TaxTMI 
TaxTMI 
2018 (2) TMI 105
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee is engaged in the business of trading in Coconut and is also a partner of M/s. K.D. Jadhav, Latur. The agricultural land of the assessee was acquired by the State Government for Minor Irrigation Division, Latur in the year 1993. The assessee received compensation for acquisition of land Rs. 77,43,080/- including interest Rs. 52,96,632/- u/s. 28 of the Land Acquisition Act, 1894 (hereinafter referred to as "the LA Act"). The assessee filed his original return of income for the impugned assessment year on 10-10-2011 declaring total income of Rs. 8,06,540/-. Thereafter, the assessee filed revised return of income on 27-03-2012 declaring total income of Rs. 34,54,859/-. The assessee again revised his return of income on 25-10-2012 declaring total income of Rs. 8,06,543/-. The case of the assessee was selected for scrutiny under CASS and accordingly, notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was issued to the assessee on 07-08-2013. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee in his second revised return of income has claimed total amount of compensation including interest as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cision relied by the CIT(A), appellant would like to rely upon the decision of Hon. Supreme Court in the case of CIT Vs Ghanshyam (HUF) (2009) 315 ITR-1(SC), dt.16-07-2009, which is logically as well as with reference to the scheme of the provision of Sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act, gives the right view in respect of the taxability of compensation received under these provision, as explained in the decision. Therefore, when there are conflicting decisions, the rule of Judicial Precedence demands that the view favorable to the assessee must be adopted, as held by the Hon'ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., 88 ITR 192. Thus, the finding of the CIT(A) may please be vacated and addition may please be deleted. 5]. The Appellate craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal." 5. The assessee has not filed any separate written submissions before the Tribunal. The only relevant document before us apart from grounds of appeal and orders of authorities below available for consideration on behalf of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax. However, on further verification A.O noted that the said land is a Capital Asset and as it is situated within 8 K,M from the municipality limit and hence, A.O has rejected the claim. Further, A.O has taxed the entire compensation of Rs.3,87,15,572/- as a Capital Gain and Rs.1,12,84,428/- as a Revenue receipt. [B) Shri. Gopal Kasat He is agriculturist. His agricultural lands situated in the small village having population of 4000 only, was acquired under LAQ Act and he has received the following compensation. He had claimed the said compensation as exempt, because of the facts it was disputed at the relevant time before court of law. According to him only interest elements u/s.34 of Rs. 1,12,84,428/- can be taxed on the finality of court matter. Particulars Amount of Compensation Value of land as enhanced 80,60,000 As per Court Compensation for trees 5,78,182 Solatium u/s. 23(2).. 25,91,454 Component... u/s. 23(1A) 35,41,655 Total 1,47,71,291 Less : Com as per original award.... 25,38,882 Balance............ 1,22,32,409 Add; Compensation u/s. 28 by interest 2,64,83,163 Total Compensation of the l....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cepted it. However, A.O is of the opinion that the interest of Rs. 2,64,83,163/-u/s.28 of LAQ act is taxable to tax, being revenue receipt and accordingly A.O taxed it. 3] Further, the Jurisdictional Bombay High Court has observed in Para 30 in the decision in the case of Gopal Kasat and others, cited supra that: 30. The Apex Court in the case of Commissioner of Income Tax. Vs. Ghanshyam (HUF) ((2009) 26 DTR (SC) 129) has observed thus: "..............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 date of notification under Section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under Section 23(1A) or Section 23(2) or under Section 28 of the 1894 Act, it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification." In the aforesaid judgment, the Apex Court has also held that the interest under Section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under Section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rcumstance, the said compensation was treated as "Business income" In the case of appellant, it is not disputed that the said compensation received under LAQ is a Capital receipt. As per court order appellant has received the statutory interest u/s.23 (1A) & 23(2) r.w.s sec. 28 of L. A Act. (as per Para 60 of the order), as compensation. However, A.O merely disputed the compensation awarded u/s.28 of the I.T.Act. 4] Therefore, we have to consider the following decisions on the issue involved in the case of appellant. The Hon Supreme Court decisions in the cases of : (1) Bikram Singh Vs Land Acquisition Collector (1977) 224 ITR 551 (SC); (2) Commissioner of Income Tax Vs. Ghanshyam (HUF) ((2009) 26 DTR (SC) 129) The Hon Jurisdictional Bombay High Court's decision in the cases of : (1) The Dy CIT Vs Gopal Kast and others Tax Appeal No 3 of 2009 dt. 5-11-2009; (2) Balasaheb R Bidwe and others Tax Appeal No. 5401 of 2013 dt. 27.08.2013 The Copies of the above decisions are filed on records. Further, with due respect of the all the above decision, appellant would like to submit again that the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent as well, it is not permissible. The ld. DR pointed that as per provisions of section 56(1)(viii) income received by way of interest on compensation or enhanced compensation is liable to be taxed as income from other sources. The ld. DR further placed reliance on the decision of Hon'ble Supreme Court of India in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. (supra). 7. We have heard the submissions made by the ld. DR and have perused the material available on record. The assessee in appeal has raised 5 grounds. All the grounds are directed towards the solitary issue whether interest received by assessee on compulsory acquisition of land is taxable under the provisions of Income Tax Act. A perusal of grounds of appeal indicate that the assessee has been awarded interest under the provisions of section 23(1A) and 23(2) r.w.s. 28 of the L.A. Act. The assessee has claimed that interest received by assessee u/s. 23(1A) and 23(2) of the L.A. Act is not exigible to Income Tax Act. A perusal of assessment order shows that the Assessing Officer has rejected the claim of assessee and has assessed the interest income received by assessee on compensation/enhanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n @ 12 per cent per annum on the market value of the land for the period commencing on and from the date of publication of the notification under s. 4(1) to the date of the award of the Collector or to the date of taking possession of the land, whichever is earlier. In other words sub-s. (1A) of s. 23 provides for additional compensation. The said sub-section takes care of increase in the value @ 12 per cent per annum. 23. In addition to the market value of the land, as above provided, the Court shall in every case award a sum of 30 per cent on such market value, in consideration of the compulsory nature of acquisition. This is under s. 23(2) of the 1894 Act. In short, s. 23(2) talks about solatium. Award of solatium is mandatory. Similarly, payment of additional amount under s. 23(1A) is mandatory. The award of interest under s. 28 of the 1894 Act is discretionary. Sec. 28 applies when the amount originally awarded has been paid or deposited and when the Court awards excess amount. In such cases interest on that excess alone is payable. Sec. 28 empowers the Court to award interest on the excess amount of compensation awarded by it over the amount awarded by the Collector.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us] A perusal of the above extract of the judgment indicate that the interest awarded u/s. 23(1A) and 23(2) r.w.s. 28 of the L.A. Act is in the nature of solitium and an integral part of compensation. It is an admitted position that the receipt of compensation awarded under L.A. Act is a capital receipt. Whereas, interest awarded u/s. 34 of the L.A. Act is on account of delayed payment of compensation and is revenue receipt. Thus, the payment of interest u/s. 23(1A) and 23(2) of the L.A. Act and interest awarded u/s. 34 of the L.A. Act are very different in nature. 9. One of the question before the Hon'ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) was : "26. The question before this Court is : whether additional amount under s. 23(1A), solatium under s. 23(2), interest paid on excess compensation under s. 28 and interest under s. 34 of the 1894 Act, could be treated as part of the compensation under s. 45(5) of the 1961 Act ?" Answering the above question along with other questions the Hon'ble Apex Court held : "33. It is to answer the above questions that we have analysed the provisions of ss. 23, 23(1A)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....x Vs. Ghanshyam (HUF) (supra) the judgment of Larger Bench in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. (supra) was not considered. However, we find that there is no conflict of law laid down in both the cases. The Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) has clearly marked the distinction between the interest received u/s. 23(1A) and 23(2) r.w.s. 28 of the L.A. Act vis-à-vis interest on delayed payment of compensation u/s. 34 of the L.A. Act. The Larger Bench of Hon'ble Supreme Court of India in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. (supra) has held that the interest received u/s. 34 of the Act on delayed payment of compensation is a revenue receipt and is exigible to tax. Both the judgments rendered by the Hon'ble Apex Court have held that payment of interest on delayed payment of compensation u/s. 34 of the L.A. Act are liable to tax under the provisions of Income Tax Act. 11. A perusal of material available on record does not clearly indicate whether the interest component which his subject matter of dispute in the present appeal was received by assessee unde....