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TMI Blog2020 (3) TMI 1115X X X X Extracts X X X X X X X X Extracts X X X X ..... o claim that interest received under Section 28 of the 1894 Act is to be treated as compensation and to be dealt with under Capital gains . The fact that there is no amendment carried out under Section 10(37) of the 1961 Act will not change the position. Section 10 deals with deductions and subsection (37) thereof deals with capital gains arising from transfer of agricultural land, it no where provides as to what is to be included under the head Capital gains . The argument raised is not well founded. Learned counsel has relied on Circular No. 5 of 2010 by merely reading clause 46.1. The said clause talks about undue hardship being caused as arrears of interest being taxable on accrual basis. Clause 46.2 states that Section 145A is amended to overcome the difficulty, by deeming the income for the year in which it is received. Clause 46.3 has been ignored in which Section 56(2)(viii) is dealt with that interest on compensation or on enhanced compensation referred to in clause (b) of Section 145A shall be assessed as income from other sources . It is held that the interest received on compensation or enhanced compensation is to be treated as income from other sources and n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent of his; (iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India; (iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004. Section 56(2)(viii) (inserted by Finance (No.2) Act 2009 w.e.f. 1.4.2010. Income from other sources. 56(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:-- xx xx xx (viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of Section 145A. Section 57(iv) of the 1961 Act Deductions. 57. The income chargeable under the head Income from other sources shall be computed after making the following deductions, namely:- xx xx xx (iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of Section 56, a deduction of a sum equal to fifty per c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Gujarat High Court in Movaliya Bhikhubhai Balabhai v. Income Tax Officer (TDS) (2016) 388 ITR 343. Before dealing with the contentions, relevant portion of the circular is quoted below: 46. Rationalizing the provisions of taxation of interest received on delayed compensation or on enhanced compensation. 46.1 The existing provisions of Income Tax Act provide that income chargeable under the head Profits 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 vs. CIT (181 ITR 400) 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, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation and to be dealt with under Capital gains . The fact that there is no amendment carried out under Section 10(37) of the 1961 Act will not change the position. Section 10 deals with deductions and subsection (37) thereof deals with capital gains arising from transfer of agricultural land, it no where provides as to what is to be included under the head Capital gains . The argument raised is not well founded. Learned counsel has relied on Circular No. 5 of 2010 by merely reading clause 46.1. The said clause talks about undue hardship being caused as arrears of interest being taxable on accrual basis. Clause 46.2 states that Section 145A is amended to overcome the difficulty, by deeming the income for the year in which it is received. Clause 46.3 has been ignored in which Section 56(2)(viii) is dealt with that interest on compensation or on enhanced compensation referred to in clause (b) of Section 145A shall be assessed as income from other sources . Gujarat High Court in Movaliya Bhikhubhai Balabhai's case (supra) while dealing with deduction of tax at source relying upon Circular No. 5 of 2010 held that amendment to the provisions of the 1961 Act by Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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