TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 136
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....arned CIT(A) has erred both on facts and in law in sustaining the addition on account of interest of enhanced compensation to the extent of gross interest of Rs. 62,63,354/- as against the gross interest of Rs. 21,80,662/- declared by the assessee. 3. On the facts and circumstance of the case the learned CIT(A) has erred both on facts and in law in confirming the addition, rejecting the contention of the assessee that the amount having been received u/s. 28 of the Land Acquisition Act, the same is not taxable. 4. On the facts and circumstance of the case the learned CIT(A) has erred both on facts and in law in confirming the addition, misinterpreting the various judicial pronouncements given by various High Courts. 5. On the facts and....
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....r any other clause of this Section." 6. Thus, the issue to adjudicate is "whether the interest on enhanced compensation partake the character of compensation or interest". 7. This issue has been examined by various Courts namely, Hon'ble Gujarat High Court, Hon'ble Punjab & Haryana High Court and by the Hon'ble Apex Court. 8. In the case of Inderjit Singh Sodhi (HUF) Vs. ITO in ITA No. 8808/Del/2019, order dated 19.06.2020 authored by one of the Member of this Bench held as under: "13. Undisputedly, the issue involved in these appeals is regarding the taxability of interest received on enhanced compensation u/s. 28 of the Land Acquisition Act, 1894. Now, there are two questions involved in these appeals, first issue is rega....
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.... (HUF) reported in (2009) 8 SCC 412, 6 albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the 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 add....
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.... from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as an accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that Inderjit Singh Sodhi converse position i.e. spread over of this interest on accrual basis is not permissible." 15....
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.... we hold that the interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s. 28of 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 Inderjit Singh Sodhi 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 ....
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....ence it is a part of enhanced compensation or consideration which is not the case with interest under section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act. In fact, what we have stated hereinabove is reinforced by the newly inserted clause (c) in section 45(5) by the Finance Act, 2003 with effect from 1-4-2004." * The order in the case of Manjit Singh (HUF) has been considered in the case of Ghanshyam (HUF). * The order in the case Hari Singh & Others in CA No. 1504/2017 dated 15.09.2007 - held - While determining as to whether the compensation paid was for agricultural land or not, the Assess....