TaxTMI 
TaxTMI 
2017 (11) TMI 370
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....assessment year 2013-14. The assessee has raised as many as 8 grounds of appeal. However, only ground Nos. 4 and 5 have been pressed which are reproduced hereinbelow: "4. That having regard to the facts and circumstances of the case, the ld. CIT(A) has erred in law and on facts in upholding the action of the Assessing Officer in making an addition of Rs. 41,84,185/- on account of alleged interest received on enhanced compensation as "Income from other sources" and that too, u/s 56(2)(viii) r.w.s 145A(b) of the Act. 5. That in any case and in any view of the matter, action of the ld. CIT(A) in confirming the action of the Assessing Officer in making the impugned addition is bad in law and against the facts and circumstances of the case." 4. Facts, in brief, as emanating from the first appellate order are that the assessee had claimed exempt income of interest of Rs. 83,68,370/- received from State Government DRO-cum-LAC. The AO noted that the appellant had received interest on enhanced compensation amounting to Rs. 83,68,370/-. The A.O held that interest on enhanced compensation is taxable u/s 56(2)(viii) and after allowing a deduction of sum equal to 50% of int....
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....to the nature of interest received by the landowner-assessee under Section 28 of the 1894 Act. In other words, whether the interest which is received by the assessee-landowner partakes the character of income or not and, in such a situation is it taxable under the provisions of the Act. 8. It would be apposite to quote herein below Sections 28 and 34 of1894 Act which read thus:- "28. Collector may be directed to pay interest on excess compensation. - If the sum which, in the opinion of the court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of [nine entuml ver annum from the date on which he took possession of the land to the date ent of such excess into Court." "34. Payment of interest.- When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited. P....
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....ely refer to market value alone and in terms talks of compensation or the sum equivalent thereto. The interest awardable under Section 28 therefore would include within its ambit both the market value and the statutory solatium. It would be thus evident that the provisions of Section 28 in terms warrant and authorize the grant of interest on solatium as well. " 12. Adverting to the case law on the subject, inevitably, reference is made to the judgment by the three Judges bench of the Supreme Court in the case of Dr. Shamlal Narula Vs.. CIT, [1964] 53ITR 151, which had considered the issue regarding award of interest under the 1894 Act. Interest under Section 28 of the 1894 Act was considered akin to interest under Section 34 thereof as both were held to be on account of keeping back the amount payable to the owner and did not form part of compensation or damages for the loss of the right to retain possession. It was noticed as under:- "As we have pointed out earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter owner of the land so acquired ceases to have any title or ....
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....session was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid delayed payment of the compensation amount and, therefore, is a revenue receipt tax under the Incomet ax Act." This position of law has been consistently by this Court in the case of TMK Govindaraju Chetty vs. Commissioner of Income-tax, Madras [66ITR 465], Rama Rai & Ors. vs. CIT, Andhra Pradesh [181 ITR 400] and K.S. Krishna Rao vs. CIT, A.P. [181 ITR 408]. Thus by a catena of judicial pronouncements, it is settled law that the interest received on delayed payment of the compensation is a revenue receipt eligible to income tax. It is true that in amending the definition of "interest" in Section 2(28A) interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. It is seen that the word "interest" for the purpose of the Act was interpreted by the inclus....
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.... the land which is not the case in the matter of payment of interest under Section 34. " 17. In view of the authoritative pronouncements of the Apex Court in Dr. Sham Lai Narula, T.N.K.Govindaraja Chetty, Amarjit Singh, Sunder, Bikram Singh's cases (supra), Rama Bai vs. CIT (1990) 181 ITR 400 and K.S.Krishna Rao v. CIT, (1990) 181 ITR 408, the assessee cannot derive any benefit from the aforesaid observations quoted above." 10. The Hon'ble Supreme Court dismissed the SLP filed in the case of Manjeet Singh (HUF) Karta Manjeet Singh Vs. Union of India & Ors. CWP No. 15506 of 2013(as discussed above) by way of Special Leave to appeal (C No. 34642 of 2014 vide order dated 18.12. 2014 with the following order:- "Heard Ld. Counsel for the petitioner and perused the relevant material. We do not find any legal and valid grounds for interference. The Special Leave Petitions are dismissed." 11. The Hon'ble Punjab & Haryana High Court considered all the aforesaid cases, in the case of Sunder Lal & Anr. Vs. Union of India in CWP No. 2014 of 2015. In this order dated 21.09.2015 the Hon'ble Jurisdictional High Court held as under:- "9. In view of the above an....
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....n making the payment of enhanced compensation and, therefore, would fall under Section 28 of the 1894 Act. Such payment could not par-take the character of compensation for acquisition of agricultural land and, thus, was not exempt under the Act. Once that was so, the tax at source had been rightly deducted by the payer. " 13. In view of the above, the tax at source has been rightly deducted and the petitioners. can claim the refund, if any, admissible to them by filing the income tax returns in accordance with law" 12. Further, on this issue, the Hon'ble Punjab & Haryana High Court has recalled the earlier decision in the case of Jagmal Singh and Ors. Vs. State of Haryana & Anr. vide its order dated 02.02.2016 in RA-CR No. 46 CH of 2014 in CR No. 7740 of 2012. The Hon'ble High Court while recalling this order held as under:- "1. The applications for review is sought by the Union of India on the plea that the orders passed by this Court in the absence of any representation of Union, failed to take of an amendment in the Income Tax Act. The said provision made interest onent assessed on additional amount on land acquisition awards under Section 28 of the Land Ac....
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....the case of Ghanshyam (HUF) (supra). In Manjeet Singh (HUF) Karta Manjeet Singh's case (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)'s case (supra) which is directly on the issue by observing that the assessee cannot derive any benefit from the observations made by the Supreme Court as quoted therein. In Hari Kishan's case (supra), the Punjab and Haryana High Court has placed reliance upon its earlier decision in the case of Manjet Singh (HUF) Karta Manjeet Singh (supra). In Bir Singh (HUF) 's case (supra), the Punjab and Haryana High Court has held that under the scheme of the 1894 Act, interest under section 34 is part of compensation while interest under section 28 is not the interest which partakes the character of compensation and is treated differently. In the opinion of this court, the above view of the Punjab and Haryana High Court is contrary to what has been held in the decision of the Supreme Court in Ghanshyam (HUF)'s case (supra) wherein it has been held that interest ....