TaxTMI 
TaxTMI 
2019 (1) TMI 1068
X X X X Extracts X X X X
X X X X Extracts X X X X
....and acquisition compensation allowed bifurcation and spread over w.e.f. the date of acquisition to the date of payment pursuant to the Provisions of Section 145A(b) by the Finance Act, 2009 w.e.f 01.04.2010 read with Section 5 of Income Tax Act, 1961? II. Whether under the facts and circumstances of the case, the interest received on compensation/ enhanced compensation by the assessee as awarded by the Court on a reference u/s 18 of the Land Acquisition Act, 1894 has to be spread over on an annual basis right from the date of delivery of possession till the date of order of the Court according to Rama Bai vs. CIT (1990) 181 ITR 400 (SC) and K.S.Krishna Rao vs. CIT (1990) 181 ITR 408 (SC)? III. Whether under the facts and circumstances of the case, when the period involved is 8 years from land acquisition to the date of receipt of the compensation (2010) for acquisition proceedings (2002), while amendment u/s 56(2)(viii) by the Finance Act, 2009 w.e.f. 01.04.2010, is the land owner barred from claiming the benefit of 'Nil Rate Slab' of income prescribed by the Statute for the respective years? IV. Whether under the facts, circumstances and nature o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment proceedings by 31.8.2015 and in the event of their remaining any refund, the same be paid within four weeks of the conclusion of the reassessment proceedings. The assessee filed objections to the notice issued under Section 148 of the Act which were rejected by the respondent vide letter dated 7.8.2015 (Annexure A-5). The assessee submitted written pleadings dated 6.8.2015 (Annexure A-6) before the Assessing Officer during the reassessment proceedings. The Assessing Officer vide assessment order dated 29.10.2015 (Annexure A-7) made addition of Rs, 5,65,280/- (50% of Rs, 11,30,561/-) as 50% of the interest amount received on compensation was taxable in the year of receipt as per provisions of Section 56(2)(viii) read with Section 57(iv) of the Act and assessed the income of the assessee at Rs, 9,76,760/-. Feeling aggrieved by the order, Annexure A-7, the assessee filed an appeal on 16.11.2015 (Annexure A-8) before the Commissioner of Income Tax (Appeals) [for brevity "the CIT(A)"]. The assessee furnished written submissions dated 15.12.2016 (Annexure A-9) before the CIT(A). The CIT(A) vide order dated 6.1.2017 (Annexure A-10) upheld the addition made by the Assessing Officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t over the amount awarded by the Collector. The compensation awarded by the Court includes the additional compensation awarded under Section 23(1A) and the solatium under Section 23(2) of the said Act. Section 28 is applicable only in respect of the excess amount, which is determined by the Court after a reference under Section 18 of the 1894 Act. 8. Under Section 34 of the 1894 Act, the Collector awards interest on the compensation offered at the rate of 9% per annum for a period of one year from the date of taking possession and thereafter at the rate of 15% per annum from the date of expiry of one year on the amount of compensation or part thereof which remains unpaid or deposited before the date of such expiry. 9. A plain reading of Sections 23(1A), 23(2) as also Section 28 of the 1894 Act clearly spells out that additional benefits are available on the market value of the acquired lands under Section 23(1A) and 23(2) whereas Section 28 is available in respect of the entire compensation. The Constitution Bench of the Supreme Court in Sunder v. Union of India reported as JT 2001(8) SC 130 had approved the following observations of the Division Bench of this Court in State ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "'interest' means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or 8 of 16 ::: Downloaded on - 19-01-2019 12:13:23 ::: ITA-132-2018 -9- obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." The expression 'interest' occurring in sub-section (28A) of Section 2 of the Act widens the scope of the term 'interest' for the purposes of the Act. 12. Another three Judges bench of the Apex Court in Bikram Singh vs. Land Acquisition Collector, (1997) 224 ITR 551 following Dr. Shamlal Narula's case (supra) and taking into consideration definition of "interest" in Section 2(28A) of the Act had recorded that interest under Section 28 of the 1894 Act was a revenue receipt and is taxable. It was held as under:- "The controversy is no longer res integra. This question was considered elaborately by this Court in Dr. Shamlal Narula vs. Commissioner of Income-tax, Jammu [51 ITR 151]. Therein, K. Subba Rao, J., as he then was, considered the earlie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under Section 28 or 31 of the Acquisition Act is a taxable event." 13. Further, this Court in CIT v. Bir Singh (HUF), ITA No.209 of 2004 decided on 27.10.2010 had held that element of interest awarded by the court on enhanced amount of compensation under Section 28 of the 1894 Act falls for taxation under Section 56 as 'income from other sources' in the year of receipt. 14. Learned counsel for the assessee has placed reliance upon the judgment of the Apex Court in CIT v. Ghanshyam (HUF) (2009) 8 SCC 412 to contend that the interest on enhanced compensation was exempt under Section 10(37) of the Act. In Ghanshyam (HUF)'s case (supra), it was held as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bsp; XX (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received." Clause (viii) in sub-section (2) of Section 56 as inserted by 2009 Act is in the following terms:- "56. Income from other sources.- (1) XX XX XX (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following income shall be chargeable to income-tax under the head "Income from other sources", namely:- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ollowed by the assessee. 46.3 Further, clause (viii) is inserted in the sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A shall be assessed as "income from other sources" in the year in which it is received. 46.4 Applicability.- This amendment has been made applicable with effect from Ist April, 2010, and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years." 19. The cumulative effect of Section 145A(b) and Section 56(2) (viii) would be that any interest received on compensation or on enhanced compensation shall be taxable under the head 'income from other sources' in the year of receipt. 20. However, by Section 27 of the 2009 Act, a new clause (iv) in Section 57 has been inserted w.e.f. 01.04.2010 which lays down that in the case of income of the nature referred to in Section 56(2)(viii), a deduction of a sum equal to 50% of such income would be allowable thereunder and no deduction would be allowed under any other clause of Section 57. The said provision reads thus:- "57. De....