Surender Kumar Vs ITO (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT), Delhi Bench, has delivered a significant ruling for assessees receiving compensation from compulsory land acquisition, determining that interest received under Section 28 of the Land Acquisition Act, 1894, should be treated as a capital receipt, forming part of the enhanced compensation, and thus potentially exempt from tax under Section 10(37) of the Income-tax Act, 1961. This decision sets aside a revisional order passed by the Principal Commissioner of Income Tax (PCIT) that sought to tax such interest as ‘income from other sources’.
The appeal was filed by Surender Kumar against an order from the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (CIT(A)/NFAC) for the assessment year 2017-18, which involved proceedings under Section 147 of the Income Tax Act. The core dispute revolved around the taxability of the interest component of land acquisition compensation. The tax authorities had sought to assess this interest under Section 56(1)(a) read with Section 57(iv) and Section 145A(b) of the Act, treating it as ‘income from other sources’.
The Revenue vehemently argued that the issue was settled, citing the Punjab & Haryana High Court’s decision in Mahender Pal Narang Vs. CBDT (2020) 423 ITR 13 (P&H) and the Delhi High Court’s ruling in PCIT Vs. Inderjit Singh Sodhi HUF (2024) 161 com301 (Del.). These judgments, according to the department, supported the view that such interest should be taxed as income from other sources.
