TMI Blog2018 (2) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... M AND SHRI VIKAS AWASTHY, JM For The Assessee : NONE For The Revenue : Shri Achal Sharma ORDER PER VIKAS AWASTHY, JM : This appeal has been filed by the assessee assailing the order of Commissioner of Income Tax (Appeals)-2, Aurangabad dated 04-12-2015 for the assessment year 2011-12. 2. The notice of appeal was issued to the assessee on 12-12-2017 through RPAD for 15-01-2018. The notice was duly served on the assessee. A copy of acknowledgment card is on record. The assessee vide letter dated 08-01-2018 has conveyed that the appeal may be decided on the basis of submissions and the papers submitted along with Form No. 36. Thus, the assessee has waived his right to appear before the Tribunal. Accordingly, we proceed on to decide this appeal by the assessee on the basis of material available on record and the submissions of ld. DR. 3. The brief facts of the case as emanating from records are: The assessee is engaged in the business of trading in Coconut and is also a partner of M/s. K.D. Jadhav, Latur. The agricultural land of the assessee was acquired by the State Government for Minor Irrigation Division, Latur in the year 1993. The assessee re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of land and hence, it is not revenue receipt and not liable to tax . Therefore, finding of the CIT ( A ) may please be vacated and it may please be held that interest received u / s . 28 under LAQ is a capital receipts and not liable to tax in the case of appellant . Thus, addition may please be deleted . 2 ]. On the facts and in the prevailing circumstance of the case and in law, the Learned CIT ( A ) has grossly erred in holding that the elements of Interest received of Rs . 26,48,316 /- , on account of acquisition of Agricultural land, under the provisions of section 23 ( 1A ) 23 ( 2 ) r / w Sec . 28 of the Land Acquisition Act as per court order, is liable to tax . Therefore, addition made by the A . O may please be deleted . 3 ]. On the facts and circumstances of the case, whether the ld . CIT ( A ) was right in law and on facts in holding that Interest received under section 28 of the Land Acquisition Act, is a taxable event? 4 ]. On the facts and circumstances of the case, and with due respect to the decision relied by the CIT ( A ) , appellant would like to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts of each case . [ A ] Shri Rama Patil . He is agriculturist . His agricultural lands situated in the small village having population of 4000, was acquired under LAQ Act and he has received the following compensation . He had claimed the said compensation as exempt, because of the facts that his agricultural land was outside of the purview of definition of Capital Gain, as per provision of section 2 ( 14 ) of the I . T Act . Therefore, assessee has claimed entire compensation as exempt . Particulars Amount of Compensation Value of land as enhanced 80,60,000 As per Court Compensation for trees 5,78,182 Solatium u / s . 23 ( 2 ) 25,91,454 Component u / s . 23 ( 1A ) 35,41,655 Total 1,47,71,291 Less : Com as per original award . 25,38,882 Balance 1,22,32,409 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LAQ 5,00,00,000 The Assessing Officer has noted the relevant facts that the said land is situated in the small village having population of 4000 only . A . O has examined the correctness of the claim of the Mr . Gopal Kasat regarding the said compensation is not liable to tax as the said land is outside of the purview of capital assets ( Sec . 2 ( 14 )). However, on further verification A . O noted that the intention of the assessee to purchase the said lands is only to earn the profit and not to cultivate the land and hence, A . O treated the entire Compensation amount as a adventure nature of trade invoking the provision of section 2 ( 13 ) of the I T Act and taxed entire compensation as business income . On the similar facts as noted above, compensation was taxed u / s . 2 ( 13 ) of the I T Act, as a business income, in the decision in the case of Gopal Kasat and others of the High Court of Judicature at Bombay, Aurangabad Bench, Aurangabad . Copy of the decision is enclosed herewith . [ Ann - A ] [ C ] Shri . Tukaram Patil He is agriculturist . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 1894 Act, is based on the full value of property as on date of notification under Section 4 of that Act . When the Court / Tribunal directs payment of enhanced compensation under Section 23 ( 1A ) or Section 23 ( 2 ) or under Section 28 of the 1894 Act, it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification . In the aforesaid judgment, the Apex Court has also held that the 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 . However, in the present case, we are not concerned with the interest under Section 34 of the Land Acquisition Act . We are only concerned with the interest under Section 28 which is payable on excess amount of compensation over and above what is awarded by the Collector . The Apex Court has held that the enhanced compensation, including interest under Section 28, becomes payable at different stages, the receipt of such enhanced compensation / consideration is to be taxed in the year of receipt s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order ) , as compensation . However, A . O merely disputed the compensation awarded u / s . 28 of the I . T . Act . 4 ] Therefore, we have to consider the following decisions on the issue involved in the case of appellant . The Hon Supreme Court decisions in the cases of : ( 1 ) Bikram Singh Vs Land Acquisition Collector ( 1977 ) 224 ITR 551 ( SC ) ; ( 2 ) Commissioner of Income Tax Vs . Ghanshyam ( HUF ) (( 2009 ) 26 DTR ( SC ) 129 ) The Hon Jurisdictional Bombay High Court's decision in the cases of : ( 1 ) The Dy CIT Vs Gopal Kast and others Tax Appeal No 3 of 2009 dt . 5 - 11 - 2009; ( 2 ) Balasaheb R Bidwe and others Tax Appeal No . 5401 of 2013 dt . 27 . 08 . 2013 The Copies of the above decisions are filed on records . Further, with due respect of the all the above decision, appellant would like to submit again that the decision in the case of CIT Vs Ghanshyam ( HUF ) ( 2009 ) 315 ITR - 1 ( SC ) , dt . 16 - 07 - 2009, logically as well as with reference to the scheme of the provision of Sections 23, 23 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of tax on interest segment as well, it is not permissible. The ld. DR pointed that as per provisions of section 56(1)(viii) income received by way of interest on compensation or enhanced compensation is liable to be taxed as income from other sources. The ld. DR further placed reliance on the decision of Hon ble Supreme Court of India in the case of Bikram Singh Ors. Vs. Land Acquisition Collector Ors. (supra). 7. We have heard the submissions made by the ld. DR and have perused the material available on record. The assessee in appeal has raised 5 grounds. All the grounds are directed towards the solitary issue whether interest received by assessee on compulsory acquisition of land is taxable under the provisions of Income Tax Act. A perusal of grounds of appeal indicate that the assessee has been awarded interest under the provisions of section 23(1A) and 23(2) r.w.s. 28 of the L.A. Act. The assessee has claimed that interest received by assessee u/s. 23(1A) and 23(2) of the L.A. Act is not exigible to Income Tax Act. A perusal of assessment order shows that the Assessing Officer has rejected the claim of assessee and has assessed the interest income received by asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the land . Sub - s . ( 1A ) of s . 23 was introduced by Land Acquisition ( Amendment ) Act, 1984 . It provides that in every case the Court shall award an amount as additional compensation @ 12 per cent per annum on the market value of the land for the period commencing on and from the date of publication of the notification under s . 4 ( 1 ) to the date of the award of the Collector or to the date of taking possession of the land, whichever is earlier . In other words sub - s . ( 1A ) of s . 23 provides for additional compensation . The said sub - section takes care of increase in the value @ 12 per cent per annum . 23 . In addition to the market value of the land, as above provided, the Court shall in every case award a sum of 30 per cent on such market value, in consideration of the compulsory nature of acquisition . This is under s . 23 ( 2 ) of the 1894 Act . In short, s . 23 ( 2 ) talks about solatium . Award of solatium is mandatory . Similarly, payment of additional amount under s . 23 ( 1A ) is mandatory . The award of interest under s . 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in terms it talks of compensation or the sum equivalent thereto . Thus, interest awardable under s . 28, would include within its ambit both the market value and the statutory solatium . It would be thus evident that even the provisions of s . 28 authorise the grant of interest on solatium as well . Thus solatium means an integral part of compensation, interest would be payable on it . Sec . 34 postulates award of interest at 9 per cent per annum from the date of taking possession only until it is paid or deposited . It is a mandatory provision . Basically s . 34 provides for payment of interest for delayed payment . [ Emphasized by us ] A perusal of the above extract of the judgment indicate that the interest awarded u/s. 23(1A) and 23(2) r.w.s. 28 of the L.A. Act is in the nature of solitium and an integral part of compensation. It is an admitted position that the receipt of compensation awarded under L.A. Act is a capital receipt. Whereas, interest awarded u/s. 34 of the L.A. Act is on account of delayed payment of compensation and is revenue receipt. Thus, the payment of interest u/s. 23(1A) and 23(2) of the L.A. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orms part of enhanced compensation under s . 45 ( 5 )( b ) of the 1961 Act . Thus, it is unambiguously clear that interest received on compulsory acquisition of land u/s. 23(1A) and 23(2) r.w.s. 28 and interest received u/s. 34 of the L.A. Act are on different pedestal and both the interest cannot be equated for tax purpose. 10. The Commissioner of Income Tax (Appeals) while confirming the order of Assessing Officer has observed that the case of assessee is covered by the decision of Hon ble Apex Court in the case of Bikram Singh Ors. Vs. Land Acquisition Collector Ors. (supra) as the said judgment is delivered by Larger Bench and prevails over the decision rendered in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) which is though subsequent in time but is rendered by Division Bench. We do not concur with the findings of Commissioner of Income Tax (Appeals) to make the addition. Undisputedly, while rendering the decision in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) the judgment of Larger Bench in the case of Bikram Singh Ors. Vs. Land Acquisition Collector Ors. (supra) was not considered. However, we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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