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2025 (3) TMI 1419 - AT - Income TaxRevision u/s 263 - Setting aside the assessment order U/s 147 r.w.s. 144B - assessee was reopened u/s 147 on the basis of information that the assessee had received as interest on enhancement of compensation on compulsory acquisition during the year which he had claimed exempt income 10(37) - whether the interest received under section 28 of the Land Acquisition Act on enhanced compensation for acquisition of land is exempt u/s 10(37) or will be exigible to tax under the income from other sources in view of amendment w.e.f 01.04.2010 in the provisions of section 56(2)(viii) and 57(iv) of the Act. ? HELD THAT - From the perusal of the facts and circumstances of the case and the position of law as on date we are of the considered view that the language in section 56(2)(viii) and 145B(1) are plain simple and unambiguous and that the correct legal position is that the interest received during the year on enhanced compensation under section 28 of the Land Acquisition Act 1894 is exigible to tax u/s 56(2)(viii) r.w.s 145B(1). The assessee s claim of the same as exempt u/s10(37) of the Act is unsustainable as the provisions of section 10(37) deals with compensation only and not interest on compensation or enhanced compensation . The argument of the Ld. DR that the AO s order which ignored the decisions 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 becomes erroneous and prejudicial to the revenue as per the clause (d) of Explanation 2 to section 263 of the Act needs to be endorsed. Thus we are of the considered opinion that the AO s order is not legally compliant and is clothed with flawed appreciation of law. The AO has not made any inquiry into the legal position regarding taxability of the said receipt. We further hold that the PCIT has correctly held that the AO order is erroneous and prejudicial as it has defied the binding decisions 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 We further hold that the ld. PCIT was within his legal competence and has validly assumed jurisdiction u/s 263 to order re-computation of the interest on enhanced compensation in accordance with section 2(28A)r.w.s.56(2)(viii) and 145B(1) and allowing deduction u/s 57(iv).We also find that the order of the Ld. PCIT is in accordance with the ratio laid down in the cases of Sham Lal Narula 1964 (4) TMI 10 - SUPREME COURT and Malabar Industrial Co. Ltd. 2000 (2) TMI 10 - SUPREME COURT and Mahender Pal Narang (supra) Puneet Singh (supra) and Inderjit Singh Sodhi (HUF) 2024 (4) TMI 408 - DELHI HIGH COURT Thus we decline to interfere with the impugned order passed by the PCIT under section 263 of the Act holding that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue. Grounds raised by the assessee are accordingly dismissed.
1. ISSUES PRESENTED and CONSIDERED
The primary issues considered by the Appellate Tribunal in this case were:
2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents: The legal framework involves the interpretation of Sections 28 and 34 of the Land Acquisition Act, 1894, concerning interest on compensation, and Sections 10(37), 56(2)(viii), and 145B(1) of the Income Tax Act, 1961. The precedents include the Supreme Court's decision in Ghanshyam HUF, which distinguished between interest under Sections 28 and 34, and subsequent amendments to the Income Tax Act that impact the taxability of interest on enhanced compensation. Court's Interpretation and Reasoning: The Tribunal examined the distinction between interest under Sections 28 and 34 of the Land Acquisition Act, noting that interest under Section 28 is considered part of enhanced compensation, while interest under Section 34 is not. The Tribunal also considered the amendments to the Income Tax Act, which classify interest on compensation as taxable under "Income from Other Sources." Key Evidence and Findings: The Tribunal noted that the AO accepted the assessee's claim of exemption based on the Supreme Court's decision in Ghanshyam HUF without conducting a detailed inquiry into the applicability of the amended provisions of the Income Tax Act. The PCIT's order highlighted the lack of inquiry and legal examination by the AO. Application of Law to Facts: The Tribunal applied the amended provisions of the Income Tax Act, which clearly categorize interest on enhanced compensation as taxable under "Income from Other Sources." The Tribunal emphasized that the legal position has changed post-amendment, and the AO's reliance on the pre-amendment Supreme Court decision was misplaced. Treatment of Competing Arguments: The Tribunal considered the assessee's reliance on earlier judgments, including Ghanshyam HUF, and the argument that the issue was debatable. However, it concluded that the legal amendments provided clear guidance on the taxability of interest on enhanced compensation, rendering the issue non-debatable. Conclusions: The Tribunal concluded that the PCIT was justified in invoking jurisdiction under Section 263, as the AO's order was erroneous and prejudicial to the interests of the revenue. The interest received under Section 28 of the Land Acquisition Act is taxable under "Income from Other Sources," and the exemption under Section 10(37) does not apply to interest. 3. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: The Tribunal reiterated the legal position post-amendment, stating: "The 2010 amendment was a conscious departure by the legislature from the earlier position and the said departure holds good law, as on date." Core Principles Established:
Final Determinations on Each Issue:
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