2017 (6) TMI 1277 - AT - Income Tax

Tax Appeal: Interest under Land Acquisition Act subject to Income-tax Act; Court upholds taxability.

The appeal centered on whether interest received under section 28 of the Land Acquisition Act should be taxed under section 56 of the Income-tax Act, ... Income from other sources u/s 56 - treating the net interest being the amount of interest u/s 28 of the Land Acquisition Act, 1894 as chargeable to tax - Held that:- The amount of interest received by the assessee is chargeable to tax in the year of receipt in view of insertion of clause (viii) to section 56(2) by the Finance No. (2) Act 2009 w.e.f 01.04.2010. This provision read with section 145A(b) makes it clear that interest received by assessee on compensation or an enhanced compensation shall be deemed to the income of the year in which it is received. CIT(A) has rightly set out and relied on in the case of Manjeet Singh (HUF) vs. UOI (2015 (12) TMI 1123 - PUNJAB & HARYANA HIGH COURT) being the jurisdictional High Court. CIT(A) was right in treating the amount as chargeable to tax. - Appeal filed by the assessee is dismissed. Issues:Treatment of interest under section 28 of the Land Acquisition Act as chargeable to tax under section 56 of the Income-tax Act, 1961.Analysis:The appeal pertains to the treatment of net interest received under section 28 of the Land Acquisition Act as taxable under section 56 of the Income-tax Act, 1961. The Assessing Officer added the interest amount to the total income after allowing a deduction of 50% towards expenses. The CIT(A) upheld this decision, leading to the assessee's grievance and subsequent appeal.Upon examination of the relevant provisions and facts, it was established that the interest received by the assessee falls within the ambit of taxability in the year of receipt. This taxability arises from the insertion of clause (viii) to section 56(2) by the Finance Act 2009, effective from 01.04.2010. The interest received on compensation or enhanced compensation is deemed to be income of the year of receipt as per section 145A(b). The CIT(A) appropriately referenced and relied on the judgment of the Hon'ble Punjab and Haryana High Court in the case of Manjeet Singh (HUF) vs. UOI, establishing the jurisdictional precedent.Based on the legal provisions and the precedent cited, the conclusion was drawn that the CIT(A) correctly treated the interest amount as chargeable to tax. Consequently, the appeal filed by the assessee was dismissed, affirming the decision of the lower authorities. The judgment was delivered on 09th June, 2017, in open court.