tax Act and the Land Acquisition Act to determine the taxability of the interest income. It was highlighted that the interest under the Land Acquisition Act was payable under Sections 34 and 28, with a distinction drawn between the nature of interest under these sections. Issue 3: Applicability of judicial precedents in determining taxability of interest income The Tribunal considered various judicial precedents, including the decision of the Hon'ble Supreme Court in the case of CIT Vs. Ghanshyam HUF, which clarified the treatment of interest paid under Section 28 of the Land Acquisition Act. The Tribunal also referred to another Supreme Court order in Union of India Vs. Hari Singh & ors, emphasizing the importance of considering whether the interest under Section 28 amounts to compensation. Relying on these binding precedents, the Tribunal concluded that the CIT(A) had not erred in allowing the appeal of the assessee. The Tribunal dismissed the grounds of appeal raised by the Revenue, affirming the non-taxability of the interest received under Section 28 of the Land Acquisition Act. In conclusion, the Tribunal upheld the decision of the CIT(A) and dismissed the appeal filed by the Department of Revenue, emphasizing the applicability of the Supreme Court judgments in determining the tax treatment of interest income under the Land Acquisition Act.
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