TaxTMI 
TaxTMI 
2021 (2) TMI 271
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the order of the Ld. CIT(A) be set aside and that of the Assessing Officer be restored. 3. The brief facts of the case are that the appellant M/s. SV Global Mill Ltd., is engaged in the business of real estate development, filed its return of income for the assessment year 2016-17 on 16.10.2016 admitting total income of Rs. 2,24,20,210/-. During the year under consideration, the assessee company has received interest on delayed payment of compensation for compulsory acquisition of land from Special Land Acquisition Officer, Bangalore under Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2003 (hereinafter the 'RFCTLARR Act, 2013') amounting to Rs. 12,25,98,815/-. The assessee has credited interest income in to the profit &loss account but while filing return of income in the statement of total income claimed exempt from tax towards interest received under RFCTLARR Act 2013, on the ground that as per Section 96 of the said Act, any compensation or award for compulsory acquisition of land including interest if any is not liable to tax. The case was taken up for scrutiny and during the course of assessment proceedings, the AO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l be reproduced at para 4.2 on page 4 to 14 of ld.CIT(A)'s order. The sum and substance of the arguments of the assessee before the ld.CIT(A) are that the ld.AO has erred in taxing interest on compensation within the ambit of Section 56(2)(viii) of the Act, brushing aside the overriding provisions of RFCTLARR Act 2013 over the IT Act by virtue of Section 96 of said RFCTLARR Act 2013 and consequently grossly erred in bringing to tax, interest received for compulsory acquisition of land. The ld.CIT(A) after considering relevant submissions of the assessee and also by relying upon various provisions of RFCTLARR Act 2013, including Section 3(i) of RFCTLARR Act 2013, which deals with the term 'cost of acquisition', held that interest received for delayed payment of compensation falls under the definition of compensation for acquisition of land, which is specifically exempted as per Section 96 of said act and consequently it cannot be brought to tax u/s.56(2)(viii) of the IT Act. He further held that as per the relevant provisions of new Land Acquisition Act, called RFCTLARR Act 2013, interest received by the assessee towards delayed compensation for compulsory acquisition of land is exe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on dated 12-2-20 16, the land which has been compulsorily acquired is referred to as a factory land and therefore, is not entitled to claim exemption u/s 10(37). Besides, the Special Land Acquisition Officer has deducted TDS of Rs. 1.22 ,Crores u/s 194LA at the rate of 10% on the interest paid of Rs. 12.25 Crores. The CBDT Circular No.36 of 2016 referred to by the appellant company is only for compensation and not for interest. The case laws relied on by the appellant company are not applicable to the facts and circumstances of the appellant's case as per the observations on Page4 of the assessment order. The AO has relied on the decision of Hon'ble ITAT, Chennai. The AO has further referred to the amended Section 194LA. Finally, the AO has assessed the interest on compensation for compulsory acquisition of land u/s 56(2)(viii) r.w. Section 145A(b) as per which the AO has observed that interest received on compensation or enhanced compensation is taxable as Income from Other Sources. After assessing the same u/s 56(2), the AO has notionally determined the expenditure to the tune of Rs. 2.46 Crores and has allowed the deduction u/s 57(iv) [towards expenditure corresponding to the in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rehabilitation and Resettlement Act 2013[hereafter referred to as RFCTLARRJ which came into existence, much after the introduction of Section 10(37) and therefore, it has over-riding effect on the provision existing in the Income Tax Act earlier. In this regard, the AR has relied on the Circular of CBDT No.36/ 2016 dated 25-10-20 16 as per which the AR has argued that there is no distinguishment between the agricultural and non-agricultural land when it comes to exemption of compensation received by the land owners for the land acquired under the new Land Acquisition Act, called the RFCTLARR Act. I have perused the said circular which is reproduced hereunder for ready reference: Circular No. 36 of 2016 F.No. 225/S8/201 6-ITA.II Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Dated: 25th October, 2016 Subject: Taxability of the compensation received by the land owners for the land acquired under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ('RFCTLAAR Act)-reg. 1. Under the existing provisions of the Income-tax Act 1961 ('the Act'), an agricultur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the appellant's contention that the interest received on compulsory acquisition under the new RFCTLARR Act, 2013 is exempt irrespective of whether the land acquired is agricultural or factory land. 4.3.8. Now, I deal with the ARs contention that just because, the Special Land Acquisition Officer effected TDS at the rate of 10% on the interest paid to the appellant company, the AO ought not to have come to a conclusion that the said interest is taxable. The AR has further contended that Section 19LA came into existence with effect from 1-10- 2004 and was relevant to the old Land Acquisition Act prior to the introduction of new RFCTLARR Act. I have perused Section 194LA which has been reproduced hereunder for ready reference: Section 194LA: Payment of compensation on acquisition of certain immovable property: "Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable (other than agricultural land), shall, at the time of payment of such sum in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd under the new Land Acquisition Act called the RFCTLARR Act, 2013 and as per the CBDT's Circular No. 36 of 2016, any compensation or enhanced compensation received under the said Act is exempt from taxation. 4.3.10. Now I deal with the AO's reliance of the decision of Hon'ble ITAT, Chennai in the case of N.Bhaskar Vs. ITO vide ITA No. 2202/Mds/2012 for AY 20 12-13 dated 20-12-2017, as per which interest on delayed payment of enhanced compensation in respect of immoveable property is held a revenue receipt and is not exempt u/s 10(37) of the IT Act. I have perused the relevant portion of the ITAT's decision which is reproduced hereunder: "In my opinion, the argument of the ld.A.R is having no merit. Interest on delayed payment of enhanced compensation in respect of acquisition of immovable property is a revenue receipt and it is to be taxed and cannot be exempted u/s. 10(37) of the Act and it cannot be considered as a part of consideration received in respect of agricultural land specified us.2(14)(iv) of the Act" 4.3.11. The AR has contended that the aforesaid decision is not applicable to the appellant's case as it was related to interest received unde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....013 reads as follows - (1) This Act may be called the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (2) It extends to whole of India except the state of Jammu and Kashmir (3) It shall come into force on such dates as the Central Government may, by notification in the Official Gazette, appoint: Provided that the Central Government shall appoint such date within three months from the date on which the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill, 2013 receives the assent of the President. Section 3 of the RFCTLARR Act, 2013 In this Act, unless the context otherwise requires, - (a) (b) (c) (d) (e) (I) (9) (h) -- FniT'T2stof acquisition" includes - I (i). amount of compensation which includes solatium, any enhanced compensation ordered by the Land Acquisition and Rehabilitation / and Resettlement Authority or the Court and interest payable thereon and any other amount determined as payable to the affected families by su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 cent per annum from the time of so taking possession until it shall have been so paid or deposited: Provided that if such compensation or any pan there of is paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per cent, per annum shall be payable from the dale or expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry. Section 96 of the RFCTLARR Act, 2013 No income tax or stamp dut shall be levied on ant,' award or agreement made under this Act except under section 46 and no person claiming under any such award or agreement shall be liable to pat,' ant,' fee for a copy of the same". 4.3.13. After perusal of the new Land Acquisition Act called RFCTLARR Act, 2013, particularly Section 96 under the said Act, I am convinced that the interest received by the appellant company for the delayed compensation falls under the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is not to be assessed u/s 56(2)(viii) rws 145A(b). Therefore, the AO's deduction on notional and estimated basis u/s 57(iv) is not relevant. (f) The decision of Hon'ble ITAT, Chennai in the case of Bhaskar Vs. ITO cited supra is not relevant to the appellant's case. 4.3.16. In view of the above remarks, I am of the considered opinion that the interest received by the appellant company towards delayed compensation for compulsory acquisition of land to the extent of 12.25 Acres is exempt and therefore, the AO's addition of Rs. 8.59 Crores u/s 56 after allowing deduction u/s 57 on notional and estimated basis, is deleted. 5. The ld.DR submitted that the ld.CIT(A) had failed to note that interest payable as used in the RFCTLARR Act 2013, in the context of cost of acquisition, which has no bearing on the issue under consideration. The ld.DR further submitted that as per the provisions of Section 56(2)(viii) r.w.s. 145A(b) of the IT Act, interest received by an assessee on compensation or enhanced compensation shall be deemed to be the income of the year under which it is received and hence such interest is taxable in the year of receipt. The ld.CIT(A) without apprec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....udgement was rendered prior to 01.04.2014, when the new Land Acquisition Act was not come into force. Therefore, the provisions of income tax which deals with taxability of compensation or interest on delayed payment of compensation and relevant case laws has no application once the Land Acquisition Act has been come in to operation from 01.04.2014 onwards. He further submitted that on the other hand, the Hon'ble Supreme Court in the case of CIT vs. Ghanshyamdas, supra, clearly held that interest paid u/s.28 of the Land Acquisition Act forms part of compensation and is a part of enhanced value of land. The Hon'ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai v. ITO, 388 ITR 343 has also held that interest forms part of compensation and the same is not taxable. Therefore, the ld.AR submitted that the AO has completely erred in taxing interest received for delayed payment of compensation for compulsory acquisition of land u/s.56(2)(viii) of the IT Act. 8. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The facts borne out from record indicate that the land parcel owned by the assessee at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... compensation received on compulsory acquisition of land, especially this relating to acquisition of non-agricultural land, a clarification has been issued by way of Circular No.36 of 2016 and clarified that compensation received in respect of award or agreement which has been exempted from levy of Income Tax vide section 96 of RFCTLARR Act 2013, shall also not to be taxable under the provisions of IT Act, even there is no specific provision of exemption for such compensation in IT Act. Further, the benefit of exemption from Income Tax in respect of the amounts paid under new Land Acquisition Act, 2013 pursuant to Circular No.36 of 2016 was inserted by way of a clarification amendment by Finance Act, 2017 in Section 10(37) and Section 194LA of IT Act. A second proviso was inserted to Section 194LA of the IT Act, which states that no deduction shall be made under this section, where such payment is made in respect of any award or agreement which has been exempted from levy of income tax u/s.96 of RFCTLARR Act 2013. From the above, it is very that TDS is also not required to be deducted in respect of amount paid under new Land Acquisition Act. It may be noted that the Special Land....
X X X X Extracts X X X X
X X X X Extracts X X X X
....01.04.2014 onwards. Under the new Land Acquisition Act, 2013, more particularly as per Section 96 of RFCTLARR Act 2013, no income tax or stamp duty shall be levied on any award or agreement made under the new Act except u/s.46 of the said Act. Therefore, after a new Land Acquisition Act, 2013, the law has been changed in as much as any compensation or enhanced compensation including interest if any, is completely exempt from Income Tax by virtue of section 96 of RFCTLARR Act 2013. Therefore, we are of the considered view that by virtue of overriding nature of the new Land Acquisition Act, 2013, the provisions of Income Tax if any which deals with taxability of compensation or interest if any received by an assessee for compulsory acquisition of land becomes redundant and has no application. Further, the assessee has relied upon the decision of Hon'ble Supreme Court in the case of CIT vs. Ghanshyamdas, 315 ITR 1, where the Hon'ble Supreme Court held that interest paid u/s.28 of the Land Acquisition Act forms part of compensation and is a part of enhanced value of land. The Hon'ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai v. ITO, 388 ITR 343, held that interest ....