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TMI Blog2025 (3) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... as 'income from other sources' and taxable. Thus, in our opinion, the view taken by the A.O. that the 'interest on enhanced compensation is part of the compensation and not the 'interest' per-se and allowing the same as exempt u/s 10(37) of the Income Tax Act cannot be called as 'plausible view'.
Thus, the interest on the compensation or interest on the enhanced compensation shall be considered as 'income from other sources' and taxable accordingly. Ld. PCIT committed no error in setting aside the assessment order and directing the A.O. to frame fresh assessment. Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as 'income from other sources' and the same is taxable. The Ld. Departmental Representative thus, sought for dismissal of the Appeal of the Assessee. 6. Heard the Ld. Departmental Representative and verified the material available on record. The only issued to be considered in the present Appeal is as to whether the interest on enhanced compensation received by the Assessee on enhanced compensation received by the Assessee partakes the character of 'Income from Other Sources' u/s56(2)(viii) of the Act?. And, whether the Ld. PCIT is right in exercising the power conferred u/s 263 of the Act in setting aside the Assessment Order and directing the A.O. to make fresh assessment?" 7. The very same question as to 'whether interest on enhanced compensation partakes the character of 'Income from Other Sources' u/s 56(2)(viii) of the Act or not' has been decided by the Jurisdictional High Court in the case of Principal Commissioner of Income Tax-10 Vs. Inderjit Singh Sodhi (HUF) in ITA No. 769/2023 and CM APPL 65057/2023 vide order dated 08/04/2024. The Hon'ble Jurisdictional High Court held that interest, whether on compensation or enhanced compensation shall be considered as 'income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whereas, Section 34 of the Act of 1894 stipulates that the Collector shall award interest on the compensation at the rate of 9% per annum from the date of taking possession. It further lays down the condition that in case of non- payment despite expiry of a period of one year, the said interest on the amount of compensation which remains unpaid, shall be awarded at the rate of 15% per annum, calculable from the date of such expiry. 21. It is the contention of the respondent-assessee that the interest awarded under Section 28 of the Act of 1894, as discussed above, shall constitute a part of the compensation itself. The ITAT has also drawn strength from the observation of the Hon'ble Supreme Court in the case of Ghanshyam (supra) and the relevant paragraph of the said decision reads as under:- "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 the 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 compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mamaiya [(2014) 16 SCC 449], which relies upon 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 three-Judges Bench of the Hon‟ble Supreme Court in the case of Sham Lal Narula (Dr.) v. CIT [(1964) 53 ITR 151], while considering the interest under Section 28 of the Act of 1894 to be analogous to the interest under Section 34 of the Act, took the view that the same did not form part of compensation. The relevant extract of the said decision is culled out as under:- "9. --- As we have pointed out, earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter the owner of the land so acquired ceases to have any title or right of posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), 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." [Emphasis supplied] 28. In the case of Puneet Singh (supra), the High Court of Punjab and Haryana, while enunciating the effect of Section 145A(b) and Section 56(2)(viii) of the Act, has held as under:- "19. The cumulative effect of section 145A(b) and section 56(2)(viii) would be that any interest received on compensation or on enhanced compensation shall be taxable under the head "Income from other sources" in the year of receipt. 20. However, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation, 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 2010. 31. In the light of the aforesaid judicial pronouncements and the concerned amendment, we set aside the order of the ITAT dated 19.06.2020. Consequently, the appeal stands allowed and the concurrent findings of the AO and CIT(A) are hereby affirmed. Pending application(s), if any, are disposed of." 8. In the present case, the opinion of the A.O. considering the 'interest on the enhanced compensation' as not taxable also cannot be called as plausible view. Once the Jurisdictional High Court reiterates the law considering the amendment to the provision and also the previous Judgments, the law laid down by the Jurisdictional High Court becomes binding precedent and the authorities or the Tribunal cannot ignore the same and take different view. The Jur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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