2019 (1) TMI 1193 - AT - Income Tax

Tribunal affirms tax treatment for interest income on enhanced compensation under Land Acquisition Act

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal against the deletion of the addition of interest income on enhanced ... TDS u/s 194LA - Exemption u/s. 10(37) - Interest received u/s 28 in case of compulsory acquisition of agricultural land as nature of interest income or it is a part of enhanced compensation - Held that:- Issue in dispute in the present appeal is squarely covered in the case of Jagmal Singh vs. ITO [2018 (9) TMI 1468 - ITAT DELHI] it is not a case of Revenue that the assessee has not received interest u/s 28 of the Land Acquisition Act, 1894. This issue has been decided by the Hon’ble Apex Court in case of Union of India Vs. Hari Singh (2017 (11) TMI 923 - SUPREME COURT) wherein it is held that on agricultural Land no tax is payable when the compensation/enhance compensation is received by the assessee as their land was agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. Therefore, the same comes under the purview of Section 28 of the Land Acquisition Act. - decided in favour of assessee Issues:Appeal against deletion of addition of interest income on enhanced compensation under section 10(37) - Whether interest received on enhanced compensation taxable as capital gains or income from other sources.Analysis:The appeal was filed by the Revenue challenging the deletion of an addition of interest income on enhanced compensation made by the Assessing Officer. The assessee received compensation under the Land Acquisition Act, claiming it as exempt under section 10(37) of the Income Tax Act. The AO added the amount under the head capital gains, disputing the nature of the compensation. The CIT(A) allowed the appeal, stating that the interest received under section 28 of the Land Acquisition Act is not taxable as capital gains but as income from other sources. The issue was extensively discussed, citing various judicial authorities. The Tribunal upheld the CIT(A)'s decision, emphasizing that the interest received on enhanced compensation is not exempt under the act and is liable to tax under income from other sources. The Tribunal referred to relevant case laws and the latest decision of the Supreme Court, supporting the taxability of such interest income.The Revenue argued that a proposal for Review Petition was filed against a Supreme Court decision related to similar cases, seeking to allow the appeal. However, the Tribunal found this argument unacceptable as the Review Petition was pending. The Tribunal noted that the issue was also addressed in a previous ITAT order, which supported the CIT(A)'s decision. The Counsel for the assessee supported the CIT(A)'s order, highlighting the reasoning and legal basis provided in the decision.After hearing both parties and reviewing the records, including the impugned order and relevant case laws, the Tribunal concluded that the CIT(A)'s findings were well-founded. The Tribunal rejected the Revenue's grounds and dismissed the appeal. The decision was based on the settled nature of the issue regarding the taxability of interest received on enhanced compensation under the Land Acquisition Act. The Tribunal upheld the CIT(A)'s decision, emphasizing the taxability of such interest income under income from other sources. The Tribunal's decision was in line with previous judicial interpretations and the latest Supreme Court ruling on the matter.In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal against the deletion of the addition of interest income on enhanced compensation. The Tribunal's thorough analysis considered the legal provisions, case laws, and the latest judicial pronouncements on the taxability of such interest income, providing a comprehensive resolution to the dispute.