Bir Singh Vs ITO (ITAT Delhi)
Interest on Enhanced Land Acquisition Compensation Taxable u/s 56(2)(viii): Delhi ITAT Rejects Section 10(37) Exemption
Delhi ITAT dismissed the Assessee’s appeal and held that interest of ₹33,03,628 received u/s 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable as “Income from Other Sources”, and does not qualify for exemption u/s 10(37).
The Tribunal noted that the Assessee had received interest on enhanced compensation for compulsory acquisition of agricultural land and claimed exemption by treating such interest as part of compensation. The ITAT rejected this contention, holding that section 10(37) grants exemption only in respect of “capital gains arising from compensation” and not “interest on compensation or enhanced compensation.”
After an exhaustive analysis of the statutory scheme and jurisprudence, the ITAT held that the Finance (No.2) Act, 2009, w.e.f. 01.04.2010, brought a conscious legislative shift by inserting section 56(2)(viii) and section 145B(1), mandating taxation of interest on compensation/enhanced compensation on receipt basis under “Income from Other Sources”, with a 50% standard deduction u/s 57(iv).
The Tribunal distinguished the Supreme Court ruling in CIT vs. Ghanshyam (HUF) as applicable to the pre-2010 regime, and relied heavily on the binding judgments of the Delhi High Court in Inderjit Singh Sodhi (HUF) and the Punjab & Haryana High Court in Mahender Pal Narang and Puneet Singh, which have unequivocally held that post-2010, interest u/s 28 of the Land Acquisition Act is fully taxable under section 56(2)(viii).
Accordingly, the ITAT upheld the recomputation directed by the CIT(A), confirming taxability of the interest income with deduction limited to 50% u/s 57(iv).
FULL TEXT OF THE ORDER OF ITAT DELHI
