Virender Singh Vs ITO (ITAT Delhi)
Delhi ITAT Holds Interest under Section 28 of Land Acquisition Act Exempt as Part of Enhanced Compensation
The Delhi SMC Bench of the ITAT, in Virender Singh v. ITO (AY 2014-15), held that interest awarded under section 28 of the Land Acquisition Act, 1894 forms part of the enhanced compensation and is not taxable as “Income from Other Sources”. Following its earlier decision in Pawan Kumar v. PCIT, the Tribunal deleted the addition made in respect of such interest.
The assessee did not press the ground relating to an addition of ₹2.39 lakh under section 69 and confined the appeal to the taxability of ₹16.18 lakh received as interest under section 28 of the Land Acquisition Act. The Revenue relied on the decisions of the Punjab & Haryana High Court in Mahender Pal Narang v. CBDT and the Delhi High Court in PCIT v. Inderjit Singh Sodhi (HUF) to contend that such interest was taxable as income from other sources.
The Tribunal, however, relied upon its detailed decision in Pawan Kumar v. PCIT (2024) 159 taxmann.com 61 (Delhi-Trib.), wherein it was held that interest awarded under section 28 is an accretion to the value of the acquired land and forms an integral part of the enhanced compensation, unlike interest under section 34, which compensates for delay in payment. The Tribunal reiterated that the Supreme Court’s ruling in CIT v. Ghanshyam (HUF) continues to govern the character of interest under section 28 and that the amendments introduced by the Finance (No. 2) Act, 2009, including section 56(2)(viii), did not alter its character from a capital receipt to income from other sources.
