TMI Blog2018 (6) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 28 of the Act of 1894 is an accretion to compensation and forms part of the compensation and, therefore, exigible to tax under section 45(5) of the Act. Interest under section 28 of the Act of 1894 is part of the amount of compensation whereas interest under section 34 thereof is only for delay in making payment after the compensation amount is determined. Interest under section 28 is a part of the enhanced value of the land which is not the case in the matter of payment of interest under section 34 CIT(Appeals) is fully justified in allowing exemption u/s. 10(37) of the Act on the interest received by the assessee u/s. 28 of the Land Acquisition Act, 1894 - decided in favour of assessee - ITA Nos. 1747 & 1750/Bang/2017 - - - Dated:- 1-6-2018 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER Appellant by : Dr. Sandeep Goel, Addl.CIT(DR)(ITAT), Bengaluru. O R D E R Per N.V. Vasudevan, Judicial Member These are appeals filed by the revenue against two different orders, both dated 16.06.2017 of the CIT(Appeals), Belagavi relating to assessment year 2013-14. 2. The facts and circumstances under which these appeals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (37) of the Act reads as follows:- Section 10(37): Capital Gain on compulsory acquisition of urban Agricultural Land: In the case of an assessee, being an individual or a Hindu individual family, any income chargeable under the head Capital gain arising from the transfer of agricultural land, shall be exempted, where : 1. Such land is situate in any area referred to in, item (a) or item (b) of sub-clause (iii) of clause (14) of Section 2 2. Such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual, or a parent of his 3. Such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India 4. Such income has arisen from the compensation or consideration for such transfer received by such assesses on or after the 1st day of April, 2004. It may be noted in this connection that exemption is available only if compulsory acquisition has taken place on or after 1-4- 2004. Exemption is also available if acquisition has taken place before 1-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 56(2)(viii) of the I.T.Act, 1961 inserted w.e.f. 01-04-2010, income by way of interest received on compensation or on enhanced compensation shall be chargeable to tax under the head Income from Other Sources and clause (b) of Section 145 specifies the year of accounting of this income as the year in which it is received. The section 56(2)(viii) is unambiguous on this issue and includes interest of any nature and kind without making any distinction of interest received under different provisions of the Land Acquisition Act, 1894. Hence, the interest {one fifth share} of ₹ 92,87,258/- received on compensation or on enhanced compensation does not qualify for treatment as compensation or on enhanced compensation does not qualify for treatment as enhanced value of the asset and has to be brought to tax under the head Income from Other Sources . 5. In the circumstances, ₹ 92,87,258/- being interest received as per the order dated 18-05-2012 is treated as the income of the assessee and added back to the total income subject to allowing the deduction of 50% as per the provisions of section 57(iv) of the I.T.Act, 1961. On account of this addition, penalty proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO that the land acquired was agricultural land and the conditions laid down u/s. 10(37)(i) to (iv) are applicable to the land which is in question which was compulsorily acquired. It is also not in dispute that the interest in question was interest awarded u/s. 28 of the Land Acquisition Act, 1894. In the given circumstances, we are of the view that the decision of the Hon ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai (supra) will be applicable to the facts of the present case. 12. In Movaliya Bhikhubhai Balabhai v. Income-tax Officer-TDS-1-Surat [2016] 70 taxmann.com 45 (Gujarat), the Hon ble Gujarat High Court had to deal with the nature of the interest awarded u/s.28 of the Land Acquisition Act, 1894. The facts of the case before the Hon ble Gujarat High Court was that the petitioner's agricultural lands came to be acquired under the provisions of the Act of 1894 for the public purpose of the Ozat-2 Irrigation Scheme. The award passed by the Collector came to be challenged by the petitioner before the learned Principal Senior Civil Judge, Junagadh (hereinafter referred to as the Reference Court ), who by an order dated 20th March, 2011 awarde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. Clause (viii) of sub-section (2) of section 56 of the I.T. Act provides for income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A which is chargeable as income from other sources. The first respondent Income Tax Officer seeks to tax the interest received by the petitioner under section 28 of the Act of 1894 as income from other sources under section 56(2)(viii) read with section 145A(b) of the I.T. Act. In the opinion of this court, in the light of the law laid down by the Supreme Court in the case of Ghanshyam (HUF) (supra), the interest received under section 28 of the Act of 1894 would not fall within the ambit of the expression interest as envisaged under section 145A(b) of the I.T. Act, inasmuch as, the Supreme Court in the above decision has held that interest under section 28 of the Act of 1894 is not in the nature of interest but is an accretion to the compensation and, therefore, forms part of the compensation. It was argued on behalf of the Revenue before the Hon ble Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly apply in relation to assessment year 2010-11 and subsequent assessment years. Thus, the substitution of section 145A by Finance (No. 2) Act, 2009 was not in connection with the decision of the Supreme Court in Ghanshyam (HUF)'s case (supra) but was brought in to mitigate the hardship caused to the assessee on account of the decision of the Supreme Court in Rama Bai v. CIT [1990] 181 ITR 400/[1991] 54 Taxman 496 whereby it was held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. Therefore, when one reads the words interest received on compensation or enhanced compensation in section 145A of the I.T. Act, the same have to be construed in the manner interpreted by the Supreme Court in Ghanshyam (HUF)'s case (supra). 13. The Hon ble Gujarat High Court finally concluded, as follows: 13. The upshot of the above discussion is that since interest under section 28 of the Act of 1894, partakes the character of compensation, it does not fall within the ambit of the expression interest as contemplated in section 145A of the I.T. Act. The first respondent - Income Tax Officer was, therefore, not justified in re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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