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TMI Blog2019 (1) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the rate of 9% per annum for a period of one year from the date of taking possession and thereafter at the rate of 15% per annum from the date of expiry of one year on the amount of compensation or part thereof which remains unpaid or deposited before the date of such expiry. A plain reading of Sections 23(1A), 23(2) as also Section 28 of the 1894 Act clearly spells out that additional benefits are available on the market value of the acquired lands under Section 23(1A) and 23(2) whereas Section 28 is available in respect of the entire compensation. The cumulative effect of Section 145A(b) and Section 56(2) (viii) would be that any interest received on compensation or on enhanced compensation shall be taxable under the head 'income from other sources' in the year of receipt. However, by Section 27 of the 2009 Act, a new clause (iv) in Section 57 has been inserted w.e.f. 01.04.2010 which lays down that in the case of income of the nature referred to in Section 56(2)(viii), a deduction of a sum equal to 50% of such income would be allowable thereunder and no deduction would be allowed under any other clause of Section 57 No illegality or perversity could be poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... salary arrears in the relevant previous assessment years for the services having been rendered in past, can the landowner whose land has been acquired 8 years back, be allowed to set off of the interest income in case had the payment been made before amendment (Finance Act, 2009 w.e.f. 01.04.2010) hence outside the purview of chargeability to tax? 3. A few facts necessary for adjudication of the instant appeal as narrated therein may be noticed. Government of Haryana vide notifications dated 2.1.2002 issued under Sections 4 and 6 of the Land Acquisition Act, 1894 (in short the 1894 Act ) acquired the land measuring 344.31 acres situated within the revenue estate of village Budha Khera, Hadbast No.1, Tehsil and District Karnal for the development and utilization of land as residential and commercial area for Sector 9 Part 32 and 33, Urban Estate, Karnal. The Land Acquisition Collector passed the award. Being aggrieved, the landowners filed references under Section 18 of the 1894 Act which were accepted with costs and compensation was enhanced vide award dated 11.8.2009. Form D dated 27.5.2010 and 30.3.2011 (Annexure P-1) were drawn by the Land Acquisition Officer. Form 16A dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an appeal on 10.2.2017 (Annexure A-11) before the Tribunal. The Tribunal vide order dated 11.10.2017 (Annexure A-12) dismissed the appeal upholding the order of the CIT(A). Hence, the present appeals by the assessee. 4. After hearing learned counsel for the parties, we do not find any merit in the appeals. 5. The primary question for consideration that arises in these appeals relates to the nature of interest received by the landowner-assessee under Section 28 of the 1894 Act. In other words, whether the interest which is received by the assessee-landowner partakes the character of income or not and, in such a situation is it taxable under the provisions of the Act. 6. It would be apposite to quote herein below Sections 28 and 34 of 1894 Act which read thus:- 28. Collector may be directed to pay interest on excess compensation . - If the sum which, in the opinion of the court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of [nine per centum] per annum from the date on which he took p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Once it is held as it inevitably must be that the solatium provided for under Section 23(2) of the Act forms an integral and statutory part of the compensation awarded to a landowner, then from the plain terms of Section 28 of the Act, it would be evident that the interest is payable on the compensation awarded and not merely on the market value of the land. Indeed the language of Section 28 does not even remotely refer to market value alone and in terms talks of compensation or the sum equivalent thereto. The interest awardable under Section 28 therefore would include within its ambit both the market value and the statutory solatium. It would be thus evident that the provisions of Section 28 in terms warrant and authorize the grant of interest on solatium as well. 10. Examining the case law on the subject, inevitably, reference is made to the judgment by the three Judges Bench of the Supreme Court in the case of Dr. Shamlal Narula v. CIT, [1964] 53 ITR 151 , which had considered the issue regarding award of interest under the 1894 Act. Interest under Section 28 of the 1894 Act was considered akin to interest under Section 34 thereof as both were held to be on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Privy Council and all other cases and had held at page 158 as under: In a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use. In no sense of the term can it be described as damages or compensation for the owner's right to retain possession, for he has no right to retain possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income-tax Act. This position of law has been consistently reiterated by this Court in the case of TMK Govindaraju Chetty vs. Commissioner of Income-tax, Madras [66 ITR 465], Rama Rai Ors. vs. CIT, Andhra Pradesh [181 ITR 400] and K.S. Krishna Rao vs. CIT, A.P. [181 ITR 408] . Thus by a catena of judicial pronouncements, it is settled law that the interest received on delayed payment of the compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of the enhanced value of the land which is not the case in the matter of payment of interest under Section 34. 15. In view of the authoritative pronouncements of the Apex Court in Dr. Sham Lal Narula, T.N.K.Govindaraja Chetty, Amarjit Singh, Sunder, Bikram Singh's cases (supra), Rama Bai vs. CIT (1990) 181 ITR 400 and K.S.Krishna Rao v. CIT, (1990) 181 ITR 408 , the assessee cannot derive any benefit from the aforesaid observations quoted above. 16. The Tribunal relying upon the decision of this Court in Manjeet Singh (HUF) Karta Manjeet Singh v. Union of India and others, CWP-15506-2013 decided on 14.1.2014 against which the SLP having been dismissed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its and gains of business or profession or income from other sources , shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the Hon'ble Supreme Court in the case of Rama Bai v. CIT has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers. 46.2 With a view to mitigate the hardship, section 145A is amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee. 46.3 Further, clause (viii) is inserted in the sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A shall be assessed as income from other sources in the year in which it is received. 46.4 Applicability.- This amendment has been made applicable with effect from Ist April, 2010, and will accordingly apply in relation ..... 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