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TMI Blog2025 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... DELHI HIGH COURT] and Mahender Pal Narang [2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] we hold that the ld. PCIT order to recompute the interest on enhanced compensation in accordance with section 56(2)(viii) r.w.s. 145B(1) and allowing deduction u/s 57(iv) needs no interference. Grounds 1 and 2 raised by the assessee are, accordingly, dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... as exempt u/s 10(37). The PCIT invoking the provision of section 263, directed the AO to treat the interest of Rs 34,40,660/- as income from other sources under amended provisions of section 56(viii) r.w. section 145B and allowing 50% deduction u/s 57(iv) of the Income Tax Act. 7. We have heard the submissions of the ld DR and have perused the relevant material on record. In the present case it is not in dispute that the assessee received interest u/s 28 of the Land Acquisition Act, 1984 during the year on enhanced compensation for acquisition of land. The issue for adjudication in the present lis is whether the interest received under section 28 of the Land Acquisition Act on enhanced compensation for acquisition of land, is exempt u/s 10(37) or will be exigible to tax under the "income from other sources" in view of amendment w.e.f 01.04.2010 in the provisions of section 56(2)(viii) and 57(iv) of the Act. 8. Before proceeding further, we find it appropriate to deal with the various provisions of the laws that comes under play in the present controversy. The two sections that deals with the interest on compensation in the Land Acquisition Act, 1894 are section 34 and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward the title absolutely vests in the Government and thereafter the owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award he gets compensation for both the rights. Therefore, the interest awarded under Section 28 of the Act, just like under Section 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner.---" 10. The 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. This position of law has been consistently reiterated by the Supreme 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] 84 CTR 144/181 ITR 408/[1991] 54 Taxman 339 (SC)]. 11. It was in 2009 that the Hon'ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anding 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.] Section 10(37) of the Act reads as under: - "Incomes are not included in total income. 10(37) in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains" arising from the transfer of agricultural land, where-- i. such land is situated in any area referred to in item (a) or item (b) of sub-clause (iii) of clause (14) of section 2; ii. such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his; iii. such transfer is 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; iv. such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orementioned provisions i.e., Sections 56(2)(viii) and 145-B of the Act vividly stipulate that the income received by way of interest on compensation or on enhanced compensation shall be chargeable to tax under the head 'income from other sources'. Therefore, since the position with respect to the imposition of tax on interest on compensation or enhanced compensation, as it exists today, came into being only in the year 2010, the conclusions drawn from the decision in Ghanshyam (supra), which was passed in the year 2009, are unsustainable in the facts of the present case. 25. Further, much reliance has been 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 Act of 1894 is exigible to tax on receipt basis. However, a deeper analysis of the decision in Govindbhai Mamaiya (supra) would show that it does not deal with any issue pertaining to the change in the taxability, put in place through the concerned amendment of 2010. Therefore, the said decision lacks any applicability in the facts and circumstances of the present case. 26. Notably, a th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income Tax Act." 9. This position of law has been consistently reiterated 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] 84 CTR 144/181 ITR 408/[1991] 54 Taxman 339 (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 constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Accordingly, finding no merit in the appeals, the same are hereby dismissed." [Emphasis supplied] 29. Considering the foregoing discussion, we affirm the concurrent findings of the AO and CIT(A) and find that the view taken by the ITAT is unsustainable, as the same is based on an incorrect appreciation of law. The 2010 amendment was a conscious departure by the Legislature from the earlier position and the said departure holds good law, as on date. There is no question with respect to the vires of the amendment before us or regarding any ambiguity in the language of the amendment. The only concern is regarding the enunciation of the applicable law and we hold the same to unequivocally mean that interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax. 30. We, accordingly, answer the substantial question of law which has arisen in the instant appeal in affirmative and in favour of the Revenue. We, thus, hold that the ITAT has erred in relying upon the decision of Ghanshyam (supra), ignoring the changes brought about by Finance (No.2) Act, 2009, which came into effect in the year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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