TMI Blog2024 (2) TMI 748X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case at hand. The opinion of the Ld. PCIT that the Ld. AO should have passed the assessment in accordance with the amended law and binding decision in Mahender Pal Narang s case [ 2020 (3) TMI 1115 - PUNJAB AND HARYANA HIGH COURT] overlooking the decision of Hon ble Supreme Court in Ghanshyam s HUF s [ 2009 (7) TMI 12 - SUPREME COURT] case is not sustainable. Reliance by the Ld. PCIT on the decision in Mahender Pal Narang s case is misplaced. During assessment proceedings in response to notice under section 143(2) and 142(1) of the Act, with reference to specific query on receipt of interest under section 28 of Land Acquisition Act, the assessee explained that interest received under section 28 of the Land Acquisition Act has been held to be part of compensation by Apex Court in the case of CIT vs. Ghanshyam HUF [ 2009 (7) TMI 12 - SUPREME COURT] , the same being exempt under section 10(37) of the Act has not been included in the total income of the assessee while filing return of income. The Ld. AO accepted the explanation of the assessee. Since the order of the Ld. AO is based on the decision of the Hon ble Supreme Court in Ghanshyam HUF (supra) on the issue of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the learned Assessing Officer was an impossible or unsustainable view. 5. That the learned Principal Commissioner of Income Tax has failed to appreciate that action u/s 263 of the Act is otherwise too inapplicable on the factual matrix of the facts of the instant case since it is not a case of lack of enquiry or lack of investigation and therefore the invocation us 263 of the Act is not in accordance with law. 6. That further more the learned Principal Commissioner of Income tax has proceeded to set aside the order on mere speculation, generalized observations, theoretical allegations and assertions, without there being any supporting evidence and is therefore not in accordance with law. 7. That finding of the learned Principal Commissioner of Income Tax that the AO had passed the order dated 3.12.2020 in a very causal manner without due diligence and without conducting proper enquiries and verification which should have been made with respect of amended provisions of the Finance Act, 2015 and binding decision of Jurisdictional Hon'ble Punjab Haryana High Court and Hon'ble Apex Court on the taxability of interest on enhanced compensation is factua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onded vide letter dated 14.02.2023. 5. The explanation was not acceptable to the Ld. PCIT who held in para 5.1 of his order as under:- 5. I have carefully examined the facts of the case and the reply of the assessee as well as the material on record. It is evident that the assessee has received interest on enhanced compensation during the assessment year under consideration which ought to be treated as income from other sources and should have been taxed accordingly, under the head income from other sources by way of amendment introduced through Finance (No.2) Act, 2009 w.e.f 01.04.2010. For the taxing treatment of Interest on compensation/enhanced compensation special provisions has been made by way of Finance (No.2) Act 2009 by introducing a clause (viii) in sub-section 2 of section 56, clause(iv) in section 57 and clause (b) in Section 145A w.e.f 01.04.2010. From the assessment year 2010-11 onwards, the amount of compensation or enhanced compensation is taxable as income from other sources after allowing deduction of a sum equal to 50% of such income in the year of receipt The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd V/s CIT in 243 ITR 83(SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 49,23,440/-. Another notice under section 142(1) of the Act dated 21.08.2020 is at page 35-37 of Paper Book seeking further details and information. Yet another notice under section 142(1) of the Act dated 24.09.2020 (pages 39-42 of Paper Book) was issued inviting the attention of the assessee to the provisions of section 56(2)(viii) r.w.s 57(iv) and section 145B(1) of the Act. 8.2 The Ld. AR pointed out that the assessee submitted reply (page 43-44 of the Paper Book) stating inter alia that his agricultural land was compulsorily acquired by Land Acquisition Collector (LAC) and gave enhanced compensation as per court order. On this enhanced compensation the LAC gave interest under section 28 of the Land Acquisition Act. All amount of compensation and interest is exempt from Income Tax under section 10 of the Act. This view is also supported by the Hon ble Supreme Court of India in CIT vs. Ghanshyam HUF (2009) 315 ITR 1(SC) dated 16.07.2009. 8.3 The Ld. AR also took us through the detailed reply dated 14.02.2023 submitted before the Ld. PCIT, copy of which is placed at pages 72-108 of the Paper Book. It contains the submission of the assessee on all the issues raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 263 on the basis of the proposal submitted by the Ld. Successor AO. Before the Ld. PCIT the assessee explained that the amended provisions were not in connection with the decision of Hon ble Supreme Court in Ghanshyam HUF s case but to make simple the taxation of interest income as earlier it was taxable on accrual/cash basis on the basis of accounting principles as held by the decision of Hon ble Supreme Court in Rama Bai vs. CIT (1990) 181 ITR 400. It was also explained that insertion of section 145A, 145B, 56(2)(viii) and 57(iv) by the Finance (No.2) Act, 2009 did not change the character of interest under section 28 of the Land Acquisition Act from capital receipt forming part of enhanced compensation as envisaged in section 45(5) of the Act to revenue receipt chargeable to tax as income from other sources . It was also explained to the Ld. PCIT that after analysing the provisions of section 28 and 34 of Land Acquisition Act the Hon ble Supreme Court held in the case of Ghanshyam HUF that interest is different from compensation. However, interest paid on the excess amount under section 28 depends upon a claim by a person whose land is acquired whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhanced compensation was received on 21.03.2016. In his return filed for AY 2016- 17 he treated the interest received under section 28 of the 1894 Act as income from other sources and claimed deduction for 50% as per section 57(iv) of the 1961 Act. The return was processed under section 143(1) of the Act. An application under section 264 was made claiming that by mistake the assessee treated the interest income as income from other sources whereas the same is part of enhanced compensation. The revisional authority rejected the application under section 264 on 30.1.2019. It was in this factual matrix that the assessee filed writ petition before the Hon ble P H High Court. The question for consideration was whether after the insertion of section 56(2)(viii) and 57(iv) of the Act w.e.f. 01.04.2010, can the assessee claim that interest received under section 28 of the Land Acquisition Act, 1894 will partake the character of the compensation and would fall under the head capital gain and not income from other sources ? It was argued by the assessee that there is no amendment in section 10(37) and by insertion of sections 56(2)(viii) and 57(iv), the nature of interest under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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