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TMI Blog2022 (6) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... e amended provision i.e. Section 56(2)(viii) r.w.s. 57(iv) r.w.s. 145A(b) applicable w.e.f. 01.04.2010. - Decided against assessee. - ITA No. 1806/PUN/2017 - - - Dated:- 12-5-2022 - SHRI S.S. GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER For the Appellant : Sharad A. Shah For the Respondents : S.P. Walimbe ORDER Per S.S. Godara, JM This assessee's appeal for AY 2010-11 arises against the order of the CIT(A)-2, Aurangabad's order dated 01.05.2017 passed in case No. ABD/CIT(A)-2/285/2016-17 involving proceedings under Section 144 r.w.s. 147 of the Income Tax Act, 1961; in short the Act. Heard both the parties. Case file perused. 2. The assessee's sole substantive grievance pleaded in the instant appeal challenges the correctness of both the lower authorities' action treating its interest income of Rs. 1,90,51,664/- received u/s. 28 of Land Acquisition Act, 1984 as taxable under Section 56(2)(viii) r.w.s. 145A(b) of the Act. The CIT(A)'s detailed discussion affirming the Assessing Officer's action to this effect reads us under: 5. In the instant case, the assessing officer had noted that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entire interest amount received u/s. 28 of the Land Acquisition Act is a part of compensation which is exempt from tax. He further stated that the Honourable Supreme Court in the case of Ghanshyamdas (HUF) has followed the decision given by the Honourable Supreme Court in the case of Sunder Vs. Union of India (2001) 7 SSC 211. He then referred to the decision given in the case of Movaliya Bhikhubhai Balbhai Vs. ITO, TDS-1, Surat to state that interest does not fall within the ambit of expression 'Interest' as contemplated in section 145A of the Act. It was stated that it is clear from the decisions cited by him that interest received u/s. 28 is a part of enhanced compensation which is taxable u/s. 45(5) of the Act and in case of compulsory acquisition of an agricultural land compensation is exempt from tax u/s. 10(37) of the Act and in case of the rural agricultural land, the entire compensation is not taxable because the land itself is not a capital asset as per the Act. In view of the above, it was stated that a decision in favour of the assessee be taken. 8. On a careful consideration to the submissions made by the assessee and the facts of this case I find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Thus, by a catena of judicial pronouncements, it is settled law that the interest received on delayed payment of the compensation is a revenue receipt exigible to income-tax. It is true that in amending the definition of 'interest' in section 2(28A), interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any service, fee or other charges in respect of the moneys borrowed u(debt incurred or in respect of any credit facility which has not been utilised. It is seen that the word 'interest' for the purpose of the Act was interpreted by the inclusive definition. A literal construction may lead to the conclusion that the interest received or payable in any manner in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would be deemed interest. That was explained by the hoard in the circular referred to hereinbefore. 10. But the question is: whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would not be exigible to income-tax? It is seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) and decided the issue in the fallowing words: 9. We have perused para-24 25 of the judgement of the Apex Court in Commissioner of Income Tax Vs. Ghanshyam supra.. We find that the Honourable Apex Court there was not called upon to look into the larger bench judgement delivered earlier in the case of Bikram Singh (supra). In para-7 the Honourable larger bench has found that the interest paid u/s. 28 is not by way of any charge on compensation determined u/s. 23(1). We, therefore, with respect, follow the larger Bench judgement of the Honourable Apex Court. 11. In the case of Manjet Singh (HUF) Karta Manjeet Singh Vs. Union of India [2016]65 taxmann.com 160 (Punjab Haryana), similar decision on the same issue has been taken. The decision is as under: 7. The primary question for consideration that arises in these petitions 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. 8. It would be apposite to quote herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 28 of the 1894 Act clearly spells out that additional benefits are available on the market value of the acquired lands u/s. 23(1A) and 23(2) whereas Section 28 is available in respect of the entire compensation. The Constitution Bench of the Supreme Court in Sunder's case (supra) had approved the following observations of the Division Bench of this Court in State or Huryana v. Smt. Kailashwati,: AIR 1980 Punj. Har. 117:- 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the 1894 Act was a revenue receipt and is taxable. It was held as under:- 'The controversy is no longer res integra. This question was considered elaborately by this Court in Dr. Snamlal Narula v. CIT [1964] 53 ITR 151 (SC). Therein, K. Subba Rao,]., as he then was, considered the earlier case law on the concept of interest laid down 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, held that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount.uid(sic), therefore, is a revenue receipt liable to tax under the Income-tax Act. This position of law has been consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 01.07.2019 allowing the instant appeal followed by the Revenue's miscellaneous application MA No. 42/Pun/2020 which has accepted on 20.08.2021 in the latter's favour. Mr. Shah thereafter submitted that the interest income in issue is not taxable going by the hon'ble apex court decision in CIT vs. Ghanshyamdas (HUF) 315 ITR 1 (SC) r.w.s. 10(37) of the Act. We find no merit inn assessee's instant argument once the legislature has inserted Section 56(2)(viii) vide Finance Act 2009 w.e.f. 01.04.2010 holding interest received on compensation or on enhanced compensation referred to in clause (b) of Section 145A as treating the corresponding income as income from other sources. The assessee could hardly rebut the fact that the foregoing statutory provision in fact makes both interest on compensation as well as on enhanced compensation deemed as income of the year in which it is received whereas the assessment year before their lordships was 1999-2000 only. We thus hold that the CIT(A) has rightly affirmed the assessment findings assessing the impugned interest income in assessee's hands. 4. Mr. Shah at this stage invited our attention to the Revenue's av ..... X X X X Extracts X X X X X X X X Extracts X X X X
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