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2024 (7) TMI 501 - AT - Income TaxRevision u/s 263 - CIT(A) direction for completing the assessment afresh - Chargeability of interest on enhanced compensation under section 56(2)(viii) - original proceedings u/s 143(3) 143(3A) 143(3 allowed the assessee claim u/s 28 of the Land Acquisition Act, 1894 and the Ld. PCIT revised the order - As argued PCIT had relied upon the case law subsequent to the assessment - whether after insertion of section 56(2)(viii) and 57(iv) of the Act w.e.f 01.04.2010, the assessee can claim that interest received under section 28 of the Land Acquisition Act will part take the character of the compensation and will fall under the head Capital Gains and not income from other sources ? HELD THAT - The Hon ble Punjab Haryana High Court, in the case of Mahender Pal Narang 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT had held categorically that the interest received on compensation or on enhanced compensation is taxable under the head Income from other sources in the year of receipt. Therefore, the tax authorities within the territorial jurisdiction of Punjab Haryana have to follow this decision being binding in nature. The decision in the case of Mahender Pal Narang (P H), SLP dismissal in the case of Mahender Pal Narang relied upon by the Ld. PCIT, in our considered opinion, is binding in the jurisdiction of the Hon ble Punjab Haryana High Court as the AO was situated within the territorial and subjective jurisdiction of that Hon ble High Court. Thus, the record for the purpose of Section 263 of the Act is not limited with the assessment record up to the date of the assessment only. Hence, the plea of the Ld. Counsel that the Ld. PCIT had relied upon the case law subsequent to the assessment is of no relevance. The 2010 amendment was a conscious departure by the legislature from earlier position and said departure holds good law, as on date. There is no question with respect to the vires of the amendment or regarding any ambiguity in the language of the amendment. Interest whether on compensation or on enhanced compensation shall be considered as income from other sources and shall be exigible to Income Tax. The language of section 56(2)(viii) and 57(iv) of the Act is plain, simple and unambiguous. There is no scope of taking outside aid for giving an interpretation to newly inserted sub sections and clauses As argued the issue under reference here is debatable, hence, the order passed under section 263 of the Act following one view is not legally valid/tenable - As decided in case of Sham Lal Narula 1964 (4) TMI 10 - SUPREME COURT interest received under Section 28 and 34 of the Land Acquisition Act is not compensation received in lieu of compulsory acquisition of land under the Land Acquisition Act. The decision in Sham Lal Narula (supra) was subsequently followed by the Hon ble Supreme Court in the case of Bikram Singh 1996 (9) TMI 6 - SUPREME COURT wherein, it was held that interest under Section 28 of the Land Acquisition Act was in the nature of a revenue receipt and hence, the same was considered to be taxable. In view of the decision of three-Judges Bench of the Hon ble Supreme Court in the case of Sham Lal Narula (supra), the finding of two-Judges Bench of the Hon ble Supreme Court in the case of Ghanshyam HUF 2009 (7) TMI 12 - SUPREME COURT does not come to the rescue of the appellant/assessee to claim that the interest received under Section 28 and 34 of the Land Acquisition Act is to be treated as compensation and to be dealt with under Capital gains . The fact that there is no amendment carried out under section 10(37) of the Act will also not change the position. The argument raised by the Ld. Counsel is not well founded. Decision in the case of Ghanshyam HUF (supra) is not applicable after the substitution of Sections 145A, 145B, 56(2)(Viii) and 57(iv) by Finance (No.2) Act, 2009. In view of the above, it is evident that the interest on compensation or interest on enhanced compensation is chargeable to tax under the head income from other sources‟ from 01.10.2010 onwards. Therefore, the decision of the Hon ble Supreme Court in the case of Ghanshyam HUF (supra), which was passed in the year 2009, in our considered opinion, is not applicable in the facts of the present case. The case laws relied upon by the Ld. Counsel were held distinguishable on facts and thus these were of no help to the appellant/assessee. We find merit in the argument of the Ld. DR that the assessment order dated 11.02.2021, wherein the decisions of the Hon ble Jurisdictional High Court/Punjab Haryana High Court in the cases of Mahender Pal Narang 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT and Puneet Singh 2019 (1) TMI 1068 - PUNJAB AND HARYANA HIGH COURT not followed was erroneous and prejudicial to the revenue as per the clause (d) of Explanation 2 to section 263 of the Act. Decided against assessee.
Issues Involved:
1. Legality of the Principal Commissioner of Income Tax's (PCIT) direction to reassess the chargeability of interest on enhanced compensation under Section 56(2)(viii) of the Income Tax Act, 1961. 2. Applicability of various judicial precedents on the taxability of interest on enhanced compensation. 3. Interpretation of amendments to Sections 56(2)(viii) and 145B of the Income Tax Act, effective from 01.04.2010. 4. Validity of the original assessment order under Section 143(3) read with Sections 143(3A) and 143(3B) of the Income Tax Act. Issue-wise Detailed Analysis: 1. Legality of the PCIT's Direction for Reassessment: The PCIT set aside the assessment order dated 11.02.2021, directing the Assessing Officer (AO) to reassess the chargeability of interest on enhanced compensation under Section 56(2)(viii) of the Income Tax Act. The PCIT held that the AO's order was "erroneous and prejudicial to the interest of revenue" because it was passed "without due diligence and without conducting proper inquiries and verification" regarding the amended provisions of the Finance Act, 2015, and binding judicial decisions. 2. Applicability of Judicial Precedents: The appellant argued that the AO's decision was based on the Supreme Court's ruling in Ghanshyam Das HUF (2009), which held that interest under Section 28 of the Land Acquisition Act forms part of compensation and is taxable as capital gains. The PCIT, however, relied on the Punjab & Haryana High Court's decision in Mahender Pal Narang (2020), which held that such interest is taxable under "income from other sources" post the 2010 amendment. The Tribunal found that the PCIT's reliance on Mahender Pal Narang was correct and binding within the jurisdiction. 3. Interpretation of Amendments to Sections 56(2)(viii) and 145B: The Tribunal examined the amendments to Sections 56(2)(viii) and 145B, effective from 01.04.2010, which stipulate that interest on compensation or enhanced compensation is chargeable to tax under "income from other sources." The Tribunal noted that the 2010 amendment was a "conscious departure by the Legislature from the earlier position," and therefore, the interest on enhanced compensation should be taxable under the head "income from other sources." 4. Validity of the Original Assessment Order: The Tribunal held that the original assessment order dated 11.02.2021, which did not tax the interest on enhanced compensation, was erroneous and prejudicial to the interest of revenue. The Tribunal noted that the AO's failure to follow the binding decisions of the jurisdictional High Court (Punjab & Haryana High Court) and the provisions of the Act post-2010 amendment made the assessment order legally unsustainable. Conclusion: The Tribunal upheld the PCIT's order under Section 263 of the Income Tax Act, directing the AO to reassess the chargeability of interest on enhanced compensation. The Tribunal found that the PCIT's order was in accordance with the binding judicial precedents and the amended provisions of the Income Tax Act. Consequently, the appeal was dismissed.
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