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Baldev Singh, Avtar Singh, Surinder Singh, Amrik Singh, Tej Kaur, Mukhtiary Devi Versus The Income Tax Officer, Ward 4, Panchkula

2016 (2) TMI 1087 - ITAT CHANDIGARH

Addition of interest on enhanced compensation - Held that:- The undisputed facts are that the assessee has received during the year enhanced compensation on compulsory acquisition of land and interest on such enhanced compensation. This is also undisputed that the interest is received by the assessee under section 28 of the Land Acquisition Act. The Assessing Officer also does not have any quarrel to exempt the principal amount of enhanced compensation under section 10(37) of the Act. The only i .....

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ITA No.313/Chd/2015, ITA No.314/Chd/2015, ITA No.315/Chd/2015, ITA No.316/Chd/2015, ITA No.317/Chd/2015, And ITA No.318/Chd/2015 - Dated:- 2-2-2016 - SHRI H.L.KARWA, VICE PRESIDENT, AND MS. RANO JAIN, ACCOUNTANT MEMBER For The Assessee : Shri Ajay Jain For The Department : Shri Jitender Kumar, DR ORDER PER RANO JAIN, A.M. : These six appeals filed by the different assesses are directed against the separate orders of learned Commissioner of Income Tax (Appeals), Panchkula all dated 29.1.2015 for .....

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A No.313/Chd/2015 : 2. Ground Nos.1 and 7 are general. 3. The learned counsel for the assessee preferred not to press ground No.6. Therefore, the same is dismissed as not being pressed. 4. Ground Nos.3 to 5 relate to the addition made by the Assessing Officer on account of interest on enhanced compensation. 5. Briefly, the facts of the case are that during the year the assessee received enhanced compensation of ₹ 30,93,458/- and interest of ₹ 79,15,853/- which was shown as not taxabl .....

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ceived enhanced compensation income aggregating to ₹ 30,93,458/- as principal amount and ₹ 79,15,893/- as interest on compensation and has claimed the same as exempt under section 10(37) of the Act. The Assessing Officer also observed that exemption under section 10(37) is available only on compensation on transfer and not on interest thereon. After applying the amended provisions of section 56(2), 57(iv) and 145A of the Act, applicable w.e.f. assessment year 2010-11, the Assessing O .....

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ending before the High Court, it should not be taxed in view of amended provisions of section 45(5)(b) of the Act, whereby it has been stated that the compensation shall be taxed on finality. Without prejudice, it was submitted that, without appreciating the spirit of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Ghanshyam (HUF) 315 ITR 1 (SC), the Assessing Officer has given exemption under section 10(37) of the Act on compensation and taxed the interest thereon. The Hon& .....

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ubmissions of the assessee, dismissed the appeal of the assessee. His observations are at page 13, para 5.5, which read as under : 5.5 The clause (viii) has been inserted in section 56(2) by Finance Act, 2009 to provide that income by way of interest received on compensation or on enhanced compensation shall be assessed under the head 'income from other sources' in the year in which it is received applicable from A.Y. 2010-11 onwards. Further, section 145A has also been inserted by Finan .....

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e to be taxed in the A.Y. 2010-11 only. This also clarifies that amended section 45(5)(b) will not be effective as the interest has been received in the year under consideration. Further, the new provision has been provided in section 57(iv) of the Act to provide for standard deduction in the case of interest on compensation or on enhanced compensation. A deduction equal to 50% of such income shall be allowed w.e.f. A.Y. 2010-11 and no other deduction will be available. Further, section 56(2)(vi .....

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d on compensation or on enhanced compensation and grant of standard deduction of 50% of such amount, the AO was justified in making the addition of the income received by the appellant by way of interest on enhanced compensation under the head 'income from other sources'. Therefore, the addition of ₹ 39,57,946/- is sustained. These grounds of appeal are dismissed. 8. Aggrieved by this, the assessee has come in appeal. The learned counsel for the assessee reiterated the submissions .....

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n 10(37) of the Act. 9. The learned D.R. relied on the order of the lower authorities, especially para 4.2 onwards of the order of the learned CIT (Appeals). 10. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The undisputed facts are that the assessee has received during the year enhanced compensation on compulsory acquisition of land and interest on such enhanced compensation. This is .....

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Ghanshyam (HUF) (supra), whereby the Hon'ble Court after analyzing various provisions of the Land Acquisition Act as well as that of the Income Tax Act, observes as under : 32. The issue to be decided before us - what is the meaning of the words "enhanced compensation/consideration" in Section 45(5)(b) of the 1961 Act? Will it cover "interest"? These questions also bring in the concept of the year of taxability. 33. It is to answer the above questions that we have analyse .....

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the Collector. It includes additional amount under Section 23(1A) 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. It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compen .....

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