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TMI Blog2022 (10) TMI 1188X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Appeals) has erred on facts and in law in upholding the addition made by the assessing officer by rejecting the claim of the assessee that the Interest received by assessee on enhanced compensation for acquisition of agricultural land by Government under Land Acquisition Act is exempt from tax under section 10(37) as the interest received under section 28 of the Land Acquisition Act assumes the character of enhanced compensation and consequently it is exempt under section 10(37) of the Act. 4. That the impugned order of the learned Commissioner of Income Tax (Appeal) is not based upon the facts of the case but on assumptions and surmises. The impugned order of the Ld. CIT is bad in law, both factually and legally erroneous. 5. That the impugned order is illegal, bad in law and in violation of the contemporary principles of natural justice as well as established judicial pronouncements. No reasonably opportunity was given by the learned CIT (Appeals) before passing the impugned order. 6 That the appellant craves leave to add, amend, alter, vary and / or withdraw any or all grounds of appeal at the time of or before the hearing of the appeal." 3. The ld. Counsel for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct such amount forms a part of capitals gains under Section 45 (5) (b) of the Act and by virtue of Section 10 (37) of the Act is not chargeable to tax. Reliance in this regard is placed on the decision of the Hon'ble Supreme Court of India in CIT vs. Ghanshyam (HUF), [2009] 182 Taxman 368 (SC) wherein the Court made the following observations: "33. It is to answer the above questions that we have analysed the provisions of sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, section 23(1 A) provides for additional amount. It takes care of increase in the value at the rate of 12 per cent per annum. Similarly, under section 23(2) of the 1894 Act, there is a provision for solatium which also represents part of enhanced compensation. Similarly, section 28 empowers the Court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under section 23(1 A) and solatium under section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the Court after reference under section 18 of the 1894 Act. It depends upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed value of the land which is not the case in the matter of payment of interest under Section 34. ...... 50. It is true that ''interest" is not compensation. It is equally 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 4J(J)(b) of the 1961 Act. " [emphasis supplied] The above view of the Supreme Court was also followed by the Hon'ble Supreme Court in the case of CIT v. Govindbhai Mamaiya (2014) 16 SCC 449 (refer to paras 3, 7 and 9) b. Under the Land Acquisition Act there are two types of interests payable to land owners one under is Section 28 and second is under Section 34. The Supreme Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on the market value for a period commencing on or from the date of publication of the notification under section 4(1) of the 1894 Act up to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier. The court held that the additional amount payable under section 23 (1 -A) of the 1894 Act is neither interest nor solatium. It is an additional compensation designed to compensate the owner of the land for the rise in price during the pendency of the land acquisition proceedings. It is a measure to offset the effect of inflation and the continuous rise in the value of properties. Therefore, the amount payable under section 23(1-A) of the Act is an additional compensation in respect to the acquisition and has to be reckoned as part of the market value of the land. The court further held that the award of interest under section 28 of the 1894 Act is discretionary. Section 28 applies when the amount originally awarded has been paid or deposited and when the court awards excess amount. In such cases, interest on that excess alone is payable. Section 28 empowers the court to award interest on the excess amount of compensation awarded by it ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under Section 34 which depends on undue delay in making the award. 50. It is true that "interest" is not compensation. It is equally 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) (h) of the 1961 Act." Thus, the court has held that interest under section 28 of the Act of 1894 is an accretion to compensation and forms part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer was, therefore, not justified in refusing to grant a certificate under section 197 of the I.T. Act to the petitioner for non-deduction of tax at source, inasmuch as, the petitioner is not liable to pay any tax under the head "income from other sources" on the interest paid to it under section 28 of the Act of 1894. " [emphasis supplied] c. The decision of the Gujarat High Court was before the Hon'ble Supreme Court as C.A. No. 017147 of 2017 in a batch of petition with the lead matter being Union of India vs. Hari Singh and Ors. being CA No. 17041 of 2017 (at para 11) wherein the Hon'ble Supreme Court in its decision dated 15.09.2017 referred to its earlier decision in Ghanshyam (HUF) (supra) and stated that in order to ascertain whether the interest under Section 28 of the Land Acquisition Act. d. The Hon'ble Delhi High Court being the jurisdictional High Court in the case of the Appellant/Assessee based in Delhi has also taken a view Surjit Kumar Chetal vs. CIT [2017] 86 taxmann.com 121 (Delhi) that the enhanced compensation along with other statutory benefits which were awarded to the Assessee/Appellant in the present case as well would constitute to be capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to compensation and interest both under the Hand Acquisition Act, 1894 and the Motor Vehicles Act, 1988 it was held that the interest awarded for delayed payment of compensation will not be liable to tax as it does not partake the character of income. 2 This view, the Court held, would not change even after taking into account the old S. 145A(b) and the new S. 145B(1) or S. 56(2)(viii) as it existed at the relevant time. " (Complete Extract is enclosed as Enclosure B) g. The above has to be read considering the fact that despite the amendments to Section 56 and Section 145A (now Section 145B) of the Act, the provisions of Section 10 (37) and Section 45 were never amended or changed. The Courts while reading the above-mentioned provisions must attempt to reconcile all the provisions of the statute so that no provision is reduced to a dead letter and all provisions of the Act are read harmoniously along with judicial binding precedents. h. It is submitted that a harmonious reading of the provisions of Section 10 (37), Section 45, Section 56 and Section 145B the Act specifically exempts compensation and amounts received under Section 28 of the Land Acquisition Act for agricultu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 99 (Delhi - Trib); & (vi) Mahender Pal Narang v. Central Board of Direct Taxes, New Delhi [(2020) 120 taxmann.com 400 (Punjab & Haryana)] 6. On careful consideration of the above submissions, I am of the considered view that the identical issue was placed for adjudication before the ITAT Delhi 'F' Bench in the case of Ram Kishan vs. ITO, wherein, after considering all the relevant judgements, the issue was decided as follows:- "8. On careful consideration of the issue before us we find That The finance (number 2) act, 2009 with effect from 1 April 2010 in the income tax act has introduced the provisions of Section 145A (b) which defines the year of taxability as the year of receipt, irrespective of the method of accounting followed by the assessee with respect to the enhanced compensation and interest on compensation. The provisions of Section 56 (2) also defines head of income as income from other sources for such income. Section 57 (iv) allows deduction of 50% of such income without any proof of such expenditure. The provisions of the sections were introduced to remove an anamoly. At that time the existing provisions of the income tax provided that the income chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case the Department circular number 5/2010 dated 3/6 / 2010 clearly demonstrates the intention of the legislature. Accordingly we hold that interest on u/s 28 of the land acquisition act, 1894 being part of the compensation shall be treated as a tax free in the case of an individual and HUF u/s 10 (37) if transfer is of an agricultural land. In view of above facts and judicial precedence we hold that the interest received by the assessee u/s 28 of the land acquisition act of Rs. 24,207,223 is not taxable. Accordingly ground number 2 & 3 of the appeal of the assessee are allowed." 7. In view of the above, I clearly note that the coordinate Bench of the Tribunal categorically held that after judgement of the Hon'ble Supreme Court in the case of Ram Bai (supra), the undue hardship to the taxpayer was mitigated and the provisions of section 145A of the Act was amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be income for the year in which it was received, irrespective of the method of accounting followed by the assessee. It was further held that Statute must be interpreted according to the intention of the legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y kindly be allowed. The ld. Sr. DR simply stated that the land of the assessee had been acquired long back under the old Land Acquisition Act, therefore, the CBDT Circular regarding acquisition of land under section 96 of the new Land Acquisition Act is not applicable to the present case. On these submissions, I am of the considered view that the Board Circular is not directly applicable to the present case of the assessee as, in the present case, the land was acquired under the old Land Acquisition Act, 1896, but, the intention of the legislature can be gathered therefrom that the Revenue does not want to tax the amount of enhanced compensation or interest thereon. 10. Therefore, in view of the foregoing, I am inclined to hold that the ld.CIT(A) was not correct in upholding the assessment order wherein the AO has granted part relief to the assessee u/s 57(iv) of the Act and not applying the provisions of section 10(37) of the Act on the interest received by the assessee on enhanced compensation. Therefore, the orders of the authorities below are set aside being not sustainable and not in accordance with the provisions of the Act. Therefore, the grounds of appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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