2022 (5) TMI 1026

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....sessee has contested the addition of Rs.1,14,17,198/-, being the amount of interest received on compensation/enhanced compensation u/s.28 of the Land Acquisition Act. During the course of appellate proceedings the assessee stated that whatever interest has been received by the assessee u/s.28 of the Land Acquisition Act is nothing but part of enhanced value of land which is exempt from tax as per the decision given by the Honourable Supreme Court in the case of CIT Vs. Ghanshyamdas (HUF) and by the Honourable Himachal Pradesh High Court in the case of CIT Vs. Keshawadevi. It was stated that the decision of the Honourable Supreme Court in the case of CIT Vs. Ghanshyamdas (HUF) was decided on 16/07/2009 which is after the Finance Act 2009. The main issue decided by this judgement is whether the additional amount u/s.23(1A), solatium u/s.23(2), interest paid u/s.28 of the Land Acquisition Act is a part of compensation and only interest given u/s.34 is revenue receipt which is liable for taxation. It was stated that in view of the aforesaid decision, the assessee had claimed the entire interest amount u/s. 28 as part of compensation and the same is being exempt from tax. The assessee f....

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....refore, it is not exigible to income-tax. We find no force in the contention. 8. The controversy is no longer res integra. This question was considered elaborately by this Court in Dr.ShamlaINarulav. CIT [1964] 53 ITR 151. Therein, K. Subba Rao, J., as he then was, considered the earlier case law on the concept of "interest" laid down by the Privy Council and all other cases and had held at page 158 as under: " ... in a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use. In no sense of the term can it be described as damages or compensation for the owner's right to retain possession, for he has no right to retain possession after possession was taken under section 16 or section 17 of the Act. We, therefore, hold that the statutory interest paid under section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income-tax Act .... " (p. 158) 9. This positi....

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....iod for which payment came to be made so as to compute the income for assessing tax for the relevant accounting year." (Emphasis Mine) 7. The contention of the assessee that the decision in Ghanshyam (HUF) case (supra) being of a later date and favourable to the assessee, should be considered for the purpose of decision this appeal against the decision of the Apex Court in the case of Bikram Singh (supra), cannot be acceded to. First and foremost, the decision in Bikrarn Singh case was given by a Three Member Bench of the Hon'ble Apex Court whereas the decision in Ghamshyam (HUF) case was given by a Two Judge Bench of the Hon'ble Supreme Court. Hence, the decision given by the Larger Bench shall prevail over the decision given by the Smaller Bench, even though the same may be of a later date. The Hon'ble Aurangabad Bench of the Bombay High Court has considered this issue in Writ Petition NO.5402 of 2013, in the case of Shivajirao Dnyanoba Ghanwat Vs. State of Maharashtra and others and in Writ Petition NO.5401 of 2013 in the case of Balasaheb Raosaheb Bidwe and Others Vs. State of Maharashtra. Apart from the above two, 11 other cases on similar ground was dispo....

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....e Collector shall pay the amount awarded with interest thereon at the rate of nine per centum 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 part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of 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." 9.The award of interest under Section 28 of the 1894 Act applies when the amount originally awarded has been paid or deposited and when the Court awards excess amount. In such cases interest on that excess alone is payable. Section 28 empowers the Court to award interest on the excess amount of compensation awarded by it 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 deter....

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....oon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award he gets compensation for both the rights. Therefore, the interest awarded under s. 28 of the Act, just like under s. 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner." The principle of Dr.ShamlalNarula'scase (supra) had subsequently been applied by three Judges Bench of the Apex Court in a later decision in T.N.K. GovindarajuChettyv. CIT[1967] 66 ITR 465." 3. The learned counsel first of all invited out attention to the tribunal's order dated 01.07.2019 allowing the instant appeal followed by the Revenue's miscellaneous application MA No. 42/Pun/2020 which has accepted on 20.08.2021 in the latter's favour. Mr. Shah thereafter submitted that the interest income in issue is not taxable going by the hon'ble apex court decision in CIT vs. Ghanshyamdas (HUF) 315 ITR 1 (SC) r.w.....