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2021 (2) TMI 271 - AT - Income TaxAddition u/s.56(2)(viii) - interest for delayed payment of compensation under the Land Acquisition Act - assessee has claimed exempt from tax towards interest received on compensation for compulsory acquisition of land on the ground that as per new Land Acquisition RFCTLARR Act 2013, the provisions of Section 96 overrides all provisions of Income Tax relating to taxation of compensation or any award payable under the Act and consequently interest if any received towards delayed payment of compensation is exempt from tax - HELD THAT:- Taxability of compensation received on compulsory acquisition of land, especially this relating to acquisition of non-agricultural land, a clarification has been issued by way of Circular No.36 of 2016 and clarified that compensation received in respect of award or agreement which has been exempted from levy of Income Tax vide section 96 of RFCTLARR Act 2013, shall also not to be taxable under the provisions of IT Act, even there is no specific provision of exemption for such compensation in IT Act. Further, the benefit of exemption from Income Tax in respect of the amounts paid under new Land Acquisition Act, 2013 pursuant to Circular No.36 of 2016 was inserted by way of a clarification amendment by Finance Act, 2017 in Section 10(37) and Section 194LA of IT Act. Second proviso was inserted to Section 194LA of the IT Act, which states that no deduction shall be made under this section, where such payment is made in respect of any award or agreement which has been exempted from levy of income tax u/s.96 of RFCTLARR Act 2013. From the above, it is very that TDS is also not required to be deducted in respect of amount paid under new Land Acquisition Act. It may be noted that the Special Land Acquisition Officer has deducted tax u/s.194LA of IT Act, which makes it clear that the amounts paid are in the nature of compensation and hence it is exempt from the purview of Income Tax. Though tax was not required to be deducted at source, the Special Land Acquisition Officer had deducted TDS by way of abundant caution in the absence of corresponding enactment under income tax, which was not made under this juncture. But, in our view, i It does not make any difference with regard to non-taxability of compensation or award including interest if any payable under the new Land Acquisition Act, 2013. Therefore, we are of the considered view that the ld.AO has grossly erred in bringing to tax interest received by the assessee for delayed payment of compensation under New Land Acquisition Act for compulsory acquisition of land. we are of the considered view that interest received by the assessee towards delayed payment of compensation for compulsory acquisition of land is akin to compensation for compulsory acquisition of land, which is exempt from Income Tax by virtue of Section 96 of RFCTLARR Act 2013. The ld.CIT(A) after considering relevant facts has rightly deleted additions made by the AO towards interest u/s.56(2)(viii) of the IT Act. There is no error in the finding recorded by the ld.CIT(A) and hence, we are inclined to uphold the order of the CIT(A) and dismiss the appeal filed by the Revenue.
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