Mamraj Yadav Vs PCIT (ITAT Delhi)
The central question in this case, Mamraj Yadav Vs PCIT heard by the Income Tax Appellate Tribunal (ITAT) Delhi, revolves around the taxability of interest received on enhanced compensation for land acquisition under Section 28 of the Land Acquisition Act, 1894. The Revenue argued, based on the Mahender Pal Narang and Inderjit Singh Sodhi cases, that this interest should be taxed as income from “other sources” under Section 56 of the Income Tax Act, 1961. Their logic cited previous instances where such interest was deemed taxable. However, the ITAT Delhi ruled in favor of the assessee, concluding that the interest on enhanced compensation is tax-free under Section 10(37) and not taxable under Section 56. The Tribunal emphasized that interest under Section 28 is an integral part of the compensation itself, not an independent source of income. Section 10(37) provides a tax exemption for compensation received from the compulsory acquisition of agricultural land. The ITAT distinguished the Mahender Pal Narang and Inderjit Singh Sodhi cases, aligning its decision with the Supreme Court’s judgment in CIT vs. Ghanshyam HUF, which established that interest under Section 28 is part of the enhanced value of the land. The Tribunal clarified that Section 56 is applicable to interest that constitutes independent income, not interest that is inherently part of compensation. This decision by the ITAT Delhi offers relief to taxpayers in Haryana and the National Capital Region (NCR) whose agricultural land has been acquired, ensuring that both the compensation and the interest related to it remain tax-free if the conditions of Section 10(37) are met.
