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TMI Blog2019 (11) TMI 1101X X X X Extracts X X X X X X X X Extracts X X X X ..... d vide order dated 17.11.2012 awarded enhanced compensation. On further appeal by the Assessee the Hon'ble Karnataka High Court further enhanced the compensation in MFA No.10207 (LAC) dated 10.7.2014. The enhanced compensation received by the Assessee of Rs. 7,79,69,881/- was claimed as exempt u/s.10(37) of the Act. The details of enhanced compensation received by the Assessee was as follows: SL. NO. PARTICULARS AMOUNT 1. Net Land Value Rs. 1,85,89,828/- 2. SA @ 30% u/S.23(2) Rs. 59,94,381/- 3. AMV @ 12% U/s.23(1A) Rs. 78,81,745/- 4. Interest U/s.28 @ 9% Rs. 28,94,936/- 5. Interest U/s.28 @ 15% Rs. 4,29,08,481/- 6. Court Cost Rs. 510/- Total Rs. 7,79,69,881/- 3. The question before the AO was with regard to exemption u/s.10(37) of the Act in respect of a sum of Rs. 4,58,03,417 (comprising of Rs. 28,94,936 + Rs. 4,29,08,481) received as interest on enhanced compensation u/s.28 of the Land Acquisition Act, 1894. 4. Under the provisions of section 10(37) of the Income-Tax Act, 1961 ["the Act"] enhanced compensation received on acquisition of agricultural lands is exempt. The provisions of section 10(37) of the Act reads as follows:- "S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section." "Income from other sources. 56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head "Income from other sources", if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :- (i) .......................... to (vii) .......................... (viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A;" Method of accounting in certain cases. "145A. Notwithstanding anything to the contrary contained in section 145,- (a) .................. (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received." 7. The AO rejected the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by the AO in the order of Assessment. The learned counsel for the Assessee reiterated contentions put forth before the revenue authorities relied on the decision of the Hon'ble Gujarat High Court in the case of in Movaliya Bhikhubhai Balabhai v. Income-tax Officer-TDS-1-Surat [2016] 70 taxmann.com 45 (Guj). 13. We have considered the rival submissions. It is not disputed by the AO that the land acquired was agricultural land and the conditions laid down u/s. 10(37)(i) to (iv) are applicable to the land which is in question which was compulsorily acquired. It is also not in dispute that the interest in question was interest awarded u/s. 28 of the Land Acquisition Act, 1894. In the given circumstances, we are of the view that the decision of the Hon'ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai (supra) will be applicable to the facts of the present case. 14. In Movaliya Bhikhubhai Balabhai v. Income-tax Officer-TDS-1- Surat [2016] 70 taxmann.com 45 (Gujarat), the Hon'ble Gujarat High Court had to deal with the nature of the interest awarded u/s.28 of the Land Acquisition Act, 1894. The facts of the case before the Hon'ble Gujarat High Court was that the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 34. On the applicability of the provisions of Sec.57(iv) read with 56(2)(viii) and Sec.145A(b) of the Act, the Hon'ble Gujarat High Court held, :- "Section 145A of the I.T. bears the heading "Method of accounting in certain cases". Section 145A(b) provides that notwithstanding anything to the contrary contained in section 145, interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. Clause (viii) of sub-section (2) of section 56 of the I.T. Act provides for income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A which is chargeable as income from other sources. The first respondent Income Tax Officer seeks to tax the interest received by the petitioner under section 28 of the Act of 1894 as income from other sources under section 56(2)(viii) read with section 145A(b) of the I.T. Act. In the opinion of this court, in the light of the law laid down by the Supreme Court in the case of Ghanshyam (HUF) (supra), the interest received under section 28 of the Act of 1894 would not fall within the ambit of the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (2) of the section 56 so as to provide that income by way of interest received on compensation or 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 1st April, 2010, and it will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years." Thus, the substitution of section 145A by Finance (No. 2) Act, 2009 was not in connection with the decision of the Supreme Court in Ghanshyam (HUF)'s case (supra) but was brought in to mitigate the hardship caused to the assessee on account of the decision of the Supreme Court in Rama Bai v. CIT [1990] 181 ITR 400/[1991] 54 Taxman 496 whereby it was held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. Therefore, when one reads the words "interest received on compensation or enhanced compensation" in section 145A of the I.T. Act, the same have to be construed in the manner interpreted by the Supreme Court in Ghanshyam (HUF)'s case (supra)." 16. The Hon'ble Gujarat High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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