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TMI Blog2022 (5) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee following the decision of Hon ble Supreme Court in the case of Ghanshyam[ 2009 (7) TMI 12 - SUPREME COURT] Since the AO of the present case falls under the jurisdiction of Hon ble Delhi High Court, therefore following the dictum that, if one High Court is in favour of the assessee, then in absence of any jurisdictional High Court, that should be followed in favour of the assessee. Thus, ratio of Hon ble Punjab Haryana High Court may not have any binding precedent. Thus, the interest on the enhanced compensation u/s 28 of the Land Acquisition Act is not taxable. Whether the land was an agricultural land or not?- It cannot be inferred even remotely that the land which was acquired by the Government was not an agricultural land. The observation and the finding of the ld. first appellate authority despite noting down these evidences does not have any basis to negate these evidences nor any independent enquiry has been made to counter these evidences. In fact the entire impugned order revolves around on various case laws and the facts discussed herein which has been distinguished by ld. counsel before us. However, we do not find it relevant to discuss here, as none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter, action of Ld. CIT(A) in confirming the action of Ld. AO in not allowing the benefit of exemption claimed by the assessee u/s 10(37) on the compulsory acquisition of agricultural land under the Land Acquisition Act and more so when all the conditions have been complied with by the assessee and further erred in exercising his jurisdiction u/s 251 (2) in treating the subject agricultural land as 'capital asset' u/s 45(5), is bad in law and against the facts and circumstances of the case. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in holding as under:- (a) That the land in question is a 'Capital Asset', whose acquisition by state Government is a transfer of capital asset wherein the principal compensation received by the appellant is chargeable to under the head 'Capital Gains' u/s 45 of Income Tax Act, 1961. (b) That interest on enhanced compensation is to be treated as 'Income from Other Sources' u/s 56 of Income Tax Act, 1961. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in treating the interest on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an enhancement. One of the allegations of the first appellate authority is that assessee has not given any other evidence to show that impugned land was agricultural land and merely relied upon the RTC. The entire case of the first appellate authority revolves around the fact that the land, which was the subject matter of award for compensation, was not used for agricultural purposes. All the evidences filed before the first appellate authority to substantiate that it was agricultural land have been rejected and finally, it was held that the land was not agricultural land albeit it had commercial value having a strategic location and, therefore, exemption u/s 10(37) cannot be allowed. The judgments which was relied upon by the assessee has been distinguished and many judgements have been quoted by him from his side and finally it was concluded as under:- 44. From the above facts and judicial pronouncements the appellant does not fulfill the conditions for claiming exemptions under section 10(37) of the Income tax Act, 1961. The nature and character of land, as seen from various documents submitted by the appellant during the assessment and appellate proceedings acquired by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned that the award classified the land as Chahi which means irrigated land. The award also mentioned that there were tubewells and trees and the land was under Kharif crop and farmers have requested for permission to harvest the crop after ripening or allowing them due compensation for the same and the Land Acquisition Collector has allowed the owners for harvesting of the crop. He also referred to Form D issued by Land Acquisition Officer which is issued in the case of compulsory acquisition of land which itself goes to show that it was agricultural land only. This Form D issued by LAO has been signed by him and Patwari and Kanungo certifying that it was an agricultural land. He also referred to copy of jamabandi at pages 73 to 75 of the paper book which clearly shows that the land was under self-cultivation and there were tubewells and it was irrigated land establishing the nature of land as agriculture. He also pointed out that in the earlier income-tax returns starting from AY 2004-05 onwards; assessee had shown agricultural income from these land only. 8. Ld. NFAC issued notice u/s 251(2) that land does not fall under the parameter of agricultural land. In response, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be not taxable by Hon ble Supreme Court in the case of CIT vs. Ghanshyam HUF and in the case of UOI vs. Hari Singh (supra). Ld. AO however held that the same is taxable. In the appeal filed before the first appellate authority, NAFC, the first appellate authority changed the entire nature of controversy and held that the amount on which compensation was awarded itself was not an agricultural land and, therefore, assessee is not entitled for any exemption u/s 10(37) of the Act which was brought into the statute to safeguard the interests of the farmers by the State Government under schemes of compulsory acquisition. 11. First of all, we will deal with the contention raised by the ld. DR for the Revenue that whether interest awarded u/s 28 of the Land Acquisition Act is part of compensation is taxable or not. According to the provisions of Land Acquisition Act, when the land is acquired the Collector may be directed to pay interest on excess compensation to the landowner u/s 28 of the Land Acquisition Act which is by the order of the Court and for the period the till excess compensation is deposited in the court. The said section has following limb :- Matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition act is a taxable event and therefore it is a revenue receipt exigible to tax u/s 4. iii. The Hon ble court held that the controversy was decided greatly in the case of Dr sham Lal Narula versus CIT (1964) 53 ITR 151 [ another three judges bench of Hon SC] wherein the definition of the interest was considered. It was held that when the title has passed on to the state any statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if here the use of the money or the losses suffered because he had not that use it cannot be held to be as damages or compensation. The court in that case held that the interest paid u] s 34 of the act is interest paid for the delayed payment of compensation and therefore it is a revenue receipt liable to tax under the income tax act. iv. The court also considered several decisions of the Hon ble Supreme Court in case of 66 ITR 465, 181 ITR 400 181 ITR 408. v. The Hon ble court in para number 10 categorically held that interest received as income on the delayed payment of the compensation determined u/s 28 or 31 [?] {sic 34} of the land acquisition act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding that interest received by the assessee shall be deemed to be the income of the year in which it is received. Subsequently with retrospective effect from 1.4.2017 The Finance Act 2018 provided that income by way of interest received on compensation or enhanced compensation is chargeable to tax as income from other sources Under the provisions of Section 56 (2) (viii) of the act. 17. Hon ble High Court of Punjab and Haryana has taken a consistent view that interest received on delayed payment of compensation under either Section 28 or u/s 34 is taxable as income from other sources in the year of the receipt under the act. Such view was after considering the order of the Hon ble Supreme Court in Dr Shyam Lal Narula, Bikram Singh, (supra). In the cases of Puneet Singh versus CIT (2019) 110 taxmann.com 16 and Manjeet Singh HUF versus Union of India (2016) 65 taxmann.com 160, wherein similar issue was involved, in those decisions the interest received u/s 28 of the land acquisition act was in question and it was held that same is chargeable to tax u/s 56 of the act. It further held that the decision of the Hon ble Punjab and Haryana High Court in case of CIT versus Bir Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 dated 19/2/2020 wherein the Hon ble High Court considered the provisions of Section 10 (37), 56 (2) (viii), 57 (iv), 145A (b) of the income tax act. It rejected the reliance by the assessee on the decision of Hon ble Supreme Court in Ghanshyam HUF. It further rejected the reliance by the assessee on the decision of the Hon ble Gujarat High Court in Movaliya's case holding that the Hon ble Gujarat High Court did not read properly the paragraph number 46.3 of the circular number 5 of 2010 where all interest received on compensation or on enhanced compensation shall be assessed as income from other sources in the year in which it is received. It further held that in view of the amendment to the provisions of the income tax act decision of the Hon ble Supreme Court in the case of Ghanshyam does not come to the rescue of the assessee. It further held that the language of the income tax act with respect to the chargeability of interest as income is plain, simple and unambiguous and therefore no scope of taking outside aid for giving any interpretation to this subsection or clauses are required. Thus it held that interest received on compensation or enhanced compensation is to be tr ..... 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