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TMI Blog2024 (11) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation as income from other sources. The Hon ble Supreme Court has not dealt with Finance (No-2) act of 2010 in the case of Hari Singh while the Hon ble Delhi High Court has discussed the finance Act (No-2)/2010 and the judgement of Ghanshyam das (HUF) both. The interest on compensation or on enhanced compensation cannot be considered as compensation and shall be chargeable to tax under the head income from other sources. The Ld CIT(A) has rightly decided that interest received on compensation or enhanced compensation is to be treated as the income from other sources u/s 56(2)(viii) - Appeal of the assessee is dismissed. - Sh. S. Rifaur Rahman, Accountant Member And Sh. Sudhir Kumar, Judicial Member For the Appellants : Sh. Suraj Bhan Nain, Advocate, Sh. K.L. Pahwa, Advocate For the Respondent : Ms. Sapna Bhatia, CIT DR ORDER SH. SUDHIR KUMAR, JM : The above captioned appeal by the assessee is directed against the order of the NFAC/Commissioner of Income Tax (Appeals), Delhi [hereinafter referred to as CIT(A) ], vide order dated 27.03.2023 pertaining to A.Y. 2019-20 arises out of the order passed by the Assessing Officer dated 17.09.2021 u/s 143(3) of the Income Tax Act,1961[ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) who vide his order dated 27-03-2023 dismissed the appeal against which the assessee is in appeal before us. 5. The issue involved in this appeal is that whether interest u/s. 28 of the Land Acquisition Act 1894 awarded by the Court is a revenue receipt chargeable to tax as Income from Other Sources or is an integral part of enhanced compensation, and thus, is a capital receipt, which is exempt u/s. 10 (37) of the Act being received on compulsory acquisition of agricultural land by the State Government. 6. The Ld AR has submitted that the enhanced compensation awarded by the appellate authority/ court to an assessee on acquisition of capital asset is chargeable to tax as capital gains in the year of receipt as per Section 45(5) of the Act. He has further submitted that the Section 10 (37) of the Act, provides that in the case of an assessee being individual or a HUF, capital gains arising from the transfer of agricultural land, being capital asset by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government, or the Reserve Bank of India is exempt from tax. Thus, in the case of an individual or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n making payment after taking the possession of the acquired land. Therefore, the interest awarded under section 34 of the Land Acquisition Act, 1894 awarded on account of delay in payment of compensation being mandatory in nature is revenue receipt and chargeable to tax as 'Income from Other Sources' u/s 56 of the Income Tax Act. Section 28 of the 1894 Act reads 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. Provided that the award of the court may also direct that where such excess or any part thereof is paid into court after the date of expiry of a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the land which is not the case in the matter of payment of interest under section 34. 32. 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. 33. It is to answer the above question 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 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 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 4 of that Act. When the court/tribunal directs payment of enhanced compensation under Section 23(1-A), or Section 23(2) or under Section 28 of the 1894 Act it is on the basis that award of the Collector or the court, under reference, has not compensated the owner for the full value of the property as on date of notification. Thus, it is clear that the Hon'ble Supreme Court after considering the scheme of section 45(5) of the I.T. Act has categorically held that payment made under section 28 of the Act of 1894 is part of enhanced compensation. 10. In the case of Movaliya Bhikhubhai Bakabhi v ITO [2016] 70 taxmann.com 45/388 ITR 343 (GUJ) the Hon ble Gujarat High Court held that :- 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 145A of the I.T. Act. The first respondent - Income Tax Officer was therefore not justified in refusing to grant the Act. The first respond 197 of the I.T. Act to the petitioner for non-deduction of tax at source, in as much as, the petitioner for non-deduction of tax at sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Del/2017 17. Decision of P H High Court in the case of HSIDC Ltd. Vs. Savitri and Another in CR No.2509 of 2012 dated 29.11.2011. 18. HSIDC Ltd. Vs. Savitri Devi and Ors. SLP (C) No. 019887/2014 19. Decision in the case of Ajay Kumar Vs. State of Haryana and Another in CR No.3236 of 2013 20. HUDA vs. Mandir Nar Singh Puri and Ors. in C. R. No. 7953 of 2013 dated 21.12.2013 ( P H High Court) 21. Supreme Court in the case of Income-tax Officer TDS- 1 Surat Vs. Movaliya Bhikhulbhai Balabhai SLP(C) No.018495 / 2017 22. Decision in the case of Gujarat High Court in the case of ITO-TDS 2, Rajkot Vs. Muktanadgiri Maheshgiri vs. District Development 23. Hon ble ITAT in the case of Hisar Vs. Hari Singh Saini in ITA No.1539/Del/2020 24. In the case of Mahender pal Narang Vs. CBDT New Delhi [ 2020] 120 taxmann.com 400 ( P H) 25. Hon ble Supreme Court in the case of Shivappa Etc. Etc. vs. The Chief Engineer Ors. (Civil Appeal) No. 2649- 2700 of 2023 judgment dated 1.04.2023 12. In all the cases it was decided that interest u/s 28 of the Land Acquisition Act 1894 granted by the court form part of the enhanced compensation is exempted u/s 10(37) of the Act except the case of Mahender Pal Narang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment corporation Ltd and this writ petition was decided in the appeal no 15041 of 2017 Union of India and Ors vs Hari Singh and ors. The Hon ble Supreme Court held that :- 2. While determining as to whether the compensation paid was for agricultural land not, the Assessing Officer(s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF) [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not. 16 The Ld AR has submitted that Hon ble Supreme Court and Hon ble Income Tax Appellate Tribunal have decided that the interest u/s 28 of Land Acquisition Act is an accretion to the value, hence it is a part of enhanced compensation or consideration received on compulsory acquisition of agriculture land and not income from other sources. 17 The Ld DR has submitted that in the case of DR Shamlal Narula v CIT Hon ble Supreme Court held that statutory interest paid u/s 34 of the Predecessor Act is paid for the delayed payment of the compensation amount is a revenue receipt liable to tax under the Act. He has furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the head 'Income from other sources'. In clause (iv) to section 57, deduction of fifty per cent is provided on interest received on compensation or enhanced compensation. The SLP filed against the said order has been dismissed by the Hon'ble Supreme Court of India in [2021] 126 taxmann.com 105 (SC). In does nothco amendments, the decision of Apex Court in Ghanshyam's case (supra) does not come to the rescue of the petitioner to claim that interest received under section 28 of the 1894 Act is to be treated as compensation and to be dealt with under Capital gains . The fact that there is no amendment carried out under section 10(37) of the 1961 Act will not change the position. Section 10 deals with deductions and sub-section (37) thereof deals with capital gains arising from transfer of agricultural land, it no where provides as to what is to be included under the head Capital gains . The argument raised is not well founded. 12. Gujarat High Court in Movaliya Bhikhubhai Balabhai's case (supra) while dealing with deduction of tax at source relying upon Circular No. 5 of 2010 held that amendment to the provisions of the 1961 Act by Finance Act, 2010 Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 70 of the Successor Act is deemed to be a decree within the meaning of clause (2) of Section 2 of the Code of Civil Procedure, 1908 and compensation including interest on enhanced compensation is determined there under. Thus, the language of Section 96 of the Successor Act, does not leave any doubt in the mind that if any land whether agricultural or non-agricultural is either acquired or is a result of an agreement, would not fall within the mischief of Income-tax Act and in other words, exemption is liable to be granted. However, it may be kept in mind that the Successor Act came into existence w.e.f. 1-1-2014 and therefore, the transactions of interest on compensation and/or enhanced compensation which partake character of compensation would not be taxable under the Act in view of the provisions the of Sections 3(1)(1) and 96 of the Successor Act. However, the transactions with regard to taxability of interest on compensation and enhanced compensation received by the assessee under sections 28 and 34 of the Predecessor Act would be governed by the existing provisions of the Act. The Central Board of Direct Taxes in tune with the provisions of Section 96 of the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereafter, in Sections 1458, 56(2) (viii) and 57(iv) of the Act. The position with regard to taxability of interest on enhanced compensation and/or interest on compensation received becomes inevitably more clear when the Legislature itself by way of an amendment in the provisions of Section 57(iv), introduced simultaneously, with the engrafting of the provisions of Section 56(2)(viii), providing for fifty per cent of the deduction of the amount referred to in Section 56(2)(viii) i.e., amount of interest on enhanced compensation and/or interest on compensation received by the assessee. The distinction brought about in Ghanshyam's case (supra) that interest under section 28 of the Predecessor Act is part of the amount of compensation and therefore, exigible to tax under 45(5) of the Act stands obliterated by the amendment with the introduction of the provisions of Sections 145B, 56(2)(viii) and 57 (iv) in the Act vide which interest received on compensation and enhanced compensation has been made taxable as 'income from other sources', and if that be so then the question of the provisions of Section 10(37) of the Act for exemption of interest awarded under section 28 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment of interest under Section 34. 22. However, vide Finance (No.2) Act, 2009 (with effect from 01.10.2010), Clause (viii) of sub-Section 2 to Section 56 of the Act was inserted and the same is extracted hereunder as:- 56. Income from other sources. (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head Income from other sources , namely:-- [(viii) income by way of interest received on compensation or on enhanced compensation referred to in [sub-section (1) of Section 145-B].] 23. For the sake of clarity, Section 145-B of the Act is reproduced as under:- [145-B. Taxability of certain income. (1) Notwithstanding anything to the 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision in Sham Lal Narula (supra) was subsequently followed by the Hon'ble Supreme Court in the case of Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], wherein, it was held that interest under Section 28 of the Act of 1894 was in the nature of a revenue receipt and hence, the same was considered to be taxable. The relevant paragraphs of the said decision read as under:- 8. The controversy is no longer res integra. This question was considered elaborately by this Court in Sham Lal Narula (Dr) v. CIT [(1964) 53 ITR 151: AIR 1964 SC 1878). Therein, K. Subba Rao, J., 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 p. 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 w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e chargeable under the head 'Income from other sources' shall be computed after making the following deductions, namely: (iv) in the case of income of the nature 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 1. 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 arise in these appeals. 23. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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