TaxTMI 
TaxTMI 
2023 (1) TMI 1218
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....that interest received on compensation is not income." 4. Brief facts of the case are that the assessee filed the return of income declaring total income of Rs.3,26,91,026/- received from LAO as interest being claimed as exempt u/s 10(37) of the Income Tax Act, 1961. The assessee was owner of agricultural land and the same was taken under compulsory acquisition by Government of Haryana. The assessee claimed the entire enhanced compensation inclusive of interest as residual part of compulsory acquisition of agricultural land and claimed it as exempted u/s 10(37). However, the AO did not accept the contention of the assessee and held that the interest income as taxable income under the head "income from other sources u/s 56(2)(viii) of the Act. The ld. CIT (A), relying on the order of the Hon'ble Supreme Court in the case of Bikram Singh & others Vs Land Acquisition Collector 224 ITR 551 and wherein it was held that interest received on compensation/enhanced compensation u/s 28 and 34 of the Land Acquisition Act are revenue receipts. The ratio of the judgment relied upon by the ld. CIT (A) is as under: "The contention that the definition of 'interest' in section 2....
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....ed, the assessee filed appeal before the ITAT. 7. During the arguments before us, the ld. AR argued that the issue before us stands covered by the orders of the higher Courts, Coordinate Benches mentioned under: Supreme Court • CIT vs. Ghanshyam (HUF) 315 ITR 1 (SC) (dated 16.7.2009) • CIT vs. Govindbhai Mamaiya 367 ITR 498(SC) (dated 4.9.2014) • CIT vs. Chet Ram (HUF) in C.A. No. 13053/2017 (dated 12.9.2017) • UOI vs. Hari Singh and ors. In C.A. No. 15041/2017 (dated 15.9.2017) • ITO v. Muktanandgiri Maheshgiri in C.A. No. 18475/2017 (dated 10.11.2017) Punjab & Haryana • Risal Singh Vs Union of India 321 ITR 251 (P&H)  HUDA vs Mandir Nar Singh Puri & Others in CR No. 7953 of 2013 dated 24.12.2013 • Ajay Kumar Vs State of Haryana & Others CR No. 3236 of 2014 dated 08.05.2014 • Haryana State Industrial Development Corporation Ltd. Vs Savitri and Another • The New India Assurance Co. Ltd. Vs Savitri Devi and Another in CR No. 6784/2016 dated 04.04.2018 • CIT Vs Vaibhav Choudhary in ITA No. 160/2015 dated 14.07.2015 â€....
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....under sect ion 45(5) of the income Tax Act and the transferred land being rural agricultural land exempt from capital Gains tax u/s 10(37) of the Income Tax Act, 1961. Subsequently, from the perusal of the computation of income attached with the return of income f i led by the assessee for assessment year 2009-10, the Assessing Officer observed that w.e.f. assessment year 2010-11 the interest received on enhanced compensation was taxable in the year of receipt as per the provisions of sect ion 145A(b) of the Act. However, prior to assessment year 2010-11 interest received on compensation/enhanced compensation was taxable on proportionate basis for the each year in view of the decision of the Hon'ble Supreme Court rendered in the case of Rama Bai Vs. CIT dated 8.11.1989 reported in 181 ITR 400 (SC). The Assessing Officer, therefore, reopened the assessment proceedings of the assessees and applied the ratio of the decision of the Hon'ble Supreme Court in the case of Rama Bai (supra) and held that the interest received by the assessees on the enhanced compensation was to be proportionately al located to different assessment years as having accrued year after year from....
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.... dated 2.2.2016 of the Hon'ble Punjab & Haryana High Court in the case of Jagmal & Another Vs. state of Haryana & Another in RA-CR NO.46 C11 of 2014 in CR No.7740 of 2012, whereby the Hon'ble High Court had recalled its earlier order and held that the interest of the additional award was taxable under u/s 56(2) (viii) r.w.s.57(iv) of the Act. 9. The Ld.CIT(Appeals) considering the aforesaid decisions and also the decision of the Hon'ble Punjab & Haryana High Court in the case of Sunder Lal & Another Vs. Union of India & Others in CWP No.20014 of 2015, order dated 21.9.2015 and also in the case of CIT Vs. Bir Singh (HUF) in ITA No.209 of 2004, etc. held that in the light of the above decisions, the mistake apparent on record had occurred in his order while allowing the appeal of the assessees while relying upon the decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra). He, therefore, vide the impugned order passed u/s 154 of the Act held that the interest received by the assessee on enhanced compensation on account of acquisi t ion of land was taxable as 'income from other sources'. He, therefore, confirmed the additions made by the As....
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....xed on the basis of apportionment for each year from the date of acquisition of lands till the receipt of the compensation in the light of the decision of the Hon'ble Supreme Court in the case of Rama Bai (supra); the second issue involved is as to whether the interest awarded u/s 28 of the Land Acquisition Act on enhanced compensation is to be treated as part of the enhanced compensation and will not be taxable separately as interest income under the Head 'income from other sources'? 14. We find that both these issues are covered by the aforesaid decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) holding the same to be in the nature of compensation itself. The Court also deal t with the other aspect namely, the year of tax and answered this quest ion by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which i t is received. The said findings given in the case of Ghanshyam (HUF) (supra) have been reiterated by the Hon'ble Supreme Court in the case of Govindbhai Mamaiya (supra) observing as under: "In so far as the second question is concerned, that is also covered by another judgm....
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....t of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a 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 converse position i.e. spread over of this interest on accrual basis is not permissible." 15. The Ld. counsel for assessee has further brought our at tent ion the latest decision of the Hon'ble Supreme Court in the case of CIT Vs. Chet Ram (HUF) dated 12.9.2017 in Civil Appeal No.13053/2017 wherein also the Hon'ble Supreme Court has again reiterated the proposition laid down in the case of Ghanshyam (HUF) (supra), which we find has been further reiterated in the case of Union of India vs. Hari Singh & others in Civi l Appeal No. 1504 of 2017 dated 15.9.2017, as under: "(2) While determining as to whether the co....
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....e what is awarded by the Collector. It includes additional amount under section 23(1A) and solatium under section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the Court after reference under section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award. It is true that "interest" is not compensation. It is equally true that section 45(5) of the 1961 Act, refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act, which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under section 28 unlike interest under section 34 is an accretion to the value, hence 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 ....