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2021 (4) TMI 494 - AT - Income TaxCharacterisation of income - interest awarded u/s 28 of the Land Acquisition Act - computation of capital gain u/s 45 - assessee had received enhanced compensation of land acquisition, which included compensation and interest thereon - Assessing Office had made addition being 50% of interest u/s 56(2)(viii) r.w. Section 57(iv) - Whether interest awarded u/s 28 of Land Acquisition Act, 1894 is nothing but an accretion to the value compensation and hence it is part and parcel of compensation? - HELD THAT:- The capital receipt unless specifically taxable u/s 45 under the head capital gain, in principle, is outside the scope of income chargeable to tax and cannot be taxed as income unless it is in the nature of Revenue receipt or specifically brought within the ambit of income by way of specific provision of the Income Tax Act. Thus, the interest received on compensation to the assessee is nothing but a capital receipt and the addition is against the law. From the perusal of the order of the CIT(A), it can be seen that the CIT(A) has not given a separate finding as to why the Assessing Officer is justified in making the addition. This issue has been decided in case of Union of India Vs. Hari Singh [2017 (11) TMI 923 - SUPREME COURT] wherein it is held that on agricultural Land no tax is payable when the compensation/enhanced compensation is received by the assessee as their land were agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. The CIT(A) has not taken cognizance of the decision of the Apex Court in case of Hari Singh (supra). The ratio of the said decision is applicable in the present case. Thus, the appeal of the assessee is allowed.
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