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TMI Blog2025 (3) TMI 1419X X X X Extracts X X X X X X X X Extracts X X X X ..... vision is not permissible U/s 263. Reliance is placed on the judgement of the Hon'ble Supreme Court in the case of PCIT Vs Yes Bank Ltd. (2017) 99 CCH 0445 and the Hon'ble Delhi High Court in the case of CIT vs. Hindustan Coca Cola Beverages P Ltd. (2011) 331 ITR 192. The Hon'ble ITAT Delhi has also followed the judgement of the Delhi High Court in Pawan Kumar vs PCIT, Rohtak dated 24.01.2024 (ITA. No. 1655/Del./2023). 4) That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred in exercising jurisdiction under section 263 of the Act in respect of taxability of interest u/s 28 of the Land Acquisition Act by not following the decisions of the Hon'ble Supreme Court in the below-mentioned cases wherein it was held that the interest U/s 28 of the Land Acquisition Act, 1894 received by the assessee, is a part of the enhanced compensation and hence exempt U/s 10(37) of the Income Tax Act: CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368/315 ITR 1(SC): UOI v. Hari Singh |2018| 91 taxmann.com 20 (SC). 5) That having regards to the facts and circumstances of the case, the Ld. Pr. Commissioner of Income Tax was not justified on facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord hence with the assistance of the ld DR we decided to proceed to adjudicate on the issue at hand. 7. In its written submission the assessee stated that the interest received was interest on enhanced compensation granted u/s 28 of the Land Acquisition Act, 1894 on compulsory acquisition of agricultural land hence it partakes the character of enhanced compensation and both the amount are exempt u/s 10(37) of the Act. The assessee further stated that the AO relied upon the decision of the Hon'ble Supreme Court in the case of Ghanshyam Das HUF[supra] where the Hon'ble Apex Court decided that interest u/s 28 on enhanced compensation unlike interest u/s 34 on compensation is an accretion to the value of land hence it is part of enhanced compensation or consideration which is not the case with interest u/s 34 of the Land Acquisition Act, 1894 8. The assessee has submitted that where the AO has passed the assessment order on the basis of judgement of the Hon'ble SC in the case of CIT Vs. Ghanshyam then the assessment order is valid and the order U/s 263 of the PCIT is not sustainable and relied on the following decision: * Pawan Kumar V. Pr. CIT dated 24.01.2024 [2024] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpulsory acquisition of agricultural land of farmers. 12. The assessee stated that the initiation of revision u/s 263 is not permissible if the issue is debatable. The issue of taxability of interest received by the assessee under section 28 of Land Acquisition Act can at best be said to be a debatable issue on which two views are possible placing reliance on the judgement of the Hon'ble Supreme Court in the case of PCIT Vs Yes Bank Ltd. (2017) 99 CCH 0445 in which it is clearly held that when two possible views are available and the issue is debatable then initiation of revision is not permissible u/s 263. The assessee also relied on the Hon'ble Delhi High Court in CIT v. Hindustan Coca Cola Beverages P Ltd. (2011) 331 1TR 192 (Del.) to reiterate that when two views are possible and the AO accepts one of the views, the Ld. PCIT cannot assume revisional jurisdiction. 13. Per contra, the ld. DR relied upon the order of the PCIT. The ld DR submitted that the PCIT has very eloquently demonstated that the AO did not carry out any inquiry both on facts as well as law with regard to taxation of the receipt in question and therefore the assumption of jurisdiction u/s 263 is lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rate of nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited. Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry." 16. The taxability of interest on delayed payment of compensation u/s 34 of LAA was not under dispute. The controversy raised is with regard to the taxability of the interest received on enhanced compensation u/s 28 of LAA. This issue of taxability of interest received on enhanced compensation u/s 28 of LAA came up for consideration, way back in 1964, by a three judge bench of the Hon'ble Supreme Court in the case of Sham Lal Narula (Dr.) v. CIT [(1964) 53 ITR 151]. The hon'ble Court considered the interest under Section 28 of the Act of 1894 to be analogous to the interest under Section 34 of the Act, and held that the same did not form part of compensation. The relevant e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45(5)(b) of the Act. The said decision however does not state that the interest on enhanced compensation under section 28 of the Land Acquisition Act is exempt u/s 10(37) of the Income Tax Act. We are further of the view that in this case, the Hon'ble Supreme Court had no occasion to deal with the issue of taxability of interest received under section 28 of LAA as 'income from other sources' especially after the amended provision of section 56(2)(viii) and 145B(1) of the I T Act with effect from 01.04.2010. 20. It was in 2010, to align the law with the legislative intent, the Parliament brought in an amendment into clause (viii) of sub-Section 2 to Section 56 of the Act, vide Finance (No.2) Act, 2009 (with effect from 01.04.2010) and section 145B(1) of the Income Tax Act to bring the interest on compensation or on enhanced compensation as taxable as 'income from other sources'. The relevant provisions for deciding this case are extracted hereunder: "56. Income from other sources: - (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head "Income from other sources", nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HUF) reported in [2024] 423 ITR 13 (Delhi), deliberated at length on the issue at hand as follows: "22. However, vide Finance (No.2) Act, 2009 (with effect from 01.10.2010), Clause (viii) of sub-Section 2 to Section 56 of the Act was inserted and the same is extracted hereunder as:- "56. Income from other sources.- *** (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head "Income from other sources", namely:- *** [(viii) income by way of interest received on compensation or on enhanced compensation referred to in [sub-section (1) of Section 145-B].]" 23. For the sake of clarity, Section 145-B of the Act is reproduced as under:- "[145-B. Taxability of certain income.-(1) Notwithstanding anything to the contrary contained in Section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received. (2) Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession but only compensation payable by the State for keeping back the amount payable to the owner. ---"[Emphasis supplied] 27. The decision in Sham Lal Narula (supra) was subsequently followed by the Hon'ble Supreme Court in the case of Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], wherein, it was held that interest under Section 28 of the Act of 1894 was in the nature of a revenue receipt and hence, the same was considered to be taxable. The relevant paragraphs of the said decision read as under:- "8. The controversy is no longer res integra. This question was considered elaborately by this Court in Sham Lal Narula (Dr) v. CIT [(1964) 53 ITR 151 : AIR 1964 SC 1878]. Therein, K. Subba Rao, J., as he then was, considered the earlier case-law on the concept of "interest" laid down by the Privy Council and all other cases and had held at p. 158 as under: "In a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use. In no sense of the term can it be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equal to 50 per cent. of such income would be allowable thereunder and no deduction would be allowed under any other clause of section 57. The said provision reads thus: "57. Deductions.-The income chargeable under the head 'Income from other sources' shall be computed after making the following deductions, namely : . . . (iv) in the case of income of the nature referred to in clause (viii) of subsection (2) of section 56, a deduction of a sum equal to fifty per cent. of such income and no deduction shall be allowed under any other clause of this section." 21. The Assessing Officer in I. T. A. No. 132 of 2018 where the assessee had received Rs. 11,30,561 as interest income, held that the interest payment received on compensation/enhanced compensation to the tune of Rs. 5,65,280 (50 per cent. of Rs. 11,30,561) is taxable as income from other sources as per provisions of sections 56(2)(viii) read with 57(iv) and section 145A(b) of the Act for the assessment year 2010-11. The Commissioner of Income-tax (Appeals) and the Tribunal had upheld the order of the Assessing Officer in that regard. 22. No illegality or perversity could be pointed out by learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of interest on enhanced compensation as per the provision of section 56(2)(viii) and 145B(1) of the income Tax Act and held as follows: "The 2010 amendment was a conscious departure by the legislature from earlier position and said departure holds good law, as on date. There is no question with respect to the vires of the amendment or regarding any ambiguity in the language of the amendment. Interest whether on compensation or on enhanced compensation shall be considered as income from other sources and shall be exigible to Income Tax. The language of section 56(2)(viii) and 57(iv) of the Act is plain, simple and unambiguous. There is no scope of taking outside aid for giving an interpretation to newly inserted sub sections and clauses*****. 24.****Therefore, in view of the decision in the case of Sham Lal Narula (supra), we are of the considered opinion that the decision in the case of Ghanshyam HUF (supra) is not applicable after the substitution of Sections 145A, 145B, 56(2)(viii) and 57(iv) by Finance (No.2) Act, 2009. In view of the above, it is evident that the interest on compensation or interest on enhanced compensation is chargeable to tax under the head "income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on compensation or enhanced compensation". 27. We are further of the considered view that the argument of the Ld. DR that the AO's order dated 25.03.2022, which ignored the decisions of the Hon'ble Jurisdictional High Court/Punjab & Haryana High Court in the cases of Mahender Pal Narang (Supra) and Puneet Singh (Supra), becomes erroneous and prejudicial to the revenue as per the clause (d) of Explanation 2 to section 263 of the Act, needs to be endorsed. 28. Respectfully following the High Court's decisions of Punjab & Haryana and Delhi as cited above, we are of the considered opinion that the AO's order is not legally compliant and is clothed with flawed appreciation of law. The AO has not made any inquiry into the legal position regarding taxability of the said receipt. We further hold that the PCIT has correctly held that the AO order is erroneous and prejudicial as it has defied the binding decisions of Hon'ble Punjab and Haryana High Court in the cases of Mahender Pal Narang (Supra) and Puneet Singh (Supra). We further hold that the ld. PCIT was within his legal competence and has validly assumed jurisdiction u/s 263 to order re-computation of the interest on en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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