Taxability of enhanced compensation interest upheld; later land acquisition exemption held inapplicable, and reassessment objections rejected.

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable under section 56(2)(viii) of the Income-tax Act, 1961 where the receipt arose before the 2013 land acquisition law came into force; the exemption in section 96 of that later Act does not apply retrospectively to such receipts. The Tribunal also rejected objections to reassessment, holding that the factual sequence of return processing and subsequent reassessment, together with binding jurisdictional precedent, did not justify interference on the ground of initiation or absence of notice under section 143(2).

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Issues: (i) Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable under section 56(2)(viii) of the Income-tax Act, 1961 or exempt under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; (ii) Whether the objections regarding initiation of reassessment and absence of notice under section 143(2) of the Income-tax Act, 1961 could be accepted.

Issue (i): Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable under section 56(2)(viii) of the Income-tax Act, 1961 or exempt under section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

Analysis: The assessment year was 2013-14 and the land acquisition and receipt of enhanced compensation had occurred before the enactment of the 2013 land acquisition law. The Tribunal followed the jurisdictional High Court view that interest under section 28 of the Land Acquisition Act is taxable and that the statutory amendment inserting section 56(2)(viii) governs such receipts. The exemption under section 96 of the 2013 Act was held inapplicable on the facts of the case.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether the objections regarding initiation of reassessment and absence of notice under section 143(2) of the Income-tax Act, 1961 could be accepted.

Analysis: The original return had been processed and reassessment proceedings were initiated thereafter. The Tribunal held that the assessee's objections on these procedural grounds did not warrant interference in the assessment, in view of the factual sequence and the governing jurisdictional precedent.

Conclusion: The issue was decided against the assessee.

Final Conclusion: The assessment of the interest receipt as taxable income was sustained and the appeal was not allowed.

Ratio Decidendi: Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable under section 56(2)(viii) of the Income-tax Act, 1961, and the later exemption under section 96 of the 2013 land acquisition law does not apply retrospectively to such receipts.

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