Bhim Singh Vs ITO (ITAT Delhi)
Conclusion: Compensation received under Section 28 of the Land Acquisition Act was taxable under section 56(2)(viii) r.w.s 145B(1) as the provisions of section 10(37) deal with ‘compensation’ only and not “interest on compensation or enhanced compensation.
Held: Assessee received an interest amount of Rs. 1,05,75,310 under Section 28 of the Land Acquisition Act as part of enhanced compensation for acquiring agricultural land. He filed his income tax return declaring Rs. 6,07,140 as a total income for the assessment year 2019-20 and claimed the interest amount as an exemption under section 10(37). Regrettably, AO did not accept this exemption due to the absence of documentary evidence and added the interest amount to assessee’s taxable income under Section 69A treating it as unexplained money. Assessee appealed against the AO’s order before CIT(A). CIT(A) ruled that the interest amount was taxable under “income from other sources” as per section 56(2)(viii) read with section 145B(1), but allowed a deduction of 50% under section 57 (iv). Assessee appealed before ITAT against the CIT(A)’s order contending that interest under Section 28 on enhanced compensation unlike interest under section 34 on compensation was an accretion of the land value hence it was part of enhanced compensation. AO contended that post-amendment to Section 56(2)(viii) and Section 145B(1), enhanced compensation was taxable as “income from other sources”. It was held that the language in section 56(2)(viii) and 145B(1) were plain, simple and unambiguous and that the correct legal position was that the interest of Rs. 1,05,75,310/- received during the year on enhanced compensation under section 28 of the Land Acquisition Act, 1894 was exigible to tax u/s 56(2)(viii) r.w.s 145B(1). Assessee’s claim of the same as exempt u/s 10(37) was unsustainable as the provisions of section 10(37) deal with ‘compensation’ only and not “interest on compensation or enhanced compensation”. Respectfully following the High Court’s decisions of Delhi and Punjab & Haryana, CIT(A)’s order to recompute the interest on enhanced compensation in accordance with section 56(2)(viii) r.w.s. 145B(1) and allowing deduction u/s 57(iv) need no interference.
