TaxTMI 
TaxTMI 
2022 (5) TMI 281
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....and further erred in exercising his jurisdiction u/s 251(2) in treating the subject agricultural land as 'Capital Asset' U/S 45(5) and that too by recording incorrect facts and findings and without appreciating the facts and circumstances of the case and in violation of principles of natural justice and without considering the submission filed by the assessee and without providing the entire adverse material available on record. 2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in not allowing the benefit of exemption claimed by the assessee u/s 10(37) on the compulsory acquisition of agricultural land under the Land Acquisition Act and more so when all the conditions have been complied with by the assessee and further erred in exercising his jurisdiction u/s 251 (2) in treating the subject agricultural land as 'capital asset' u/s 45(5), is bad in law and against the facts and circumstances of the case. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in holding as under:- (a) That the land in question is a 'Capital Asset', whose acquisiti....
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....his claim. 5. The assessee then raised this issue before the NFAC. Ld. NFAC however, instead of dealing with the controversy raised in the grounds of appeal and was subject matter of appellate proceedings that amount of interest received on the acquisition of land u/s 28 of the Land Acquisition Act is exempt, has held that the land itself is not agricultural and, therefore, there is no question of any exemption u/s 10(37) of the Act. Accordingly, there was an enhancement. One of the allegations of the first appellate authority is that assessee has not given any other evidence to show that impugned land was agricultural land and merely relied upon the RTC. The entire case of the first appellate authority revolves around the fact that the land, which was the subject matter of award for compensation, was not used for agricultural purposes. All the evidences filed before the first appellate authority to substantiate that it was agricultural land have been rejected and finally, it was held that the land was not agricultural land albeit it had commercial value having a strategic location and, therefore, exemption u/s 10(37) cannot be allowed. The judgments which was relied upon by the a....
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.... Copies of which have been filed in the paper book before us. 7. Thus, insofar as the assessee's claim for exemption u/s 10(37) is concerned, the same cannot be denied insofar as interest on enhanced compensation received u/s 28 of the Land Acquisition Act. He also referred to copy of award, as appearing in pages 140 to 146 of the paper book, passed by Land Acquisition Collector where it has been categorically mentioned that the award classified the land as "Chahi" which means irrigated land. The award also mentioned that there were tubewells and trees and the land was under Kharif crop and farmers have requested for permission to harvest the crop after ripening or allowing them due compensation for the same and the Land Acquisition Collector has allowed the owners for harvesting of the crop. He also referred to Form 'D' issued by Land Acquisition Officer which is issued in the case of compulsory acquisition of land which itself goes to show that it was agricultural land only. This Form 'D' issued by LAO has been signed by him and Patwari and Kanungo certifying that it was an agricultural land. He also referred to copy of jamabandi at pages 73 to 75 of the paper book which clearl....
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....of 50% in the revised return and accordingly, in the return of income, the assessee has shown income on this amount of interest at Rs.1,70,83,650/-. Later on, during the course of assessment proceedings, the assessee claimed that this interest is not taxable at all, because such interest is enhanced income u/s 28 of the Land Acquisition Act and, therefore, it partakes the character of compensation which is held to be not taxable by Hon'ble Supreme Court in the case of CIT vs. Ghanshyam HUF and in the case of UOI vs. Hari Singh (supra). Ld. AO however held that the same is taxable. In the appeal filed before the first appellate authority, NAFC, the first appellate authority changed the entire nature of controversy and held that the amount on which compensation was awarded itself was not an agricultural land and, therefore, assessee is not entitled for any exemption u/s 10(37) of the Act which was brought into the statute to safeguard the interests of the farmers by the State Government under schemes of compulsory acquisition. 11. First of all, we will deal with the contention raised by the ld. DR for the Revenue that whether interest awarded u/s 28 of the Land Acquisition Act is pa....
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....ption under the appropriate provision the revenue receipt is exigible to tax. It held that interest received as income on the delayed payment of the compensation determined under the provisions of the land acquisition act is a taxable event and therefore it is a revenue receipt exigible to tax u/s 4. iii. The Hon'ble court held that the controversy was decided greatly in the case of Dr sham Lal Narula versus CIT (1964) 53 ITR 151 [ another three judges bench of Hon SC] wherein the definition of the interest was considered. It was held that when the title has passed on to the state any statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if here the use of the money or the losses suffered because he had not that use it cannot be held to be as damages or compensation. The court in that case held that the interest paid u] s 34 of the act is interest paid for the delayed payment of compensation and therefore it is a revenue receipt liable to tax under the income tax act. iv. The court also considered several decisions of the Hon'ble Supreme Court in case of 66 ITR 465, 181 ITR 400 & 181 ITR 408. ....
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....ntroduced u/s 57 (iv) providing for deduction of a sum equal to the 50% of the income chargeable to tax under the above provision. The provisions of Section 145A (B) was also introduced providing that interest received by the assessee shall be deemed to be the income of the year in which it is received. Subsequently with retrospective effect from 1.4.2017 The Finance Act 2018 provided that income by way of interest received on compensation or enhanced compensation is chargeable to tax as income from other sources Under the provisions of Section 56 (2) (viii) of the act. 17. Hon'ble High Court of Punjab and Haryana has taken a consistent view that interest received on delayed payment of compensation under either Section 28 or u/s 34 is taxable as income from other sources in the year of the receipt under the act. Such view was after considering the order of the Hon'ble Supreme Court in Dr Shyam Lal Narula, Bikram Singh, (supra). In the cases of Puneet Singh versus CIT (2019) 110 taxmann.com 16 and Manjeet Singh HUF versus Union of India (2016) 65 taxmann.com 160, wherein similar issue was involved, in those decisions the interest received u/s 28 of the land acquisition act was in q....
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....able to tax as interest but is part of compensation. However, in the latest decision of Hon'ble Punjab & Haryana High Court in the case Mahindra Pal Narang vs. CBDT (2020) 423 ITR 13 dated 19/2/2020 wherein the Hon'ble High Court considered the provisions of Section 10 (37), 56 (2) (viii), 57 (iv), 145A (b) of the income tax act. It rejected the reliance by the assessee on the decision of Hon'ble Supreme Court in Ghanshyam HUF. It further rejected the reliance by the assessee on the decision of the Hon'ble Gujarat High Court in Movaliya's case holding that the Hon'ble Gujarat High Court did not read properly the paragraph number 46.3 of the circular number 5 of 2010 where all interest received on compensation or on enhanced compensation shall be assessed as income from other sources in the year in which it is received. It further held that in view of the amendment to the provisions of the income tax act decision of the Hon'ble Supreme Court in the case of Ghanshyam does not come to the rescue of the assessee. It further held that the language of the income tax act with respect to the chargeability of interest as income is plain, simple and unambiguous and therefore no scope of ....