2024 (5) TMI 343 - AT - Income Tax

Interest on land acquisition compensation under Section 28 not taxable under Income Tax Act Section 56(2)(viii)

Shri Kusum Jayram Thakur Dhutum Versus The Income Tax Officer, Ward-3, Maharashtra.

ITAT Pune ruled in favor of the assessee regarding taxability of interest received under Section 28 of the Land Acquisition Act, 1894. The tribunal ... Income from Other Sources u/s 56(2) - interest received u/Sec. 28 of the Land Acquisition Act, 1894 granted by the learned Reference Court - HELD THAT:- As decided in Raghunath Budhaji Patil, Uran [2023 (4) TMI 1323 - ITAT PUNE] has already settled the issue in assessee’s favour and against the department wherein as held that taxability of the assessee’s interest income received under section 28 of the Act is covered in assessee’s favour as per the hon’ble high court’s Bombay bench [2019 (8) TMI 518 - BOMBAY HIGH COURT] holding that the same is not taxable under section 56(2)(viii) of the Act as against the Revenue’s contentions that the Aurangabad bench of the very hon’ble jurisdictional high court has taken a divergent view against the taxpayer in Shivajirao and Others [2013 (8) TMI 1160 - BOMBAY HIGH COURT] - Decided in favour of assessee. Issues Involved:1. Taxability of interest received u/s 28 of the Land Acquisition Act, 1894.2. Binding nature of jurisdictional ITAT decisions.3. Validity of the assessment order u/s 143(3) due to non-issuance of notice u/s 143(2) by the jurisdictional officer.4. Fairness and justification of CIT(A) in confirming the addition.5. Liability to interest under subsections of Sec. 234.6. Right to add, alter, amend, or take additional grounds or submit additional evidence.Summary:Issue 1: Taxability of interest received u/s 28 of the Land Acquisition Act, 1894The assessee contested that the interest granted u/s 28 of the Land Acquisition Act, 1894 should be treated as additional compensation for the acquisition of agricultural land and thus be exempt u/s 10(37) of the Income Tax Act, 1961. Both the Assessing Officer and NFAC assessed the interest as income from 'Other Sources' u/s 56(2)(viii) r.w.s. 145A of the Act. However, the tribunal referred to its recent decision in Raghunath Budhaji Patil, Uran vs. ITO ITA.No.235/PUN./2023, which settled the issue in favor of the assessee, holding that such interest income is part of land acquisition compensation and not taxable.Issue 2: Binding nature of jurisdictional ITAT decisionsThe assessee argued that CIT(A) erred in not following the binding decisions of the Pune ITAT Jurisdictional Tribunal. The tribunal upheld this contention, emphasizing that the jurisdictional high court's decision should prevail, particularly when the assessee's land and the Assessing Officer fall within its territorial jurisdiction.Issue 3: Validity of the assessment order u/s 143(3)The assessee claimed that the assessment order was invalid as the notice u/s 143(2) was not issued by the jurisdictional officer. The tribunal did not specifically address this issue in the detailed discussion but allowed the appeal based on the main substantive grievance.Issue 4: Fairness and justification of CIT(A)The assessee contended that CIT(A) was not just and fair in confirming the addition. The tribunal, in its detailed discussion, found in favor of the assessee, thereby reversing the CIT(A)'s decision.Issue 5: Liability to interest under subsections of Sec. 234The assessee denied liability to interest under subsections of Sec. 234. This issue was not specifically addressed in the tribunal's detailed discussion.Issue 6: Right to add, alter, amend, or take additional grounds or submit additional evidenceThe tribunal did not address this procedural issue in detail as no other ground or argument was raised or pressed during the hearing.Conclusion:The tribunal allowed the assessee's appeal, deciding the main substantive issue in favor of the assessee by holding that the interest received u/s 28 of the Land Acquisition Act, 1894 is not taxable as income from 'Other Sources' u/s 56(2)(viii) of the Act, following the jurisdictional high court's decision. The order was pronounced in the open Court on 03.05.2024.