TaxTMI 
TaxTMI 
2022 (6) TMI 22
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.... assessing officer had noted that the assessee had received an amount of Rs. 1,90,51,664/- as interest on enhanced compensation. These facts were evident from the return of income filed on 27/09/2011. The assessee had not offered the interest on enhanced compensation for taxation as per the provisions of section 56(2)(viii). Accordingly, the assessing officer had issued the notice u/s. 147 as he had reasons to believe that income had escaped assessment. In assessment proceedings, the assessee had made submissions as to why the interest component of enhanced compensation is not taxable. The assessing officer did not accept the contentions raised by the assessee. The assessing officer referred to the provisions of section 56(2)(viii) and Section 145A of the Act and held that the legislative intent behind the amendments is to tax the interest received on compensation or enhanced compensation in the year of receipt of the interest. He then referred to the provisions of section 57(iv) of the Act whereby a deduction of 50% of such income is allowed to the assessee in respect of income received u/s. 56(2)(viii) of the Act. In view of the above, the assessing officer held that interest rec....
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.... the submissions made by the assessee and the facts of this case I find that this case is squarely covered by the decision in the case of Bikram Singh Vs. Land Acquisition Collector [1997] 224 ITR 551 (SC). The Hon'ble Supreme Court held: "7. Relying upon these three provisions, it is contended that the definition of 'interest' is confined only to money-lending business between debtor and the creditor and if the creditor receives any amount by way of interest from the debtor, it is in the nature of a receipt of income on a charge paid in respect of money borrowed or in respect of the credit facility given which have been utilised and, therefore, the definition would be applicable only when the money is lent by a creditor and received by the debtor. Then only interest is chargeable to income-tax. When interest is paid either under section 34 or section 28 of the Land Acquisition Act, it is only a payment in consideration of loss of enjoyment of the possession by the owner. It is not by way of any charge on compensation determined under section 23(1). Therefore, it is not exigible to income-tax. We find no force in the contention. 8. The controversy is n....
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....immovable property under the Acquisition Act would not be exigible to income-tax? It is seen that this Court has 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 of the Act, the revenue receipt is exigible to tax. The amendment is 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 section 28 or 31 of the Land Acquisition Act is a taxable event. Therefore, we hold that it is a revenue receipt exigible to tax u/s. c of the Act. Section 194A has no application for the purpose of this case as it encompasses deduction of the income at the source. However, the appellants are entitled to spread over the income for the period for which payment came to be made so as to compute the income for assessing tax for the relevant accounting year."....
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.... not and, in such a situation is it taxable under the provisions of the Act. 8. It would be apposite to quote herein below Sections 28 and 34 of 1894 Act which read thus:- 28. Collector may be directed to pay interest on excess compensation.- If the sum which, in the opinion of the court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of [nine per centum] per annum from the date on which he took possession of the land to the date of payment of such excess into Court." "34. Payment of interest- When the amount of such 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 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 J period of one year from the date on which possession is taken, interest at the rate of....
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....h the market value and the statutory solatium. It would be thus evident that the provisions of Section 28 in terms warrant and authorize the grant of interest on, solatium as well." 12. Adverting to the case law on the subject, inevitably, reference is made to the judgment by the three Judges bench of the Supreme Court in the case of Dr. Shamlal Narula v. CIT [1964] 53 ITR 151, which had considered the issue regarding award of' interest under the 1894 Act. Interest under Section 28 of the 1984 Act was considered akin to interest under Section 34 thereof as both were held to be on account of keeping back the amount payable to the owner and did not form part of compensation or damages for the loss of the right to retain possession. It was noticed as under:- "As we have pointed out earlier, as soon 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 unde....
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.... is interest paid for the delayed payment of the compensation amount.uid(sic), therefore, is a revenue receipt liable to tax under the Income-tax Act." This position of law has been consistently reiterated by this Court in the case of TMK Covirularaju Chetty v. Commissioner of Income-tax, Madras [66 ITR 465], Rama Rai & Ors. v. CIT, Andhra Pradesh [181 ITR 400] and K.S. Krishna Rao v. en: A.P. [181 ITR 408]. Thus by a catena of judicial pronouncements, it is settled law that the interest received on delayed payment of the compensation is (sic);l revenue receipt eligible to income tax. It is true that in amending the definition of "interest" in Section 2(28A) interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. It is seen 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 o....