TMI Blog2023 (1) TMI 1218X X X X Extracts X X X X X X X X Extracts X X X X ..... The interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable. Appeals of the assessees are allowed. - ITA No. 1391/Del/2017 And ITA No. 1389/Del/2017 - - - Dated:- 25-1-2023 - Dr. B. R. R. Kumar, Accountant Member And Sh. Yogesh Kumar US, Judicial Member For the Assessee : Sh. Aditya Srinivasan, CA And Sh. Rishabh Kanojia, CA For the Revenue : Sh. K. K. Mishra, Sr. DR ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: The present appeals have been filed by the assessees against the orders of ld. CIT(A), Karnal dated 06.01.2017. 2. Since, the issues involved in both the appeals are identical, they were heard together and being adjudicated by a common order. 3. In ITA No. 1391/Del/2017, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised. 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 or payable in any manner in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would be deemed interest. But the question is: whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would be exigible to income-tax? The Court had 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, the revenue receipt is exigible to tax. The amendment was 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 provisions of the Land Acquisition Act is a taxable event. Therefore, it is a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur 96 taxmann.com 541 dated 20.07.2018 Pune Bench Dnyanoba Shajirao Jadhav Vs ITO 90 Taxmann.com 285 dated 29.01.2018 8. Heard the arguments of both the parties and perused the material available on record. 9. The moot issue to determine is whether the interest on the compensation received by the assessee is in the nature of compensation exempt from tax u/s 10(37) or taxable under Section 56(2)(viii) as interest under the head income from other sources . 10. This matter has been argued at length and carefully analyzed by various judicial forums. For the sake of ready reference, the composite order titled Shri Satbir Vs. ITO, Jind in ITA No. 1413 to 1415/CHD/2016 for the A.Ys. 2007-08 to 2009-10 vide order dated 09.07.2018 is reproduced here under: 6. The brief fact relevant to the issue under consideration are that the lands of the assessees were compulsorily acquired by the HSI IDC, Sirsa/Government of Haryana in the year 2005. Subsequently the compensation was enhanced by the Court. The enhanced compensation alongwith interest thereupon u/s 28 of the Land Acquisition Act, 1894 was received by the assessees in the financial year 2008-09 releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) after considering the submissions of the assessee as well as considering the nature of compensation and interest thereupon received by the assessee, held that the issue was squarely covered by the decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) and accordingly, allowed the appeal of the assessee. 8. Subsequently the Assessing Officer moved an application for rectification of the u/s 154 of the Act before the CIT(A) pleading therein that the interest received on enhanced compensation u/s 28 of Land Acquisition Act was chargeable to tax as income from other sources u/s 56(2) (viii) r.w.s. 57(iv) of the Act in the light of the decision of the Hon'ble Punjab Haryana High Court in the case of Manjeet Singh (HUF), Karta Manjeet Singh Vs. Union of India Others in CWP No.15506 of 2013, date of decision 14.1.2014, wherein, the Hon'ble High Court has held that the interest received by the assessee u/s 28 as well as u/s 34 of the Land Acquisition Act on the additional compensation received was chargeable to tax u/s 56(2) (viii) r.w.s. 57(iv) of the Act. It was further contended that even the SLP filed in that case before the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of payment of compensation. In the case in hand, the Ld. CIT (Appeals) vide his order dated 14.3.2016 had allowed the appeal of the assessee following the decision in case of Ghanshyam (HUF) (supra), wherein it has held Interest u/s 28 of the Land Acquisition Act 1984, unlike interest u/s 34 is an accretion to the value of the land, hence it is part of enhanced compensation or consideration which is not the case with interest u/s 34A. So also additional amount u/s 23(1A) and solatium u/s 23(2) form part of enhanced compensation. 12. The Ld. CIT(A), however, subsequently, while relying upon the decision of the Hon'ble High Court in the case of Bir Singh (HUF) (supra) and Manjeet Singh (HUF) (supra) Others as noted above, recalled his orders dated 14.3.2016 and confirmed the additions made by the Assessing Officer. 13. Undisputedly, the issue involved in these appeals is regarding the taxability of interest received on enhanced compensation u/s 28 of the Land Acquisition Act, 1894. Now, there are two quest ions involved in these appeals, first issue is regarding the year of taxability of the interest income whether it has to taxed in the year of receipt in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) 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. 50. 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 (1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act. 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable. 11. Before parting, the salient features of the orders of the Hon ble Supreme Court are mentioned below: The order of the Bikram Singh Vs Land Acquisition Collector is dated 12.09.1996 Interest of any nature is taxable irrespective of its receipt. The order of Ghanshyam (HUF) is dated 16.07.2009 It is to answer the above questions that we have analysed the provisions of sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, section 23(1A) provides for additional amount. It takes care of increase in the value at the rate of 12 per cent per annum. Similarly, under section 23(2) of the 1894 Act, there is a provision for solatium which also represents part of enhanced compensation. Similarly, section 28 empowers the Court in its discretion to awar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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