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TMI Blog2024 (10) TMI 361X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Movaliya Bhikhubhai Balabhai [ 2016 (5) TMI 488 - GUJARAT HIGH COURT] discussed the law laid down in the case of CIT v. Ghanshyam (HUF) [ 2009 (7) TMI 12 - SUPREME COURT] and the effect of amendment brought in by inserting clause (b) to section 145A of the Act as well as finding of Jagmal Singh v. State of Haryana [ 2013 (7) TMI 774 - PUNJAB HARYANA HIGH COURT] which was relied upon by the learned CIT(A). Thus, respectfully following the finding of the Hon ble Gujarat High Court, we hereby hold that the interest received by the assessee on enhanced compensation under section 28 of the Land Acquisition Act is not chargeable to tax as income from other sources. Thus, we set aside the finding of the ld. CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal filed by the assessee is hereby allowed. - Shri Waseem Ahmed, Accountant Member And Shri Soundararajan K., Judicial Member For the Appellant : Shri Shaji Paulose, CA For the Respondent : Smt. Girly Albert, Sr. D.R. ORDER PER BENCH This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 05.12.2022 for Assessment Ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ana High Court in the case of Jagmal Singh Other Vs. State of Haryana others in CR No. 7740 of 2012. 6. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 7. The learned AR before us submitted that the interest on the enhanced compensation relates to the agricultural land which was not chargeable to tax and therefore the amount of interest cannot be made subject to the addition to the income of the assessee. 8. On the other hand, the learned Sr. DR before us vehemently supported the order of the authorities below. 9. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the facts involved in the case on hand are not in dispute. As such, there is no dispute that the assessee has received enhanced compensation for agricultural land along with interest computed under section 28 of the Land Acquisition Act. Thus, only question before us is whether the interest received on enhanced compensation shall be exempted u/s 10(37) of the Actor chargeable to tax as income from other sources as per the provisions of section 56(2)(viii) r.w.s. 145A(b) of the Act. In this regard we not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/ consideration (including interest under Section 28 of the 1894 Act) becomes payable/paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee. 46.3 Further, clause (viii) is inserted in sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or enhanced compensation referred to in clause (b) of section 145A shall be assessed as income from other sources in the year in which it is received. 46.4 Applicability. - This amendment has been made applicable with effect from 1st April, 2010, and it will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. Thus, the substitution of section 145A by Finance (No. 2) Act, 2009 was not in connection with the decision of the Supreme Court in Ghanshyam (HUF)'s case (supra) but was brought in to mitigate the hardship caused to the assessee on account of the decision of the Supreme Court in Rama Bai v. CIT [1990] 181 ITR 400/[1991] 54 Taxman 496 whereby it was held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. Therefore, when one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kes the character of compensation, it does not fall within the ambit of the expression interest as contemplated in section 145A of the I.T. Act. The first respondent - Income Tax Officer 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. 10. In the above detailed finding, the Hon ble Gujarat High Court has discussed the law laid down by the Hon ble Supreme court in the case of CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368 (SC) and the effect of amendment brought in by inserting clause (b) to section 145A of the Act as well as finding of the Hon ble Punjab and Haryana High court in case of Jagmal Singh v. State of Haryana [Civil Revision No. 7740 of 2012 which was relied upon by the learned CIT(A). Thus, respectfully following the finding of the Hon ble Gujarat High Court, we hereby hold that the interest received by the assessee on enhanced compensation under section 28 of the Land Acquisition Act is not chargeable to tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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