Jagpal Vs PCIT (ITAT Delhi)
Interest on Enhanced Compensation Taxable as ‘Other Sources’: ITAT Upholds PCIT’s Section 263 Revision and Rejects Section 10(37) Exemption
The Delhi ITAT dismissed the assessee’s appeal and upheld the revision order passed under Section 263, holding that interest of ₹82.88 lakh received under Section 28 of the Land Acquisition Act on enhanced compensation is taxable as “income from other sources” under Section 56(2)(viii) read with Section 145B, and is not exempt under Section 10(37). The Tribunal noted that the Assessing Officer had accepted the exemption claim without examining the amended statutory provisions and binding judicial precedents, thereby rendering the reassessment order erroneous and prejudicial to the interests of the Revenue.
Relying extensively on Supreme Court rulings (Sham Lal Narula), Delhi High Court (Inderjit Singh Sodhi), and Punjab & Haryana High Court (Mahender Pal Narang, Puneet Singh), the Tribunal held that after the 2010 amendments, interest on compensation or enhanced compensation is mandatorily taxable on receipt basis as “other sources” income with only 50% deduction under Section 57(iv). Section 10(37) applies only to capital gains on compensation and does not cover interest component. Since the AO failed to conduct proper enquiry and ignored settled law, the PCIT’s assumption of jurisdiction under Section 263 and direction to recompute taxability were upheld. The assessee’s appeal was accordingly dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
