TaxTMI 
TaxTMI 
2020 (6) TMI 697
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....gricultural land received u/s 28 of Land Compensation Act 1894 and eligible for exemption u/ s 10 (37) of the Act. 2.1 That while sustaining the aforesaid addition the learned Commissioner of Income Tax ( Appeals) has erroneously sustained the addition relying on the judgment of Hon'ble Apex Court in the case of Bikram Singh VS Land Acquisition Collectors reported in 224 ITR 551 overlooking the following binding judgments of Apex Court: 1) 315 ITR 1 (SC) CIT vs. Ghanshyam (HUF) ( dated 16.7.2009 ) ii) 367 ITR 498( SC) CIT vs. Govindbhai Mamaiya (dated 4.9.2014) iii) C.A. No, 13053/ 2017 CIT vs. Chet Ram (HUF) (dated 12.9.2017) iv) C.A. No. 15041/2017 UOI vs. Hari Singh and ors. ( dated 15.9. 2017) v) C.A. No. 18475/2017 ITO v. Muktanandgiri Maheshgiri ( dated 10.11.2017 ) 2.2 That various adverse findings and conclusions recorded by the Commissioner of Income Tax (Appeals) are factually incorrect and to record, legally misconceived and untenable. 2.3. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on fact in sustaining the view taken by learned A Officer of making additi....
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....en that the word " interest" for the purpose of the Act was interpreted by the inclusive definition. A literal construction may lead to the conclusion that the interest received or payable in any manner in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would be deemed interest. But the question is: whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would be exigible to income-tax? The Court had consistently taken the view that it is a revenue receipt. The amended definition of " interest" 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, the revenue receipt is exigible to tax. The amendment was 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 provisions of the Land Acquisition Act is a taxable event. Therefore, it is a revenue receip....
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....sheela Vs ITO in ITA No. 100 /Hyd/2016 dated 07.12.2016 Bangalore Bench • ITO Vs Basavaraj M. Kudarikannur 95 taxmann.com 106 dated 01.06. 2018 • ITO Vs Sangappa S. Kudarikannur 96 taxmann.com 541 dated 20.07. 2018 Pune Bench • Dnyanoba Shajirao Jadhav Vs ITO 90 Taxmann.com 285 dated 29.01. 2018 7. The ld. DR, on the other hand, gave a power point presentation regarding the provisions of Section 28, Section 34 of Land Acquisition Act and Section 45 (5) and Section 56(2)( viii) of Income Tax Act and applicability of the ratios mentioned by the ld. CIT ( A). 8. Heard the arguments of both the parties and perused the material available on record. 9. The moot issue to determine is whether the interest on the compensation received by the assessee is in the nature of compensation exempt from tax u/s 10(37 ) or taxable under Section 56 (2 )( viii) as interest under the head " income from other sources". 10. This matter has been argued at length and carefully analyzed by various judicial forums. For the sake of ready reference, the composite order titled Shri Satbir Vs. ITO, Jind in ITA No. 1413 to 1415/CHD/2016 for the A.Ys. 2007-08 to....
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....the Act. 7. Before the Ld. CIT (Appeals), the assessee relied upon the decision of the Hon' ble Supreme Court in the case of CIT Vs. Ghanshyam (HUF) (2009 ) 315 ITR 1 (SC) and contended that as per the ratio laid down in the said decision the interest received u/s 28 of the Land Acquisition Act, 1894 does not partake the character of interest, rather it was a part of compensation of land which was not taxable as per the provisions of sect ion 10(37 ) of the Income Tax Act. The Ld. CIT(Appeals) after considering the submissions of the assessee as well as considering the nature of compensation and interest thereupon received by the assessee, held that the issue was squarely covered by the decision of the Hon'ble Supreme Court in the case of Ghanshyam ( HUF) (supra) and accordingly, allowed the appeal of the assessee. 8. Subsequently the Assessing Officer moved an application for rectification of the u/s 154 of the Act before the CIT(A) pleading therein that the interest received on enhanced compensation u/s 28 of Land Acquisition Act was chargeable to tax as 'income from other sources' u/s 56 (2) (viii) r. w.s. 57(iv) of the Act in the light of the decision ....
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.... the excess amount of compensation awarded by the court over the amount awarded by the collector. It is awarded by the Court payable by the collector from the date on which the collector took the possession of the land to the date of payment of such excess into Court. Whereas interest under sect ion 34 of the Land Acquisition Act, 1894 is given when the amount of compensation awarded by the collector is not paid or deposited on or before taking possession of land, such interest is payable from the time of so taking possession till the date of payment of compensation. In the case in hand, the Ld. CIT ( Appeals) vide his order dated 14.3.2016 had allowed the appeal of the assessee following the decision in case of Ghanshyam (HUF) (supra), wherein it has held Interest u/s 28 of the Land Acquisition Act 1984, unlike interest u/s 34 is an accretion to the value of the land, hence it is part of enhanced compensation or consideration which is not the case with interest u/s 34A. So also additional amount u/ s 23 (1A) and solatium u/ s 23 (2 ) form part of enhanced compensation. 12. The Ld. CIT(A), however, subsequently, while relying upon the decision of the Hon'ble High Court....
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....Income Tax Act. The question was whether it will cover " interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading: " 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 which depends on undue delay in making the award. 50. It is true that " interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as....
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.... subsequent to the decision passed by the Hon' ble Jurisdictional High Court in the case of Manjeet Singh(HUF) (supra) which had dealt with the decisions of the Hon'ble Apex Court in Ghanshyam, HUF (supra). Therefore, in view of the same, the proposition laid down in Ghanshyam, HUF (supra) remains and which having been laid down by the Hon' ble Apex Court is the law of the land and has to be followed by all lower authorities. In view of the above, we hold that the interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10 (37 ) of the Act is not disputed. In view of the same the order passed by the CIT( Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable." 11. Before parting, the salient features of the orders of the Hon' ble Supreme Court are mentioned below: * The order of the Bikram Singh Vs Land Acquisition Collector is da....