TMI Blog2020 (5) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 - See CIT v. Ghanshyam (HUE) [2009 (7) TMI 12 - SUPREME COURT] . 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 No.1952/Bang/2017 (Assessment Year: 2012-13) - - - Dated:- 3-1-2020 - SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER Assessee By: Shri B.S. Balachandran, Advocate Revenue By: Shri Sunil Kumar Agarwal, Addl. CIT (D.R) ORDER PER SHRI PAVAN KUMAR GADALE, J.M. : The assessee has filed an appeal against the order of Commissioner of Income Tax, Hubli passed under Section 143(3) and 250 of the Income Tax Act, 1961 ('the Act'). There was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant prays to add, alter or amend any of the foregoing grounds of appeal at the time of hearing. 3. The Brief facts of the case are that the assessee is an employee of Karnataka Vikas Grameena Bank and filed the Return of Income electronically on 25.3.2013 with total income of ₹ 6,13,770. In the Return of Income filed, the assessee has disclosed Long Term Capital Gains of ₹ 2,02,95,269 being th share of compensation received under Section 28 of the Land Acquisition Act and has claimed exemption under Section 10(37) of the Income Tax Act, 1961. The Return of Income was processed under Section 143(1) of the Act, subsequently the Notice under Section 143(2) and 142(1) of the Act along with Questionnaire were issued. In compliance the learned Authorised Representative appeared from time to time and filed the details. In the appellate proceedings, the assessee has furnished the documents in support of the th share of compensation received and the nature of agriculture land. On perusal of the facts, the Assessing Officer found that the assessee was awarded, enhanced compensation of land acquisition together with the interest and TDS was also deducted by Chief Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28 of Land Acquisition Act, 1894 is not interest referred to Section 56(2)(viii) of the Act and prayed for allowing the appeal. Contra, the learned Departmental Representative relied on the CIT(Appeals) order. 5. We heard the rival contentions and perused the material on record. The sole crux of the disputed issue is with respect to chargeability of interest awarded under Section 28 of the Land Acquisition Act. The learned Authorised Representative submitted that the interest under Section 28 of the Land Acquisition Act, 1984 cannot be considered/equated as interest as referred under Section 56(2)(viii) of IT Act which has been inserted w.e.f. 1.4.2009 effectively from Assessment Year 2010-11. We found the assessee has claimed exemption under Section 10(37) of the Act whereas as per Section 28 of Land Acquisition Act, the compensation to be awarded in excess of the sum awarded by the Land Acquisition Officer, the Court may direct the Land Acquisition Officer to pay interest @ 9% per annum from the date of compensation on land to the date of payment of such excess deposit in the Court. We found the co-ordinate Bench of the Tribunal dealt on the issue in the case of ITO, Ward 1 Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... head income from other sources. Being aggrieved by such order, the Assessee filed writ petition before Hon ble Gujarat High Court. The question before the Court was whether interest awarded u/s.28 of the Act of 1894 is akin to compensation and chargeable to tax u/s.45(5) of the Act or under the head Income from other sources u/s.57(iv) read with Sec.56(2)(viii) and 145A(b) of the Act. The Hon ble Gujarat High Court held that interest under section 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. In coming to the aforesaid conclusion, the Hon ble Gujarat High Court followed the decision of Hon ble Supreme Court in the case of CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368, wherein it was held that 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. On the applicability of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following portion of the departmental circular No. 5/2010, dated 3.6.2010, as follows: Rationalizing the provisions for taxation of interest received on delayed compensation or on enhanced compensation.- 46.1 The existing provisions of Income Tax Act, 1961, provide that income chargeable under the head Profits and gains of business or profession or Income from other sources , shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further the Hon'ble Supreme Court in the case of Smt. Rama Bai v. CIT (1990) 84 CTR (SC) 164 : (1990) 181 ITR 400 (SC) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers. 46.2 With a view to mitigate the hardship, section 145A is amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee. 46.3 Further, clause (viii) is inserted in sub-section (2) of the section 56 so as to provide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing tax at source under section 194A of the I.T. Act in respect of such amount. The petitioner is, therefore, entitled to refund of the amount wrongly deducted under section 194A of the I.T. Act. 14. In the light of the aforesaid decision of the Hon ble Gujarat High Court and in the light of the admitted factual position in the present case, we are of the view that the 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. We find no grounds to interfere with the impugned orders of the CIT(Appeals). We found the present case is similar to the facts of above case in respect of interest under Section 28 of Land Acquisition Act, 1894 and the co-ordinate Bench of Tribunal has considered the Hon'ble Apex Court decision in the case of CIT Vs. Ghanshyam (supra) and of Hon'ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai Vs. ITO (TDS) Another (supra). We respectfully follow the judicial precedence and found that the facts are identical and apply the ratio of judicial decisions and direct the Assessing Officer to delete the interest disallowance and a ..... 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