2022 (11) TMI 448 - AT - Income Tax

Income from other sources - interest u/s 28 of Land Acquisition Act received by the appellant which was part of enhanced compensation received on compulsory acquisition of her agricultural land which is exempt u/s 10(37) - HELD THAT - In the present case, from the orders of the authorities below, it is clear that the authorities below have treated interest received by the assessee on enhanced compensation u/s 28 of the Land Acquisition Act, 1984 as Income from other sources and denied exemption u/s 10(37) of the Act. The facts and circumstances of the present case are identical and similar to the case of Ram Kishan 2020 (12) TMI 1244 - ITAT DELHI wherein the coordinate Bench of the Tribunal categorically held that the interest received by the assessee u/s 28 of the Land Acquisition Act, 1984 on enhanced compensation is part and parcel of the compensation, if the agricultural land of the assessee has been acquired under compulsory acquisition and, thus, the same is exempt income u/s 10(37) of the Act. Respectfully following the said proposition, allow ground No.2 of the assessee and the AO is directed to delete the addition.

Summary

Issues:
1. Jurisdiction of proceedings under section 147 of the Income Tax Act.
2. Addition of income from other sources on account of interest u/s 28 of Land Acquisition Act.

Jurisdiction of Proceedings under Section 147:
The appeal challenged the initiation of proceedings under section 147 of the Income Tax Act, contending that the reasons recorded were factually incorrect and lacked independent application of mind. The appellant argued that the notice issued at the wrong address was not served. The Commissioner of Income Tax (Appeals) dismissed the grounds not pressed by the appellant. The Tribunal upheld the jurisdictional issue, emphasizing the need for proper examination of records and facts before initiating proceedings under section 147.

Addition of Income from Other Sources:
The dispute centered on the addition of income from other sources due to interest received under section 28 of the Land Acquisition Act. The appellant claimed exemption under section 10(37) of the Act, arguing that the interest was part of enhanced compensation for agricultural land acquired under compulsory acquisition. The appellant relied on various judgments to support their case. The Senior DR contended that such interest should be treated as income from other sources and not exempt under section 10(37). The Tribunal analyzed relevant precedents and legislative changes, noting that interest on compensation should be tax-free for individuals and HUFs under section 10(37) if related to agricultural land acquisition. Citing a specific case, the Tribunal allowed the appeal, directing the deletion of the addition.

In conclusion, the Tribunal partially allowed the appeal, ruling in favor of the appellant on the issue of addition of income from other sources. The decision highlighted the interpretation of statutory provisions and the intention of the legislature in determining the tax treatment of interest received under the Land Acquisition Act. The judgment provided a detailed analysis of relevant legal precedents and legislative amendments to support the appellant's claim for exemption under section 10(37) of the Income Tax Act.