Veeraswamy Jotheeswaran Vs ITO (ITAT Chennai)
ITAT Chennai held that interest received on enhanced compensation forms part of the compensation and hence entitled for exemption under section 10(37) of the Income Tax Act and accordingly, not taxable. Accordingly, appeal of the assessee allowed.
Facts- Assessee had received compensation for land acquisition of Rs.58,49,228/- from Special District Revenue Officer, National Highway Authority of India (NHAI). Since no return of income was filed by the assessee, the AO initiated proceedings u/s.148 of the Act. On perusal of the replies filed by the assessee, the AO noticed that assessee had received enhanced compensation of Rs.93,28,713/- which included interest on enhanced compensation amounting to Rs.35,99,509/- received from NHAI, Tiruvallur District. The AO noticed that interest on enhanced compensation was not offered for taxation.
AO completed the assessment u/s.147 r.w.s. 144 r.w.s.144B of the Act vide order dated 19.02.2024, wherein he treated 50% of such interest income as taxable u/s.56(2)(viii) r.w.s.57(iv) of the Act. Therefore, a sum of Rs.17,99,975/- was treated as ‘income from other sources’.
First Appellate Authority rejected the contention of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- In the case of CIT v. Ghanshyam (HUF) (supra), wherein, the Hon’ble Supreme Court held that “interest paid under section 28 of the Land Acquisition Act forms part of compensation and is a part of enhanced value of the land”. The Hon’ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai v. ITO 388 ITR 343 held that interest forms part of compensation and the same is not taxable.
