Case Law Details
ITO Vs Sh. Dhanender Kumar HUF (ITAT Chandigarh)
The issue under consideration is whether interest received u/s. 28 of the Land Acquisition Act, 1894 on compulsory acquisition of agricultural land in the nature of compensation is exempt u/s. 10(37) or chargeable to tax under head ‘Income from Other Sources’?
ITAT states that, it is true that “interest” is not compensation. It equally is true that Section 45(5) of the 1961 Act refers to compensation. The provisions of the 1894 Act which awards “interest” both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23(1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45 (5) (b) of the 1961 Act. It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would means that converse position i.e. spread over of this interest on accrual basis is not permissible. In view of the above, respectfully following the decision of Hon’ble ITAT, Chandigarh in appellant’s own case in ITA No.551/Chd/2016, it is held that interest u/s 28 of the Land Acquisition Act received by the appellant is in the nature of compensation and is exempt under the provision of Section 10(37) of the I.T. Act. Therefore, addition made by the AO u/s 56(2) (viii) of the I.T. Act, being interest received by appellant u/s 28 of the Land Acquisition Act and forming part of enhanced compensation on acquisition of agricultural land, is ordered to be deleted. This ground of appeal is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The above appeal has been preferred by the Revenue challenging the order of the Commissioner of Income Tax (Appeals), Panchkula [(in short referred to as CIT(A)] dated 17.10.2018 relating to assessment year 2010-11, passed u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’.
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