TaxTMI 
TaxTMI 
2016 (5) TMI 488
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....ated 23rd March, 2011 whereby the reference was partly allowed and additional compensation was awarded at the rate of Rs. 41.60 per square metre for the irrigated lands and Rs. 33.28 per square metre for non-irrigated lands along with other benefits under the Land Acquisition Act, 1894 (hereinafter referred to as the "Act of 1894"). 3. Pursuant to the award passed by the Reference Court, the second respondent - Executive Engineer, Junagadh Irrigation Scheme Division submitted a calculation sheet which showed an amount of interest of Rs. 20,74,157/- in Column No.15 thereof and the amount of TDS to be deducted as per section 194A was shown to be Rs. 2,07,416/- in Column No.18 thereof,. The petitioner made an application in Form No.13 to the Income Tax Department on 9th January, 2015 under section 197(1) for deciding the tax liability of interest and to issue a certificate as to NIL tax liability. By the impugned communication dated 9th February, 2015 (wrongly typed as 09.02.2014 in the letter as per paragraph 5 of the affidavit-inreply), the application has been rejected on the ground that the interest amount on the delayed payment of compensation and enhanced value of compensatio....
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....nt has deducted tax at source to the extent of Rs. 2,07,416/-. It was submitted that such action of the second respondent not being in consonance with the statutory provisions, the respondents are required to be directed to pay such amount to the petitioner. It was, accordingly, urged that the petition deserves to be allowed by quashing and setting aside the impugned communication dated 9th February, 2014 (sic. 2015) issued by the Income Tax Officer, TDS-1 refusing to grant the certificate under section 197 of the Act as well as holding the action of the respondents in deducting Rs. 2,07,416/- towards 10% TDS to be illegal and invalid. 4.1 In support of his submissions, the learned counsel placed reliance upon a decision of the Punjab & Haryana High Court in the case of Jagmal Singh v. State of Haryana rendered in Civil Revision No.7740 of 2012 on 18th July, 2013, wherein the court placing reliance upon the decision of the Supreme Court in the case of CIT, Faridabad v. Ghanshyam (supra) observed that it was clear from the observations of the Supreme Court that interest under section 28 is, unlike under section 34 of the 1894 Act, an accretion in value and regarded as part of the....
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....at it is clear that no tax is to be deducted at source from compensation awarded in lieu of agricultural land. In respect of 'interest', it has to be seen as to whether interest is a part of the compensation. If the answer is in the affirmative, then tax cannot be deducted at source. However, if it is for delay in making payment it does not form part of the compensation and tax may be deducted at source. The court held that in the facts of the said case, the land was agricultural land and enhanced compensation and interest was awarded under section 28 and hence in view of the specific finding in Ghanshyam's case (supra) the amount awarded under section 28 of the Land Acquisition Act is accretion in value and interest therein forms part of compensation; income tax cannot be deducted at source since the land acquired is agricultural land. The learned counsel for the petitioner further pointed out that the land in question being agricultural land in the rural area, the same has not been taxed under the heading of capital gains under section 45(5) of the Act. 5. Opposing the petition, Mr. Sudhir Mehta, learned senior standing counsel for the respondents submitted that under the awar....
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....nterest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income in the year in which it is received, came to be inserted in section 145A of the Act and hence, would not have any applicability in the facts of the present case. In support of his submissions, the learned counsel placed reliance upon the decision of the Punjab & Haryana High Court in the case of Hari Kishan and others v. Union of India and others rendered on 30th January, 2014 wherein the court has placed reliance upon its earlier decision in the case of The Commissioner of Income Tax, Faridabad v. Bir Singh (HUF), Ballabgarh rendered in ITA No.209 of 2004 on 27th October, 2010, wherein the court after considering the decision of the Supreme Court in Ghanshyam's case (supra) has held that the interest received by the petitioner was on account of delay in making the payment of enhanced compensation which would not partake the character of compensation for acquisition of agricultural land and thus, was not exempt under the Income Tax Act. Once that was so, the tax at source had rightly been deducted by the payer. 5.2 Reliance was also placed upon the de....
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.... of the Supreme Court in the case of Dr. Shamlal Narula v. C.I.T., (1964) 53 ITR 151, the decision of the Supreme Court in the case of T.N.K. Govindaraju Chetty v. C.I.T. (1967) 66 ITR 465, the decision of the Supreme Court in the case of Bikram Singh v. Land Acquisition Collector, (1997) 224 ITR 551 and held that the interest received as income on the delayed payment of compensation determined under section 28 or 31 of the Act is a taxable event. The court held that in view of the authoritative pronouncements of the apex court in the above referred decisions, the assessee cannot derive any benefit from the observations of the Supreme Court in the case of Ghanshyam (HUF) and dismissed the petitions. 5.4 Reliance was also placed upon the decision of the Delhi High Court in the case of Commissioner of Income- Tax v. Sharda Kochhar, (2014) 49 taxmann.com 120 (Delhi), wherein the question before the Delhi High Court was as to whether the amount received by the assessee during the previous year relevant to assessment year 1988-89 was taxable in view of the provisions of section 45(5)(b) of the Income Tax Act. The court following the decision of the Supreme Court in the case of Ghansh....
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....ions of section 45 of the I.T. Act and the intention behind insertion of sub-section (5) of section 45. The court noted that sub-section (5) of section 45 was inserted to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. The court considered the provisions of sections 23(1), 23(1-A) and section 23(2) of the Act as well as section 28 and section 34 of the Act of 1894 and observed that section 23(1-A) was introduced in the 1894 Act to mitigate the hardship caused to the owner of the land who is deprived of its enjoyment by taking possession from him and using it for public purpose, because of the considerable delay and offering payment thereof. To obviate such hardship, section 23(1-A) was introduced and the legislature envisaged that the owner is entitled to 12% per annum additional amount on the market value for a period commencing on or from the date of publication of the notification under section 4(1) of the 1894 Act up to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier. The court held that the additional amount payable under section 23(1-A) of ....
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....1 Act and the court held thus:- "47. The issue to be decided before us-what is the meaning of the words "enhanced compensation/ consideration" in Section 45(5)(b) of the 1961 Act? Will it cover "interest"? These questions also bring in the concept of the year of taxability. 48. It is to answer the above questions that we have analysed the provisions of Sections 23, 23(1-A), 23(2), 28 and 34 of the 1894 Act. 49. As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under Section 34 wh....
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...., the interest received under section 28 of the Act of 1894 being an accretion to the value, would form part of the compensation and would be exigible to tax under section 45(5) of the I.T. Act, whereas the interest received under section 34 of the Act of 1894 would be "interest" within the meaning of such expression as envisaged under section 145A of the I.T. Act and would be deemed to be the income of the year under consideration, chargeable to tax as income from other sources under section 56 of the I.T. Act. 10. In the facts of the present case, it is an admitted position that the interest on which the tax is sought to be deducted at source under section 194A of the Act is interest under section 28 of the Act of 1894 and not under section 34 thereof. As noted hereinabove, the petitioner's application for a certificate under section 197 of the I.T. Act for no deduction of tax at source has been rejected on the ground that the interest amount received under section 28 of the Act of 1894 is taxable as per the provisions of section 57(iv) read with section 56(2)(viii) and section 145A(b) of the I.T. Act. Section 145A of the I.T. bears the heading "Method of accounting in certain....
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....ay clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. 55. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on the date of notification under Section 4 of that Act. When the court/tribunal directs payment of enhanced compensation under Section 23(1-A), or Section 23(2) or under Section 28 of the 1894 Act it is on the basis that award of the Collector or the court, under reference, has not compensated the owner for the full value of the property as on date of notification." Thus, it is clear that the Supreme Court after considering the scheme of section 45(5) of the I.T. Act has categorically held that payment made under section 28 of the Act of 1894 is enhanced compensation, as a necessary corollary, therefore, the contention that payment made under section 28 of the Act of 1894 is interest as envisaged under s....
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....to mitigate the hardship caused to the assessee on account of the decision of the Supreme Court in Smt. Rama Bai v. CIT, (1990) 181 ITR 400 (SC) whereby it was held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. Therefore, when one reads the words "interest received on compensation or enhanced compensation" in section 145A of the I.T. Act, the same have to be construed in the manner interpreted by the Supreme Court in Ghanshyam (HUF) (supra). 12. On behalf of the first respondent, reliance has been placed upon decisions of different High Courts taking a different view. This court is not in agreement with the view adopted by the other High Courts which are not consistent with the law laid down in the case of Ghanshyam (HUF) (supra). In Manjet Singh (HUF) v. Union of India (supra), the Punjab and Haryana High Court has chosen to place reliance upon various decisions of the Supreme Court rendered during the period 1964 to 1997 and has chosen to brush aside the subsequent decision of the Supreme Court in Ghanshyam (HUF) (supra) which is directly on the issue by observing that the assessee cannot derive any benefit from the ob....