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TMI Blog2019 (10) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10(37) of the Income Tax Act, 1961 and is not chargeable to tax under the head 'Income from Other Sources' under section 56 of the Income Tax Act, 1961? 2. Whether on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal is right in law in disregarding the statutory provision of Clause(viii) under sub-section2ofsection 56 of the IncomeTaxAct,1961read with Clause( b) of section 145A according to which the interest on compensation or enhance compensation is chargeable to tax under the head Income from Other Sources' in the year of receipt irrespective of the method of accounting employed subject to deduction of a sum equal to 50% of such income under Clause (iv) of section 57 of the Income Tax Act, 1961? 3. Whether on the facts and in the circumstances of the case the Ld. Income Tax Appellate Tribunal grossly erred in disregarding the decision of the Hon'ble Jurisdiction High Court in the case of Manjeet Singh Vs. Union of India & Others reported as [2016] 237 TAXMAN 116 (Punj&Har) and the decision in the case of Commissioner of Income Tax, Panchkula Versus Prem Singh decided2010 wherein the decision of the Hon'ble Apex Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2010. Accordingly, the AO subjected 50% of the interest received on enhanced compensation amounting to Rs. 2,51,69,390/- to tax. 4. The matter was carried in appeal before the Ld.CIT(A) who found merit in the claim of the assessee. The Ld.CIT(A) referred to the decision of the Hon'ble Apex Court in the case of Ghanshyam(HUF) (supra) and relying on the same held that as per the said decision ,interest received u/s 28 of the Land Acquisition Act was part of the enhanced valued of land and in the nature of enhanced compensation only. Further the Ld.CIT(A) stated that the amendment made to the Act by introducing sections 56(2)(viii), 57(iv) and 145A(b) of the Act was for the purpose of mitigating the hardships of the assessee on account of the decision of the Hon'ble Apex Court in the case of Ramabai Vs. CIT(1990) 181 ITR 400 whereby it was held that the arrears of interest computed on the enhanced compensation was to be taxed on accrual basis. The Ld.CIT(A) derived from the same that the term interest received on compensation or enhanced compensation used u/s 145A(b),taxing the said interest in the year of receipt, was to be read in that context only and, therefore, it cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. 55. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on the date of notification under Section 4 of that Act. When the court/tribunal directs payment of enhanced compensation under Section 23(1-A), or Section 23(2) or under Section 28 of the 1894 Act it is on the basis that award of the Collector or the court, under reference, has not compensated the owner for the full value of the property as on date of notification." 6.6 The substitution of section 145A by Finance (No.2) Act, 2009 was not in connection with the decision of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) but was brought in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s appellants namely Sh. Surinder Kumar and others in ITA No.539 to 543/Chd/2016, ITA No.673/Chd/2016, ITA No.547 to 551/Chd/2016, ITA No No.368/Chd/2014, ITA No.948/Chd/2016 and ITA No.949/Chd/2016 wherein the appellant's appeal against order u/s 154 for this A.Y. was also decided in ITA No.551/Chd/2016 has discussed the issue of taxability of interest u/s 28 received on enhanced compensation on lands compulsorily acquired by the Government as under: "7. The core ground involved in these appeals is regarding the taxability of interest received on enhanced compensation u/s 28 of the Land Acquisition Act, 1894. Now, there are two questions involved in these appeals, first issue is regarding the year of taxability of the interest income whether it has to taxed in the year of receipt in the light of the decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) or is to be taxed on the basis of apportionment for each year from the date of acquisition of lands till the receipt of the compensation in the light of the decision of the Hon'ble Supreme Court in the case of Rama Bai (supra); the second issue involved is as to whether the interest awarded u/s 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 34 which depends on undue delay in making the award. 50. It is true that "interest" is not compensation. It equally is true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23(1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45 (5) (b) of the 1961 Act. " 8. It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld apply mutatismutandis to the core issue of taxability of interest received on enhanced compensation. 10. In view of the above discussion, these appeals of the assesses are hereby allowed. " 6.9 In view of the above, respectfully following the decision of Hon'ble ITAT, Chandigarh in appellant's own case in ITA No.551/Chd/2016, it is held that interest u/s 28 of the Land Acquisition Act received by the appellant is in the nature of compensation and is exempt under the provision of Section 10(37) of the I.T. Act. Therefore, addition of Rs. 2,51,21,9597- made by the AO u/s 56(2) (viii) of the I.T. Act, being interest received by appellant u/s 28 of the Land Acquisition Act and forming part of enhanced compensation on acquisition of agricultural land, is ordered to be deleted. This ground of appeal is allowed." 5. Before us the Ld. DR relied upon the order of the AO, though he fairly conceded that the issue stood decided in favour of the assessee by the ITAT in appeal for the impugned year, though in different proceedings ,i.e u/s 154 of the Act. 6. In view of the above ,since the issue involved in the present already stands adjudicated by the ITAT for the impugned yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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