Case Law Details
Kamla Devi Vs ITO (ITAT Delhi)
In the present case, from the orders of the authorities below, it is clear that the authorities below have treated interest received by the assessee on enhanced compensation u/s 28 of the Land Acquisition Act, 1984 as ‘Income from other sources’ and denied exemption u/s 10(37) of the Act. The facts and circumstances of the present case are identical and similar to the case of Ram Kishan (supra) wherein the coordinate Bench of the Tribunal categorically held that the interest received by the assessee u/s 28 of the Land Acquisition Act, 1984 on enhanced compensation is part and parcel of the compensation, if the agricultural land of the assessee has been acquired under compulsory acquisition and, thus, the same is exempt income u/s 10(37) of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order dated 29.04.2022 of the National Faceless Appeal Centre (NFAC) for Assessment Year 2012-13.
2. The grounds raised by the assessee read as under:-
“1. That the Ld. Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the Income Tax Act 1961 (the Act) and, completion of assessment u/s 147/143(3) of the Act, which were without jurisdiction and deserved to be quashed as such.
1.1 That while upholding the assumption of jurisdiction, the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that reasons recorded were based on factually incorrect assumption that the appellant had not filed her return of income and that reasons had been mechanically recorded without independent application of mind by the Ld. Assessing Officer and approval by the Ld. Principal Commissioner of Income Tax had also been granted mechanically without examining records & facts of case and without independent application of mind.
1.2 That while upholding the assumption of jurisdiction, the learned Commissioner of Income Tax (Appeals) has, failed to appreciate that the said notice u/s 148 issued at wrong address was not served on the appellant.
2. That the Ld. Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the addition of Rs. 24,88,134/-made by the Ld. Assessing Officer as income from other sources on account of interest u/s 28 of Land Acquisition Act received by the appellant which was part of enhanced compensation on – compulsory acquisition of her agricultural land exempt u/s 10(37) of the Act.
3. That the appellant craves the leave to add, modify, amend, or delete any of the grounds of appeal during appellate proceedings.”
3. The ld. Counsel of the assessee did not press grounds 1 to 1.2, thus, the same are dismissed as ‘not pressed.’
Ground No.2
4. The ld. AR submitted that the ld.CIT(A) has erred both in law and on facts in confirming the addition of Rs. 24,88,134/- made by the Assessing Officer as ‘Income from other sources’ on account of interest u/s 28 of Land Acquisition Act received by the appellant which was part of enhanced compensation received on compulsory acquisition of her agricultural land which is exempt u/s 10(37) of the Act. The ld. Counsel placed vehement reliance on various judgements which are listed as follows:-
(i) Decision of the Hon’ble Supreme Court in the case of CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368/315 ITR KSC);
(ii) Decision of the Hon’ble Supreme Court in the case of CIT, Rajkot v. Govindbhai Mamaiya [2014] 52 com 270/[2015] 229 Taxman 138/[20141 367 ITR 498(SC);
(iii) Decision of the Hon’ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai v. ITO [20161 70 com 45/388 ITR 343 (Guj.);
(iv) Decision of the Hon’ble Supreme Court in the case of UOI v. Hari Singh [2018] 91 com 20 (SC);
(v) Decision of the Hon’ble Supreme Court in the case of ITO-TDS, Rajkot Vs. Muktanandgiri Maheshgiri in Civil Appeal No. 18475 of 2017 (Arising out of SLP (C)No. 27333 of 2017), judgement dated November 10,2017;
(v) Decision of the Hon’ble ITAT New Delhi ‘F’ Bench in the case of Paramjeet Singh vs. ACIT, Circle Karnal in ITA No.1393/DEL/2017 (A.Y 2011-12) order dated 16.04.2021;
(vi) Decision of the Hon’ble ITAT New Delhi F Bench in the case of Ram Kishan vs. ITO in ITA No. 5391/Del/2017 (Assessment Year: 2014-15) order dated 02.12.2020; and
(viii) Decision of the Hon’ble ITAT Delhi ‘E’ Bench in the case of Shri. Nitya Nand vs. ITO, Ward-3, Gurgaon in ITA No.6508/Del/2016 for Assessment Year: 2013-14 order dated 30.01.2020.
5. Replying to the above, the ld. Sr. DR, placing reliance on the judgement of Punjab & Haryana High Court in the case of Mahender Pal Narang vs. CBDT, dated 19.02.2020 in CWP No.17971 of 2019, submitted that the interest received on compensation or enhanced compensation is to be treated as ‘Income from other sources’ and not under the head ‘Capital gains.’ Therefore, the same is not exempt u/s 10(37) of the Act.
6. Placing rejoinder to the above, the ld. AR again drew our attention to the copy of the order of ITAT Delhi ‘F’ Bench in the case of Ram Kishan (supra) and submitted that in this order, the Tribunal has considered lead judgement of the Hon’ble Supreme Court in the case CIT vs. Ghanshyam (HUF) (supra) as well as the judgement of the Hon’ble Punjab & Haryana High Court in the case of Mahender Pal Narang (supra) as relied by the ld. Sr. DR and in paras 8 and 9 has held that the interest received by the assessee u/s 28 of the Land Acquisition Act on the enhanced compensation is not taxable being part of compensation and the same has to be treated as tax free in the case of an individual and HUF u/s 10(37) of the Act if transfer is of an agricultural land.
7. On careful consideration of the above submissions, I am of the considered view that similar controversy arose before the ITAT Delhi ‘F’ Bench in the case of Ram Kishan (supra) wherein the coordinate Bench of the Tribunal in paras 8 and 9 has elaborately considered the judgement of the Hon’ble Supreme Court in the case of Ghanshyam (HUF) (supra) as well as the judgement of the Hon’ble Punjab & Haryana High Court in the case of Mahender Pal Narang (supra). The relevant observations and findings of the coordinate Bench of the Tribunal in paras 8 and 9 the said order read as under:-
“8. On careful consideration of the issue before us we find That The finance (number 2) act, 2009 with effect from 1 April 2010 in the income tax act has introduced the provisions of Section 145A (b) which defines the year of taxability as the year of receipt, irrespective of the method of accounting followed by the assessee with respect to the enhanced compensation and interest on compensation. The provisions of Section 56 (2) also defines head of income as income from other sources for such income. Section 57 (iv) allows deduction of 50% of such income without any proof of such expenditure. The provisions of the sections were introduced to remove an anamoly. At that time the existing provisions of the income tax provided that the income chargeable Under that profits and gains of business or profession or income from other sources shall be computed in accordance with either cash or Mercantile system of accounting regularly employed by the assessee. The honourable Supreme Court in case of Rama Bai versus CIT 181 ITR 400 held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers. With a view to mitigate that hardship provisions of Section 145A were amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be income for the year in which it was received, irrespective of the method of accounting followed by the assessee. Further amendment u/s 56 was also made to provide that such income shall be taxable as income from other sources in the year in which it is received. However such amendment was not in respect to the decision of the honourable Supreme Court in case of Ghanshyam HUF 315 ITR 1. Despite the above changes made u/s 14 5A and u/s 56 (2) with effect from 1 June 2010, so as to tax the interest on compensation or enhanced compensation as income from other sources u/s 56 in the year of receipts, the judicial precedents held that the interest awarded to landowners u/s 28 of the land acquisition act, 1894 on enhanced compensation is still a part of compensation and is a capital receipt taxable Under the head capital gains. Such is the judicial precedent of the honourable Himachal Pradesh High Court in case of CIT versus Joginder Singh 217 taxmann 208 and honourable Gujarat High Court in case of Movaliya Bhikha Bhai Balabhai 70 taxmann.com 45 [388 ITR 343] . Further we are also mindful of the fact that the honourable Punjab and Haryana High Court in the case of Mahenderpal Narang versus CBDT CWP 17971 of 2019 dated 19/2/2020 as well as in case of Puneet Singh V CIT 110 taxmann.com 16 and Manjeet Singh HUF V Union of India 137 taxman 116 has decided in favour of revenue. It is a settled law that Statute must be interpreted according to the intention of the legislature and the court should act upon the true intent of the legislation while applying the law and its interpretation. If a statutory provision is open to more than one meaning, the Court has to choose the interpretation which represents the intention of the legislature. In the present case the Department circular number 5/2010 dated 3/6 / 2010 clearly demonstrates the intention of the legislature. Accordingly we hold that interest on u/s 28 of the land acquisition act, 1894 being part of the compensation shall be treated as a tax free in the case of an individual and HUF u/s 10 (37) if transfer is of an agricultural land. In view of above facts and judicial precedence we hold that the interest received by the assessee u/s 28 of the land acquisition act of ₹ 24,207,223 is not taxable. Accordingly ground number 2 & 3 of the appeal of the assessee are allowed.
9. In the result appeal of the assessee is allowed.”
8. In the present case, from the orders of the authorities below, it is clear that the authorities below have treated interest received by the assessee on enhanced compensation u/s 28 of the Land Acquisition Act, 1984 as ‘Income from other sources’ and denied exemption u/s 10(37) of the Act. The facts and circumstances of the present case are identical and similar to the case of Ram Kishan (supra) wherein the coordinate Bench of the Tribunal categorically held that the interest received by the assessee u/s 28 of the Land Acquisition Act, 1984 on enhanced compensation is part and parcel of the compensation, if the agricultural land of the assessee has been acquired under compulsory acquisition and, thus, the same is exempt income u/s 10(37) of the Act. Respectfully following the said proposition, I allow ground No.2 of the assessee and the AO is directed to delete the addition.
9. In the result, the appeal filed by the assessee is partly allowed. The decision was pronounced in the open court on 21.09.2022.
