2023 (10) TMI 1564 - AT - Income Tax

Tax on interest under Land Acquisition Act s.28 for enhanced compensation: treated as 'income from other sources'; appeal dismissed.

The dominant issue was whether interest received under s. 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable and under which head. ... Taxability of interest received by the assessee u/s 28 of Land Acquisition Act, 1894 on enhanced compensation - CIT(A) considered the provisions of the Act considering the provisions of section 28 of Land Acquisition Act, 1894 and also the decision of Manjeet Singh (HUF) Karta Mangeet Singh V/s Union of India [2015 (12) TMI 1123 - PUNJAB & HARYANA HIGH COURT] and held that the said interest received u/s 28 of Land Acquisition Act would be taxable as income from other sources in the hands of the assessee. HELD THAT:- We find that the Ld. CIT(A) had followed the decisions of Hon’ble Jurisdictional High Court and denied the benefit to the assessee. Moreover, the provisions of the Act in terms of section 56(2)(viii) r.w.s 57(iv) of the Act are also very clear and against the assessee. Hence, we do not find any infirmity in the order passed by the Ld. CIT(A) denying relief to the assessee. Accordingly, the grounds raised by the assessee are dismissed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquired land is chargeable to tax, and if so, under which head of income. (ii) Whether the statutory treatment under section 56(2)(viii) read with section 57(iv) of the Income-tax Act applies to such interest, including allowance of the specified deduction. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Taxability and head of income for interest under section 28 of the Land Acquisition Act on enhanced compensation Legal framework (as applied by the Tribunal): The Tribunal considered the scheme under the Income-tax Act that brings 'interest received on enhanced compensation' to tax and the manner in which it is to be assessed, alongside the character of interest awarded under section 28 of the Land Acquisition Act as examined in binding jurisdictional precedent referred to in the order under appeal. Interpretation and reasoning: The Tribunal accepted the factual finding that the assessee received a substantial amount as 'interest' from the land acquisition authority on account of delay in payment of enhanced compensation. The appellate authority had held, following jurisdictional High Court decisions discussed in the impugned order, that such interest under section 28 of the Land Acquisition Act is taxable as 'income from other sources.' The Tribunal found that the appellate authority's approach was aligned with binding jurisdictional rulings and therefore did not warrant interference. Conclusion: Interest received under section 28 of the Land Acquisition Act on enhanced compensation was held taxable in the assessee's hands as income from other sources. Issue (ii): Applicability of section 56(2)(viii) read with section 57(iv) and deduction mechanism Legal framework (as applied by the Tribunal): The Tribunal applied section 56(2)(viii), which treats interest received on enhanced compensation as taxable under 'Income from other sources,' and section 57(iv), which provides for deduction in respect of such interest income. Interpretation and reasoning: The Tribunal noted that the assessing authority taxed the interest by invoking section 56(2)(viii) and also granted the deduction contemplated by section 57(iv) by allowing 50% deduction while bringing the balance 50% to tax. The Tribunal held that the statutory provisions were 'very clear' and operated against the assessee's claim for non-taxability, and that the appellate authority's confirmation of the assessment was consistent with the Act. Conclusion: The Tribunal upheld the assessment of the interest under section 56(2)(viii) read with section 57(iv), sustaining taxation of 50% of the interest amount as 'income from other sources' and rejecting the assessee's challenge.