2019 (10) TMI 738 - AT - Income Tax

Enhanced compensation under Land Acquisition Act not taxable as interest income. Tribunal directs refund of TDS.

Mahesh Kumar Gupta Versus The DCIT, Circle-2, Ayakar Bhawan, Noida

The Tribunal held that the enhanced compensation received under Section 28 of the Land Acquisition Act is not taxable as interest income. Relying on ... Assessibility of the amount received u/s 28 of the Land Acquisition Act - claim of the assessee is that such enhanced compensation was part of the compensation and was not taxable in his hands - HELD THAT:- In view of the categorical affirmation of the proposition laid down by the apex court in the case of Ghanshyam HUF [2009 (7) TMI 12 - SUPREME COURT] in its latest decision in the case of Hari singh [2017 (11) TMI 923 - SUPREME COURT] , we hold that there is no error in the order of the AO treating the interest received by them u/s 28 of the LAA,1894,as compensation following the proposition laid down by the apex court in Ghanshyam HUF(supra). The order passed by the Ld.Pr.CIT u/s 263 is therefore set aside. Appeal of assessee is allowed. Issues Involved:1. Assessibility of the amount received under Section 28 of the Land Acquisition Act.2. Nature of the enhanced compensation received.3. Taxability of interest received under Section 28 of the Land Acquisition Act.4. Applicability of judicial precedents including Supreme Court judgments.Issue-wise Detailed Analysis:1. Assessibility of the Amount Received under Section 28 of the Land Acquisition Act:The primary issue in the appeal was whether the amount received by the assessee under Section 28 of the Land Acquisition Act (LAA) is taxable. The assessee argued that the enhanced compensation received under this section was not taxable, whereas the Revenue contended that it should be taxed as interest income.2. Nature of the Enhanced Compensation Received:The Tribunal examined whether the enhanced compensation received under Section 28 of the LAA should be considered as part of the compensation or as interest. The Tribunal referred to the case of CIT vs. Ghanshyam (HUF), where the Supreme Court held that interest received under Section 28 of the LAA is part of the compensation and not taxable as interest income. This principle was further confirmed by the Delhi Bench of the Tribunal in the case of Shri Opinder Singh Virk and others.3. Taxability of Interest Received under Section 28 of the Land Acquisition Act:The Tribunal noted that the Supreme Court in Ghanshyam (HUF) had unequivocally stated that interest received under Section 28 of the LAA is part of enhanced compensation and thus, not taxable. This view was reiterated in subsequent judgments, including the case of Shri Manish Yadav, where the Tribunal dismissed the Revenue's appeal, holding that interest under Section 28 is in the nature of compensation.4. Applicability of Judicial Precedents Including Supreme Court Judgments:The Tribunal relied heavily on the judicial precedents set by the Supreme Court and other Tribunal decisions. It cited the case of Hari Singh, where the Supreme Court directed that if compensation was received for agricultural land, the tax deposited should be refunded. The Tribunal emphasized that the nature of the receipt under Section 28 of the LAA is settled law, being part of the enhanced compensation and thus, exempt under Section 10(37) of the Income-tax Act if it pertains to agricultural land.Conclusion:The Tribunal concluded that the enhanced compensation received by the assessee under Section 28 of the LAA is not taxable as interest income. Following the judicial precedents, especially the Supreme Court's rulings, the Tribunal allowed the claim of the assessee and directed the refund of the TDS amount deducted on account of the interest received under Section 28 of the LAA. The appeal of the assessee was thus allowed, setting aside the orders of the lower authorities.Order Pronounced:The order was pronounced in the open court on 16th October 2019, allowing the appeal of the assessee.