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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 ..... in favour of assessee. - ITA No. 1619/Del/2017 - - - Dated:- 14-10-2022 - Shri C.M. Garg, Judicial Member For the Assessee : Ms Ishita Farsaiya, Advocate. For the Revenue : Shri Mithalesh Kr. Pandey, Sr. DR. ORDER This appeal filed by the assessee is directed against the order dated 06.09.2021 of the NFAC, Delhi, relating to Assessment Year 2018-19. 2. The grounds raised by the assessee read as under:- 1. That the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the assessment made by the assessing officer and the impugned order was passed without properly and judicially considering the submissions of the appellant. 2. That the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding addition made by the assessing officer amounting Rs. 41,22,768/- under section 56 (2)(viii) of Income Tax Act, on account of interest on enhanced compensation. The said addition is based on mere surmises, conjunctures and is against the law and is therefore not tenable in law. 3. That the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the addition mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions placed on record by the ld. Counsel of the assessee are as follows:- 10. The Impugned Order passed by the Ld. CIT (A) and the AO are incorrect in law and fact and ought to be set aside by this Hon ble Tribunal. The submission in this regard are as under: a. It is undisputed that the Appellant owned agricultural land which was acquired under the Land Compensation Act, 1984 and the same was acquired by HSIIDC. The compensation paid by HSIIDC was set aside and the Hon ble Punjab and Haryana High Court vide decision dated 18.02.2016 increased the compensation to Rs. 59,88,657/- per acre from Rs. 30,00,000/- which was to be treated from the date of the award of compensation in the case of the Appellant and other land owners. The amount as directed by the Court was disbursed to the Appellant and the same included compensation under Section 28 of the Act. It is submitted that the amount paid to the Assessee/Appellant under Section 28 of the Act subsequent to the decision of the Punjab and Haryana High Court dated 18.02.2016 forms a part of the solatium of the total compensation received under the Land Acquisition Act such amount forms a part of capitals gains under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nhanced compensation or consideration referred to in clause (b)j of section 45(5), and subsequently such compensation or consideration is reduced by any Court, Tribunal or other authority. 34. In such a situation, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such Court, Tribunal or other authority to be the full value of the consideration. For giving effect to such recomputation, the provisions of the newly inserted (with effect from 1-4-2004) section 155(16) by the Finance Act, 2003 (32 of 2003), have been enacted. 35. To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of enhanced value of the land which is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bhai Balabhai vs. ITO, [2016] 70 taxmann.com 45 (Gujarat) is as under: 7. At this juncture, reference may be made to the decision of the Supreme Court in the case of Ghanshyam (HUF) (supra) wherein, the court has examined the provisions of the Land Acquisition Act, 1894 as well as the provisions of section 45 of the I. T. Act and the intention behind insertion of sub-section (5) of section 45. The court noted that sub-section (5) of section 45 was inserted to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. The court considered the provisions of sections 23(1), 23(1-A) and section 23(2) of the Act as well as section 28 and section 34 of the Act of 1894 and observed that section 23(1- A) was introduced in the 1894 Act to mitigate the hardship caused to the owner of the land who is deprived of its enjoyment by taking possession from him and using it for public purpose, because of the considerable delay and offering payment thereof. To obviate such hardship, section 23(1-A) was introduced and the legislature envisaged that the owner is entitled to 12% per annum additional amount on the market value f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter, specifically considered the question as to whether additional amount under section 23(1-A), solatium under section 23(2), interest paid on excess compensation under section 28 and interest under section 34 of the 1894 Act, could be treated as part of compensation under section 45(5) of the 1961 Act and the court held thus: 47. The issue to be decided before us-what is the meaning of the words enhanced compensation/consideration in Section 45(5)(b) of the 1961 Act? Will it cover interest ? These questions also bring in the concept of the year of taxability. 48. It is to answer the above questions that we have analysed the provisions of Sections 23, 23(1-A), 23(2), 28 and 34 of the 1894 Act. 49. As discussed hereinabove, Section 23(1-A)provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the 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 addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 28 of the Act of 1894 would form part of the enhanced compensation and would he exigible to capital gains under section 45(5) of the I. T. Act. In other words, in case of a transaction which is otherwise exigible to capital gains tax under section 45 of the I.T. Act, the interest received under section 28 of the Act of 1894 being an accretion to the value, would form part of the compensation and would be exigible to tax under section 45(5) of the I.T. Act, whereas the interest received under section 34 of the Act of 1894 would be interest within the meaning of such expression as envisaged under section 145A of the I.T. Act and would be deemed to be the income of the year under consideration, chargeable to tax as income from other sources under section 56 of the I.T. Act. [emphasis supplied] Attention is also drawn to the following extract of the decision of the Gujarat High Court: 13. The upshot of the above discussion is that since interest under section 28 of the Act of 1894, partakes the character of compensation, it does not fall within the ambit of the expression interest as contemplated in section 147A of the I.T. Act. The first respondent - Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ume 1 at p. 1524): Section 145A was enacted in a particular context to get over the decision of the Supreme Court in Rama Bai vs. CIT, which had held that the interest on compensation was the income of each year in which it was payable and could not be brought to tax in they ear in which it was received. Hence, Section 145A does not seek to tax a sum that was not otherwise liable to tax; it only clarifies the year in which this income would be taxable, if it is the income at all. The question to be asked, therefore, is whether the compensation in question is income or not. It is submitted that compensation received for a motor vehicle, accident and interest thereupon is only.. a Capital receipt and not an income. In a well-reasoned judgment, the Bombay High Court has considered all the important decisions on compensation and interest payable thereon. Sadly, while the accident took place in 1978, the matter was finally disposed by the Bombay High Court in 2014 and the final compensation became payable a staggering 36 years later. The issue before the court was whether the interest that was payable on the delayed payment of compensation was exigible to tax. After considering t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned amount is interest received by the assessee on enhanced compensation. 5. Placing rejoinder to the above, the ld. AR drew our attention to the order of the ITAT Delhi Bench F in the case of Ram Kishan Kishan vs. ITO, dated 02.12.2020 in ITA No.5391/Del/2017 for AY 2014-15, especially to para 8 and 9 and submitted that the ITAT Delhi Bench, after considering the judgement of Hon ble Supreme Court in the case of CIT vs. Ghanshyam (HUF), (2009) 8 Supreme Court Cases 412 and by relying on the judgements available at that time including the judgement of the Hon ble Punjab Haryana High Court in the case of Mahender Pal Narang (supra) decided that the interest received by the assessee u/s 28 of the Land Acquisition Act is not taxable. Therefore, the grievance of the assessee may kindly be allowed. The ld. Counsel of the assessee has also relied on the following judgements:- (i) CIT v. Ghanshyam (HUF) [(2009) 8 SCC 412]; (ii) CIT, Rajkot v. Govindbhai Mamiya [(2014) 16 SCC 449]; (iii) Movaliya Bhikhubhai Balabhai v. Income Tax Officer, Surat [(2016) 70 taxmann.com 45 (Gujarat)]; (iv) Union of India Ors. V. Hari Singh Ors. [ Civil Appeal No. 15041 of 2017]; ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced compensation as income from other sources u/s 56 in the year of receipts, the judicial precedents held that the interest awarded to landowners u/s 28 of the land acquisition act, 1894 on enhanced compensation is still a part of compensation and is a capital receipt taxable Under the head capital gains. Such is the judicial precedent of the honourable Himachal Pradesh High Court in case of CIT versus Joginder Singh 217 taxmann 208 and honourable Gujarat High Court in case of Movaliya BhikhaBhai Balabhai 70 taxmann.com 45 [388 ITR 343]. Further we are also mindful of the fact that the honourable Punjab and Haryana High Court in the case of Mahenderpal Narang versus CBDT CWP 17971 of 2019 dated 19/2/2020 as well as in case of Puneet Singh V CIT 110 taxmann.com 16 and Manjeet Singh HUF V Union of India 1 37 taxman 116 has decided in favour of revenue. It is a settled law that Statute must be interpreted according to the intention of the legislature and the court should act upon the true intent of the legislation while applying the law and its interpretation. If a statutory provision is open to more than one meaning, the Court has to choose the interpretation which represents the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made by the AO was confirmed. I also note that the AO did not allow benefit of the section 10(37) of the Act to the assessee, however, he allowed 50% of deduction on total interest received, u/s 28 of enhanced compensation by following the provisions of section 57(iv) of the Act and treated the remaining 50% as Income from other sources. 9. The ld. Counsel of the assessee has also drawn my attention to the Circular No.36 of 2016 issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes dated 25.10.2016 wherein, at para 3, it was clarified that the compensation received in respect of an award or agreement which has been exempt from levy of income-tax, vide section 96 of RFCTLAAR Act shall also not be taxable under the provisions of the Income-tax Act, 1961 even if there is no specific provision for exemption for such compensation in the Income-tax Act. The ld. Counsel submitted that the land of the assessee was acquired under the old Land Acquisition Act, but, the intention of the legislature is also clear as per the said Circular wherein the compensation received by the assessee u/s 96 of the RFCTLAAR Act has to be held as exempt from levy of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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