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TMI Blog2018 (2) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... l purpose. X X X X Extracts X X X X X X X X Extracts X X X X ..... and not liable to tax. Therefore, finding of the CIT(A) may please be vacated and it may please be held that interest received u/s. 28 under LAQ is a capital receipts and not liable to tax in the case of appellant. Thus, addition may please be deleted. 2]. On the facts and in the prevailing circumstance of the case and in law, the Learned CIT(A) has grossly erred in holding that the elements of Interest received of Rs.26,48,316/-, on account of acquisition of Agricultural land, under the provisions of section 23(1A) & 23(2) r/w Sec. 28 of the Land Acquisition Act as per court order, is liable to tax. Therefore, addition made by the A.O may please be deleted. 3]. On the facts and circumstances of the case, whether the ld. CIT(A) was right in law and on facts in holding that Interest received under section 28 of the Land Acquisition Act, is a taxable event? 4]. On the facts and circumstances of the case, and with due respect to the decision relied by the CIT(A), appellant would like to rely upon the decision of Hon. Supreme Court in the case of CIT Vs Ghanshyam (HUF) (2009) 315 ITR-1(SC), dt.16-07-2009, which is logically as well as with reference to the scheme of the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 2(14) of the I.T Act. Therefore, assessee has claimed entire compensation as exempt. Particulars Amount of Compensation Value of land as enhanced 80,60,000 As per Court Compensation for trees 5,78,182 Solatium u/s. 23(2) 25,91,454 Component… u/s. 23(1A) 35,41,655 Total 1,47,71,291 Less : Com as per original award…. 25,38,882 Balance………… 1,22,32,409 Add; Compensation u/s. 28 by interest 2,64,83,163 Total Compensation of the land….. 3,87,15,572 Interest u/s. 34 for delayed payments…say 1,12,84,428 Total amount received under LAQ 5,00,00,000 The Assessing Officer has noted the relevant facts that the said land is situated in the small village having population of 4000 only. A.0 has examined the correctness of the claim of the assessee regarding not liable to tax. However, on further verification A.O noted that the said land is a Capital Asset and as it is situated within 8 K,M from the municipality limit and hence, A.O has rejected the claim. Further, A.O has taxed the entire compensation of Rs.3,87,15,572/- as a Capital Gain and Rs.1,12,84,428/- as a Revenue receipt. [B) Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed entire compensation as exempt. Particulars Amount of Compensation Value of land as enhanced 80,60,000 As per Court Compensation for trees 5,78,182 Solatium u/s. 23(2).. 25,91,454 Component… u/s. 23(1A) 35,41,655 Total 1,47,71,291 Less : Com as per original award…. 25,38,882 Balance………… 1,22,32,409 Add; Compensation u/s. 28 by interest 2,64,83,163 Total Compensation of the land….. 3,87,15,572 Interest u/s. 34 for delayed payments…say Nil Total amount received under LAQ 3,87,15,572 The Assessing Officer has noted the relevant facts that the said land is situated in the small village having population of 4000 only. A.O has examined the correctness of the claim of the assessee regarding not liable to tax and accepted it. However, A.O is of the opinion that the interest of Rs. 2,64,83,163/-u/s.28 of LAQ act is taxable to tax, being revenue receipt and accordingly A.O taxed it. 3] Further, the Jurisdictional Bombay High Court has observed in Para 30 in the decision in the case of Gopal Kasat and others, cited supra that: 30. The Apex Court in the case of Commissioner of Income Tax. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of enhanced compensation and further held that the interest under Section 28 is also a component of the enhanced compensation and since we have already held that the compensation received on account of acquisition of the lands, in question, was a business income taxable under Section 28 of the Income Tax Act, 1961, we find that the Income Tax Appellate Tribunal has erred in treating the interest as "income from other sources" . . . . . . ... The interest which forms component of the compensation, as held by the Apex Court, in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra), has to be taxed in the year of receipt. The interest, which has been held to be a component of the compensation, is chargeable to income tax under the head "profit and gains of business or profession". In the case of Gopal Kasat, as per prevailing circumstance, the said compensation was treated as "Business income" In the case of appellant, it is not disputed that the said compensation received under LAQ is a Capital receipt. As per court order appellant has received the statutory interest u/s.23 (1A) & 23(2) r.w.s sec. 28 of L. A Act. (as per Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering entire facts into totality and taking into accounts the ratio laid down in the above relied decisions, the addition made by the A.O cannot be sustained. It is, therefore, requested to your kind honour that addition may please be deleted. Thanking you Sir, in anticipation. Yours Sincerely, Sd/- ( Dnyanoba S. Jadhav) Enclo : As above." 6. Shri Achal Sharma representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals). The ld. DR submitted that it is a well settled law that interest received on compensation/enhanced compensation under the provisions of LA Act does not form part of compensation. Undisputedly, compensation is exempt from tax u/s. 10(37) of the Act. The assessee is seeking exemption of tax on interest segment as well, it is not permissible. The ld. DR pointed that as per provisions of section 56(1)(viii) income received by way of interest on compensation or enhanced compensation is liable to be taxed as income from other sources. The ld. DR further placed reliance on the decision of Hon'ble Supreme Court of India in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. (supra). 7. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional amount payable under s. 23(1A) of the 1894 Act is neither interest nor solatium. It is an additional compensation designed to compensate the owner of the land, for the rise in price during the pendency of the land acquisition proceedings. It is a measure to offset the effect of inflation and the continuous rise in the value of properties. [see : State of Tamil Nadu & Ors. vs. L. Krishnan & Ors. AIR 1996 SC 497]. Therefore, the amount payable under s. 23(1A) of the 1894 Act is an additional compensation in respect to the acquisition and has to be reckoned as part of the market value of the land. Sub-s. (1A) of s. 23 was introduced by Land Acquisition (Amendment) Act, 1984. It provides that in every case the Court shall award an amount as additional compensation @ 12 per cent per annum on the market value of the land for the period commencing on and from the date of publication of the notification under s. 4(1) to the date of the award of the Collector or to the date of taking possession of the land, whichever is earlier. In other words sub-s. (1A) of s. 23 provides for additional compensation. The said sub-section takes care of increase in the value @ 12 per cent per annu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Union of India (2001) 7 SCC 211, that "indeed the language of s. 28 does not even remotely refer to market value alone and in terms it talks of compensation or the sum equivalent thereto. Thus, interest awardable under s. 28, would include within its ambit both the market value and the statutory solatium. It would be thus evident that even the provisions of s. 28 authorise the grant of interest on solatium as well." Thus solatium means an integral part of compensation, interest would be payable on it. Sec. 34 postulates award of interest at 9 per cent per annum from the date of taking possession only until it is paid or deposited. It is a mandatory provision. Basically s. 34 provides for payment of interest for delayed payment." [Emphasized by us] A perusal of the above extract of the judgment indicate that the interest awarded u/s. 23(1A) and 23(2) r.w.s. 28 of the L.A. Act is in the nature of solitium and an integral part of compensation. It is an admitted position that the receipt of compensation awarded under L.A. Act is a capital receipt. Whereas, interest awarded u/s. 34 of the L.A. Act is on account of delayed payment of compensation and is revenue receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the L.A. Act are on different pedestal and both the interest cannot be equated for tax purpose. 10. The Commissioner of Income Tax (Appeals) while confirming the order of Assessing Officer has observed that the case of assessee is covered by the decision of Hon'ble Apex Court in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. (supra) as the said judgment is delivered by Larger Bench and prevails over the decision rendered in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) which is though subsequent in time but is rendered by Division Bench. We do not concur with the findings of Commissioner of Income Tax (Appeals) to make the addition. Undisputedly, while rendering the decision in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) the judgment of Larger Bench in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. (supra) was not considered. However, we find that there is no conflict of law laid down in both the cases. The Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) has clearly marked the distinction between the interest received u/s. 23(1A) and 23(2) r.w.s. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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