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2015 (12) TMI 1032 - PUNJAB & HARYANA HIGH COURT

2015 (12) TMI 1032 - PUNJAB & HARYANA HIGH COURT - TMI - Refund of TDS in respect of the amount received on account of interest awarded under Section 28 on acquisition of the agricultural land - Held that:- On enhanced amount of compensation in respect of the acquired land falls for taxation under Section 56 of the Act as "income from other sources" and is exigible to tax in the year of receipt under cash system of accountancy. It had also been observed that where the assessee is not maintaining .....

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by the payer. See Sarti v. Haryana State Industrial and Infrastructure Development Corporation Ltd. and others [2011 (5) TMI 939 - PUNJAB AND HARYANA HIGH COURT]

In view of the above, the tax at source has been rightly deducted and the petitioners can claim the refund, if any, admissible to them by filing the income tax returns in accordance with law. - Decided against assessee - CWP No. 20014 of 2015 - Dated:- 21-9-2015 - Ajay Kumar Mittal And Ramendra Jain, JJ. For the Appellant : .....

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compensation of their acquired land. 2. Put shortly, the facts necessary for adjudication of the present petition as narrated therein may be noticed. The petitioners along with respondents No.6 to 8 and 9 to 23 were owners in possession of the agricultural land to the extent of 1/3rd and 2/3rd share, respectively. State of Haryana vide notification dated 12.2.2008 issued under Section 4 of the Land Acquisition Act, 1894 (in short "the Act") followed by notification dated 11.2.2009 unde .....

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with respondent No.5 vide FDR dated 8.6.2011 (Annexure P-1). The reference court vide award dated 13.3.2014 (Annexure P-2) held that respondents No.9 to 23 were not entitled to any apportionment of the award money. The reference court vide order dated 21.10.2014 (Annexure P-3) ordered for release of the FDR, Annexure P-1, in favour of the petitioners. Respondent No.5 while making the payment to the petitioners deducted TDS amounting to ₹ 6,65,250/- and issued the certificates dated 21.1.2 .....

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ty v. Mandir Nar Singh Puri and others, CR No. 7953 of 2013 decided on 21.12.2013 (Annexure P-10). 4. After hearing the learned counsel for the petitioners, we do not find any merit in the writ petition. 5. Section 4 of the Income Tax Act, 1961 (hereinafter referred to as the "1961 Act") provides for the basis of charge on the income of the assessee whereas the tax levied is collected either by way of tax deducted at source or by direct payment by the assessee. Tax deducted at source i .....

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to the Central Government is to be treated as payment on behalf of the assessee. In other words, the TDS is provisional collection of tax by the revenue and is always subject to final determination at the time of filing of the return. The petitioners had received the amount of enhanced compensation and interest thereon. A perusal of TDS certificates appended by the petitioners clearly shows that tax has been deducted under Section 194A of the Act which relates to interest other than "intere .....

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t received by an assessee on compensation or enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received." The cumulative effect of the aforesaid amendments would be that the interest component on the amount of compensation or enhanced compensation would be exigible to tax in the year of receipt irrespective of the method of accounting being employed by the assessee. 7. Adverting to the judgment of the Apex Court in Ghanshyam's case (s .....

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the subject, inevitably, reference is made to the judgment by the three Judges bench of the Supreme Court in the case of Dr. Shamlal Narula v. CIT, [1964] 53 ITR 151, which had considered the issue regarding award of interest under the 1894 Act. Interest under Section 28 of the 1894 Act was considered akin to interest under Section 34 thereof as both were held to be on account of keeping back the amount payable to the owner and did not form part of compensation or damages for the loss of the ri .....

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mpensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner." The principle of Dr.Shamlal Narula's case (supra) had subsequently been applied by three Judges Bench of the Apex Court in a later decision in T.N.K.Govindaraju Chetty v. CIT, (1967) 66 ITR 465. 13. Further Section 2(28A) of the Act defines "interest" and was inserted by Finance Act, 1976 to be effective from 1.6.197 .....

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9; for the purposes of the Act. 14. Another three Judges bench of the Apex Court in Bikram Singh vs. Land Acquisition Collector, (1997) 224 ITR 551 following Dr. Shamlal Narula's case (supra) and taking into consideration definition of "interest" in Section 2(28A) of the Act had recorded that interest under Section 28 of the 1894 Act was a revenue receipt and is taxable. It was held as under:- "The controversy is no longer res integra. This question was considered elaborately .....

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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 possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under t .....

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inition of "interest" in Section 2(28A) interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. It is seen that the word "interest" for the purpose of the Act was interpreted by the inclusive defini .....

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sistently 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 of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definit .....

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hat element of interest awarded by the court on enhanced amount of compensation under Section 28 of the 1894 Act falls for taxation under Section 56 as 'income from other sources' in the year of receipt. 16. The reliance was placed upon following observations in Ghanshyam (HUF)'s case (supra):- "To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired .....

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ive pronouncements of the Apex Court in Dr. Sham Lal Narula, T.N.K.Govindaraja Chetty, Amarjit Singh, Sunder, Bikram Singh's cases (supra), Rama Bai vs. CIT (1990) 181 ITR 400 and K.S.Krishna Rao v. CIT, (1990) 181 ITR 408, the assessee cannot derive any benefit from the aforesaid observations quoted above." 8. Appeal carried to the Apex Court by the assessee therein by way of Special Leave to Appeal (C) No. 34642 of 2014 was dismissed by the Supreme Court on 18.12.2014 with the followi .....

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t, in Commissioner of Income Tax v. Bir Singh (HUF), ITA No. 209 of 2004 decided on 27.10.2010, it was held by the Division Bench of this Court that the interest awarded by court on enhanced compensation under Section 28 of the Act was chargeable to tax as income from other sources in the year of receipt. Division Bench of this Court again in Commissioner of Income Tax, Panchkula v. Prem Singh decided on 16.12.2010 while considering identical issue recorded as under:- "11. In this view of t .....

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