ITO Vs Sangappa S. Kudarikannur (ITAT Bangalore)
The assessee, one of five co-owners of agricultural land, held a one-fifth share in land compulsorily acquired under the Land Acquisition Act, 1894. Following a reference for enhancement of compensation, enhanced compensation and interest were awarded by the Special Land Acquisition Officer and paid during the relevant previous year. The assessee received Rs.62,99,529 as enhanced compensation and Rs.92,87,258 as interest on enhanced compensation.
The dispute concerned the taxability of the interest amount of Rs.92,87,258. The Assessing Officer held that it was taxable as income from other sources under Sections 56(2)(viii), 57(iv) and 145A(b), allowing only the statutory deduction under Section 57(iv).
Procedural History
The Assessing Officer rejected the claim of exemption under Section 10(37) and brought the interest to tax. On appeal, the CIT(A) held that interest of Rs.90,37,666 awarded under Section 28 of the Land Acquisition Act formed part of compensation and qualified for exemption under Section 10(37). The balance amount of Rs.2,49,592 was directed to be taxed as income from other sources after allowing deduction under Section 57(iv). The Revenue appealed before the ITAT.
Legal Issues
- Whether interest awarded under Section 28 of the Land Acquisition Act, 1894 forms part of compensation eligible for exemption under Section 10(37) of the Income-tax Act.
- Whether such interest is taxable as income from other sources under Sections 56(2)(viii), 57(iv) and 145A(b).
Relevant Statutory Provisions
- Sections 10(37), 56(2)(viii), 57(iv) and 145A(b) of the Income-tax Act, 1961.
- Sections 28 and 34 of the Land Acquisition Act, 1894.
Parties’ Submissions
