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TMI Blog2024 (7) TMI 501X X X X Extracts X X X X X X X X Extracts X X X X ..... the territorial jurisdiction of Punjab Haryana have to follow this decision being binding in nature. The decision in the case of Mahender Pal Narang (P H), SLP dismissal in the case of Mahender Pal Narang relied upon by the Ld. PCIT, in our considered opinion, is binding in the jurisdiction of the Hon ble Punjab Haryana High Court as the AO was situated within the territorial and subjective jurisdiction of that Hon ble High Court. Thus, the record for the purpose of Section 263 of the Act is not limited with the assessment record up to the date of the assessment only. Hence, the plea of the Ld. Counsel that the Ld. PCIT had relied upon the case law subsequent to the assessment is of no relevance. The 2010 amendment was a conscious departure by the legislature from earlier position and said departure holds good law, as on date. There is no question with respect to the vires of the amendment or regarding any ambiguity in the language of the amendment. Interest whether on compensation or on enhanced compensation shall be considered as income from other sources and shall be exigible to Income Tax. The language of section 56(2)(viii) and 57(iv) of the Act is plain, simple and unambiguou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] and Puneet Singh 2019 (1) TMI 1068 - PUNJAB AND HARYANA HIGH COURT] not followed was erroneous and prejudicial to the revenue as per the clause (d) of Explanation 2 to section 263 of the Act. Decided against assessee. - Shri Vikas Awasthy, Judicial Member And Shri Avdhesh Kumar Mishra, Accountant Member For the Appellant : Shri Satyam Aneja, Advocate For the Respondent : Sh. Dharm Veer Singh, CIT-DR ORDER PER AVDHESH KUMAR MISHRA, AM The instant appeal of the Assessment Year [In short, the AY ] 2018-19 filed by the assessee is against the order, dated 27.03.2023, under section 263 of the Income Tax Act, 1961 [In short, the Act ], passed by the Principal Commissioner of Income Tax, Rohtak [In Short, the PCIT ]. The impugned order of the PCIT, under challenge, set aside the assessment order dated 11.02.2021 passed under section 143(3) r.w.s. 143(3A) 143(3B) of the Act by the Assessing Officer [In short, the AO ] and revert the issue of chargeability of interest on enhanced compensation under section 56(2)(viii) of the Act back to the AO for completing the assessment afresh. 2. Following grounds of appeal were taken in the present a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 10(37) of the Act. The AO accepted the income declared in the ITR, vide order dated 11.02.2021, passed under section 143(3) r.w.s. 143(3A) 143(3B) of the Act. Subsequently, the PCIT, exercising-powers under section 263 of the Act, held the AO s order as erroneous and prejudicial to the interest of revenue and therefore, set aside the assessment order passed by the AO as under: 7. Keeping in view of the facts and circumstances of the case as discussed above, I am of the considered opinion that the AO had passed the order dated 11.02.2021 in a very casual manner without due diligence and without conducting proper enquires and verification which should have been made with respect to amended provisions of the Finance Act, 2015 and binding decisions of Jurisdictional Hon ble Punjab and Haryana High Court Hon ble Apex Court on the taxability of interest on enhanced compensation. Therefore, the assessment completed u/s 143(3) rws 143(3A) 143(3B) of the Act is erroneous so far as it is prejudicial to the interest of the revenue in terms of Explanation 2 of section 263 of the Act. Accordingly, the assessment order passed by the AO on 11.02.2021 u/s 143(3) rws 143(3A) 143(3B) of the Act fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al) 8 (Delhi) and Green world Corporation [2009] 314 ITR 81 (SC). 4.2 The Ld. Counsel contended that the Ld. PCIT s opinion that the decision in the case of Mahender Pal Narang over rules the decision of the Hon'ble Supreme court in Ghanshyam Das HUF (Supra) was incorrect amounted to per incuriam. Further, it was argued that the dismissal of SLP in the case of Mahender Pal Narang was not reasoned out (emphasizing the decision of the Hon ble Supreme Court in the case of V. M. Salgaocar and Bros Pvt. Ltd. 243 ITR 383; therefore, it did not formulate any law of the land and the said dismissal was subsequent to the assessment order. Therefore, it was argued that the decision in the case of Mahender Pal Narang (Supra) was not applicable in this case. To buttress his contention, the Ld. Counsel placed emphasis on the decisions in the case of Pawan Kumar [2024] 159 taxmann.com 61 (Delhi - Trib.) and Saluja Exim Ltd. [2010] 329 ITR 603 (P H High Court) wherein after considering the above-mentioned case laws had been held that this issue, being debatable; being two views were possible, could not make the assessment order erroneous and prejudicial to the revenue for invoking the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come received by way of interest on compensation or on enhanced compensation, after the amendment made vide Finance (No.2) Act, 2009 (with effect from 01.10.2010) by way of inserting of clause (viii) of sub-Section 2 to Section 56 of the Act, shall be chargeable to tax under the head income from other sources . 5.1 The Ld. DR further contended that the position with respect to the imposition of tax on interest on compensation or enhanced compensation changed from the year 2010; therefore, the conclusion drawn from the decision in Ghanshyam (supra), which was passed in the year 2009, were unsustainable in the facts of the present case. Thus, the reliance placed by the ITAT upon the decision of the Hon'ble Supreme Court in the case of Ghanshyam (supra) to hold that the interest on enhanced compensation received under section 28 of the Land Acquisition Act is exigible to tax on receipt basis will not be applicable subsequent to amendment of 2010. Highlighting the following observation of the Hon'ble Delhi High Court in the case of Inderjit Singh Sodhi (HUF): The 2010 amendment was a conscious departure by the Legislature from the earlier position and the said departure holds g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant/assessee, would be of no help as these decisions were in contradiction with the position of law on the issues involved post 2010 amendment as enunciated by the Hon'ble High Court. The Ld. DR thus contended that the AO had adopted the contrary view to that legally permissible after 2010 and thus the AO s failure to bring interest on enhanced compensation to tax was patently erroneous and prejudicial to the interest of Revenue. 5.4 The Ld. DR drew our attention to the provisions of section 263 of the Act, which reads as under: Explanation 2-For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer or the Transfer Pricing Officer, as the case may be shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, - (a) the order is passed without making inquiries or verification which should have been made; (b) the order is passed allowing any relief without inquiring into the claim; (c) the order has not been made in accordance with any order, direction or instruction issued by the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (viii) of sub-section (2) of section 56 of the Act, there would be deduction of fifty per cent. Section 145 of the Act provides for accounting method. Clause (b) of section 145A of the Act provides that interest received on compensation or enhanced compensation shall be deemed to be income for the year in which it is received. 8. Sections 28 and 34 of the Land Acquisition Act dealing with the interest on compensation read as under: - 28. Collector may be directed to pay interest on excess compensation. ─ If the sum which, in the opinion of the court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of [nine per centum] per annum from the date on which he took possession of the land to the date of payment of such excess into Court. 34. Payment of interest. ─ When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of nine per centum per annum from the time of so taking possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary contained in Section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received. 2) Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. (3) The income referred to in sub-clause (xviii) of clause (24) of Section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year.] 13. The Hon'ble Supreme Court in the case of Ghanshyam HUF (supra) has held that interest on excess compensation under section 28 of the Land Acquisition Act forms part of enhanced compensation under section 45(5)(b) of the Act and, therefore the same is taxable as capital gains under section 45(5) of the Act and not as income from other sources under section 56 of the Act. Sections 56(2)(viii) and 57(iv) of the Act were amended w.e.f. 01.04.2010. The Hon ble Supreme Court in the case of Ghanshyam HUF (supra) has held that interest paid on excess amount under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent. of such income and no deduction shall be allowed under any other clause of this section. 21. The Assessing Officer in I. T. A. No. 132 of 2018 where the assessee had received Rs. 11,30,561 as interest income, held that the interest payment received on compensation/enhanced compensation to the tune of Rs. 5,65,280 (50 per cent. of Rs. 11,30,561) is taxable as income from other sources as per provisions of sections 56(2)(viii) read with 57(iv) and section 145A(b) of the Act for the assessment year 2010-11. The Commissioner of Income-tax (Appeals) and the Tribunal had upheld the order of the Assessing Officer in that regard. 22. No illegality or perversity could be pointed out by learned counsel for the assessee in the concurrent findings of fact recorded by the authorities below which may warrant interference by this court. No question of law, much less, substantial question of law arises in these appeals. 23. Accordingly, finding no merit in the appeals, the same are hereby dismissed. 17. The word record defined in Section 263 of the Act reads as under: record shall include a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for interpretation arises only when the words used in the statute are, on their own terms ambivalent and do not manifest the intention of the legislature. 20. The argument of the Ld. Counsel is that the issue under reference here is debatable. Hence, the order passed under section 263 of the Act following one view is not legally valid/tenable. One view revolves around the finding of the Hon ble Supreme Court in the case of Ghanshyam HUF (supra) whereas the other one revolves around the finding of the Hon ble Supreme Court dismissing the SLP in the case of Mahender Pal Narang v. CBDT [2021] 279 Taxman 74 affirming the decision of the Hon'ble Punjab and Haryana High Court in the case of Mahender Pal Narang (supra) and the decision of the Hon ble Delhi High Court in the case Inderjit Singh Sodhi (HUF) [2024] 161 taxmann.com 301. 21. A three-Judges Bench of the Hon ble Supreme Court in the case of Sham Lal Narula 53 ITR 151 held that the interest under Section 28 of the Land Acquisition Act is analogous to the interest under Section 34 of the Land Acquisition Act and such interest does not form part of the compensation. It is worth to reproduce the relevant part of the said deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by this Court in the case of T.N.K. Govindaraju Chetty v. CIT [(1967) 66 ITR 465 : AIR 1968 SC 129], Rama Bai v. CIT [1990 Supp SCC 699 : (1990) 181 ITR 400] and K.S. Krishna Rao v. CIT [(1990) 181 ITR 408 (SC)]. 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(28-A), 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 or 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 Board in the circular referred to hereinbefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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