TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 304
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....r the claim of agricultural income is correct. 2.1. In the abovesaid proceeding notices u/s 143(2) and 142(1) of the Act, was issued and duly served upon the appellant on different dates, and it was noticed that the appellant had received a sum of Rs. 13,43,02,195/- as interest on enhanced compensation from New Okhla Industrial Development Authority. The interest income which was received by the appellant, has not been declared in his return of income for the AY 2015-16. The Learned AO, made addition of Rs 6,71,51,098/- in the income of the appellant as in the head 'income from other sources". 3. In appeal, the Learned CIT(A) upheld the impugned addition and on being aggrieved with the same, the assessee before us by way of present appeal. 4. The appellant has raised the following grounds of appeal: "GROUND OF APPEAL - 1: The Ld. CIT(A) erred in upholding the decision of the Ld. AO to include an additional amount of Rs. 6,71,51,098/- in the appellant's taxable income under the head "Income from Other Sources." GROUND OF APPEAL - II: The Ld. CIT(A) failed to appreciate the factual and legal contentions raised by the appellant with res....
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....compensation / enhanced compensation under section 28 of the Land Acquisition Act, 1894, the interest components under section 28 and section 34 of the Land Acquisition Act, 1894 are different. Interest under section 28 is rightfully viewed as an integral part of the compensation amount and should not be subjected to regular income tax treatment. Also submitted that it was an agricultural land on which the compensation has been awarded by the court, and secondly, the interest received on enhanced compensation u/s 28 of the Land Acquisition Act is the part of compensation and hence is not taxable, and the appellant is entitled for exemption u/s 10(37) of the Act. 7. The Ld. AR, placed reliance on the case of CIT v. Ghanshyam (HUF) (2009) 315 ITR 1(SC)., and also, placed the reliance on the various decisions of Co-ordinate Bench of ITAT Delhi, which are reproduced as under: * ITO, Ward 2. vs. Hari Singh Saini ITA No.1539/Del/2020 & CO No.164/Del/2022 * ITO vs Girish Kumar - I.Τ.Α. No. 5084/DEL/2019 * Pranav Saran vs ACIT, Circle 32 - ITA No.499/Del./2021 * Ram Kishan vs ITO, Ward 60-ITA No. 5391/Del/2017 * Virendr Rathee vs IT....
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....gricultural land is compulsorily acquired, and the compensation qualifies for exemption. Since the Appellant's land was agricultural in nature and compulsorily acquired, no capital gains arise U/s 45 of the Act, rendering it inapplicable to the present case. Also submitted that the Section 56(2)(viii) of the Act relates to income chargeable under the head "Income from Other Sources." However, this provision does not apply to compensation or consideration for the compulsory acquisition of agricultural land that qualifies for exemption U/s 10(37) of the Act. The order of the Ld. AO to tax the compensation U/s 56(2)(viii) of the Act is, therefore, misplaced and contrary to law. As in the present case, the Compensation amount was finally determined in February 2014 by the Judgment of the Hon'ble Supreme Court, though the acquisition was made in 1990 and it was paid to the assessee in June 2014, all the more it was the interest on the amount of the compensation which was determined at the later stage, not at the time of the acquisition which was awarded by the Court order or otherwise at a later stage. 10.1. The Learned AR also contended that despite the explicit exemption U/....
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....yment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under Section 34. 10.5. The Learned AR submits that delays in the determination of compensation at various stages coupled with delayed actual payment to the landowners are common phenomena and, therefore, payment of interest gives a healing touch, which partially recompenses the decline of the intrinsic worth of money and for such reasons, the interest received U/s 28 of the LA Act must be excluded from the taxable income, as it doesn't constitutes a capital receipt forming part of the enhanced compensation and the appellant is entitled to exemption/s 10(37) of the Act. 10.6 The Learned AR also submitted that Para 5.7 of the impugned order, erroneously relied on the decision of the Hon'ble Punjab & Haryana High Court in Mahender Pal Narang v. CBDT [2020] 423 ITR 13, as this decision failed to ful....
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.... in the provisions of Sections 145B, 56(2)(viii) and 57(iv) Act vide which interest received on compensation and enhanced compensation has been made taxable as 'income from other sources', and if that be so then the question of the provisions of Section 10(37) of the Act for exemption of interest awarded under section 28 of the Land Acquisition Act from taxability would not come into play inasmuch as such interest is taxable as per the judgment of the Larger Benches of the Hon'ble Supreme Court in Dr. Shamlal Narula case etc., being not a part of compensation and even otherwise interest component of compensation received under section 28 being not expressly exempted there under. Had the intention of the Legislature been to exempt the interest on compensation or enhanced compensation under section 10(37) of the Act, then a provision would have been engrafted there under in view of the pronouncement earlier thereto rendered by the Hon'ble Supreme Court in Ghanshyam's case(supra), more so when the provisions of Section 56(2) (viii) were introduced in the Act providing there under that interest of compensation or enhanced compensation would be taxable as income from oth....
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....h Court correctly observed that the Finance Act, 2009 amendments could not override the nature of Section 28 interest as compensatory. Moreover, while interpreting the interest received by the assessee, the AO and the CIT(A) should have also considered the placement of Sections 28 and 34 within the framework of the LA Act. Section 28 is placed in Part III of the Act, which is titled "Reference to Court and Procedure Thereon," while Section 34 is placed in Chapter V, titled "Payment." The placement and the headings of these chapters reflect the legislative intent. Section 28 deals with the interest awarded by the court on enhanced compensation, which is inherently linked to the process of adjudicating and determining fair compensation. Conversely, Section 34 pertains to interest awarded purely for delay in payment, a separate context entirely. The placement of Section 28 in the procedural part of the Act indicates the legislature's intent to treat interest under this section as part of the original compensation, whereas interest under Section 34 is treated as independent income. Had the legislature intended to treat interest under section 28 as taxable income distinct from compe....
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....details, TDS of Rs. 1,34,30,221/-was deducted by the NOIDA Authority on the aforesaid interest. Out of the total interest income of Rs. 13,43,02,195/-, 50% which is computed as Rs. 6,71,51,098/-is taxable as per the provision of the Income Tax Act, 1961 (as discussed in para 5(i) & (ii) above). The assessee has not shown the above income in his ITR and claimed refund of Rs. 1,34,19,430/-. Hence, an addition of Rs. 6,71,51,098/- is made in the income of the assessee in the head Income from Other Sources. Since, the assessee has furnished inaccurate particulars of his income and the assessee has concealed the above income, penalty proceedings u/s 271(1)(c) is being initiated separately. 14. While deciding the appeal, the Learned CIT(A) observed that the action of the Learned AO in treating the interest income of Rs 13,43,02,195/- as assessed u/s 56(2)(viii) of the Act deserves to be upheld, relevant extract thereof as under: "5.1 During the course of assessment proceedings, it was found that the appellant received an amount of Rs. 13,43,02,195/- as interest on enhanced compensation from New Okhla Industrial Development Authority (NOIDA). As the same was not declared in th....
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....Tax Act, 1961 and any amount received as compensation/enhanced compensation u/s 28 or Sec. 28A of the Land Compensation Act was attributable to the land sale. value and hence exempt u/s 10(37) of the Income Tax Act 1961. The appellant maintained that even though it was named as interest, actually it was in the nature of compensation/enhanced compensation to be treated as principle amount in line with Section 28 of the Land Compensation Act and not as interest on delayed payment u/s 34 of the said Act. In reliance of its claim that this income is to be treated as exempt being in the nature of principle amount, the appellant relied mainly on the Hon'ble Supreme Court's decision in the case of CIT vs. Ghanshyam (HUF). The appellant also relied on various other case laws detailed in para 4 above. 5.5 Section 56(2) (viii) of the I.T. Act was introduced w.e.f. A.Y. 2010-11. The wordings of the section are clear and it is reproduced as below: "Income by way of interest received on compensation or enhanced compensation referred to in Clause(b) of Section 145A" Clause (b) of Section 145A is reproduced below: "Interest received by appellan....
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.... (viii). The Hon'ble High Court of Punjab & Haryana in the case of Mahendar pal Narang vs CBDT, New Delhi has distinguished the decision of Hon'ble Supreme Court in the case of CIT vs Ghanshyam (HUF) and held that the said decision does not come to the rescue of the petitioner as amendments have taken place in various sections of the Act after the said decision. The facts are identical to the facts of the appellant's case, hence the Supreme Court decision is no longer applicable in view of the amendments in the Act. It is worthwhile to mention that the SLP filed by the appellant in the case of Mahendar pal Narang has been dismissed by the Hon'ble Supreme Court. (126 taxmann.com 105 (SC)/2021) 5.8 With regard to reliance by the appellant on other case laws, the discussion is as follows: 1. Shri Pawan Giri HUF Vs Department of Income Tax ITA No. 405/Chd/2013 (Hon'ble ITAT, Chandigarh): The Assessment Year concerned is AY 2008-09 when section 56(2)(vii) was not in statute. It followed the Hon'ble Supreme Court decision in the case of CIT, Faridabad vs. Ghanshyam (HUF). The more relevant case law will be Hon'ble High Court of Punjab & Harya....
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....T, in ITA No.1222/Del/2023 for Assessment Year 2018-19 decided the identical issue (in which author is one of us), of which relevant extract, are reproduced as under: "24 The decisions of the coordinate benches of the ITAT relied upon by the Ld. Ld. Counsel are based upon the reasoning propounded in the case of Ghanshyam HUF (supra). The Co-ordinate benches of the ITAT had not been made aware of an earlier judgment in the case of Sham Lal Narula (supra). Hence, the decisions were in favour of the assessee and not a good law. Therefore, in view of the decision in the case of Sham Lal Narula (supra), we are of the considered opinion that the decision in the case of Ghanshyam HUF (supra) is not applicable after the substitution of Sections 145A, 145B, 56(2)(Viii) and 57(iv) by Finance (No.2) Act, 2009. In view of the above, it is evident that the interest on compensation or interest on enhanced compensation is chargeable to tax under the head "income from other sources" from 01.10.2010 onwards. Therefore, the decision of the Hon'ble Supreme Court in the case of Ghanshyam HUF (supra), which was passed in the year 2009, in our considered opinion, is not applicable in the fa....
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....hat the interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax, relevant paras of which as under: "19. At the outset, it is significant to refer to Sections 28 and 34 of the Act of 1894, which deal with the payment of interest on compensation, and read as under:- "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 deposi....
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.... "56. Income from other sources. (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head "Income from other sources", namely:- [(viii) income by way of interest received on compensation or on enhanced compensation referred to in [sub-section (1) of Section 145-B].]" 23. For the sake of clarity, Section 145-B of the Act is reproduced as under:- "[145-B. Taxability of certain income. (1) Notwithstanding anything to the contrary contained in Section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received. (2) Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. (3) The income referred to in sub-clause (xviii) of clause (24) of Section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier....
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....ecision in Sham Lal Narula (supra) was subsequently followed by the Hon'ble Supreme Court in the case of Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], wherein, it was held that interest under Section 28 of the Act of 1894 was in the nature of a revenue receipt and hence, the same was considered to be taxable. The relevant paragraphs of the said decision read as under:- "8. The controversy is no longer res integra. This question was considered elaborately by this Court in Sham Lal Narula (Dr) v. CIT [(1964) 53 ITR 151: AIR 1964 SC 1878]. 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 p. 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 p....
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....use of section 57. The said provision reads thus: "57. Deductions. The income chargeable under the head 'Income from other sources' shall be computed after making the following deductions, namely: (iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent. of such income and no deduction shall be allowed under any other clause of this section." 21. The Assessing Officer in 1. T. A. No. 132 of 2018 where the assessee had received Rs. 11,30,561 as interest income, held that the interest payment received on compensation/enhanced compensation to the tune of Rs. 5,65,280 (50 per cent. of Rs. 11,30,561) is taxable as income from other sources as per provisions of sections 56(2)(viii) read with 57(iv) and section 145A(b) of the Act for the assessment year 2010-11. The Commissioner of Income tax (Appeals) and the Tribunal had upheld the order of the Assessing Officer in that regard 22. No illegality or perversity could be pointed out by learned counsel for the assessee in the co findings of fact recorded by the authorities below which may warrant interferenc....