Dnyanoba Shajirao Jadhav Vs ITO (ITAT Pune)
Interest awarded u/s. 23(1A) and 23(2) r.w.s. 28 of the L.A. Act is in the nature of solitium and an integral part of compensation. It is an admitted position that the receipt of compensation awarded under L.A. Act is a capital receipt. Whereas, interest awarded u/s. 34 of the L.A. Act is on account of delayed payment of compensation and is revenue receipt. Thus, the payment of interest u/s. 23(1A) and 23(2) of the L.A. Act and interest awarded u/s. 34 of the L.A. Act are very different in nature.
Hon’ble Supreme Court in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) has clearly marked the distinction between the interest received u/s. 23(1A) and 23(2) r.w.s. 28 of the L.A. Act vis-à-vis interest on delayed payment of compensation u/s. 34 of the L.A. Act. The Larger Bench of Hon’ble Supreme Court of India in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. (supra) has held that the interest received u/s. 34 of the Act on delayed payment of compensation is a revenue receipt and is exigible to tax. Both the judgments rendered by the Hon’ble Apex Court have held that payment of interest on delayed payment of compensation u/s. 34 of the L.A. Act are liable to tax under the provisions of Income Tax Act.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal has been filed by the assessee assailing the order of Commissioner of Income Tax (Appeals)-2, Aurangabad dated 04-12-2015 for the assessment year 2011-12.
2. The notice of appeal was issued to the assessee on 12-12-2017 through RPAD for 15-01-2018. The notice was duly served on the assessee. A copy of acknowledgment card is on record. The assessee vide letter dated 08-01-2018 has conveyed that the appeal may be decided on the basis of submissions and the papers submitted along with Form No. 36. Thus, the assessee has waived his right to appear before the Tribunal. Accordingly, we proceed on to decide this appeal by the assessee on the basis of material available on record and the submissions of ld. DR.
3. The brief facts of the case as emanating from records are: The assessee is engaged in the business of trading in Coconut and is also a partner of M/s. K.D. Jadhav, Latur. The agricultural land of the assessee was acquired by the State Government for Minor Irrigation Division, Latur in the year 1993. The assessee received compensation for acquisition of land Rs.77,43,080/- including interest Rs.52,96,632/- u/s. 28 of the Land Acquisition Act, 1894 (hereinafter referred to as “the LA Act”). The assessee filed his original return of income for the impugned assessment year on 10-10-2011 declaring total income of Rs.8,06,540/-. Thereafter, the assessee filed revised return of income on 27-03-2012 declaring total income of Rs.34,54,859/-. The assessee again revised his return of income on 25-10-2012 declaring total income of Rs.8,06,543/-. The case of the assessee was selected for scrutiny under CASS and accordingly, notice u/s. 143(2) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was issued to the assessee on 07-08-2013. During the course of scrutiny assessment proceedings, the Assessing Officer observed that the assessee in his second revised return of income has claimed total amount of compensation including interest as exempt u/s. 10(37) of the Act. The Assessing Officer following the decision of Hon’ble Supreme Court of India in the case of Bikram Singh & Ors. Vs. Land Acquisition Collector & Ors. reported as 224 ITR 551 held that the interest received on compensation/enhanced compensation u/s. 28 and 34 of the LA Act are revenue receipt, chargeable to tax u/s. 56(2)(viii) of the Act. The Assessing Officer further held that the assessee is eligible for deduction @ 50% u/s. 57(iv) of such income. Accordingly, after allowing such deduction the Assessing Officer made addition of Rs.26,48,316/-.
Aggrieved by assessment order dated 17-02-2014, the assessee filed appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order upheld the findings of Assessing Officer and dismissed the appeal of assessee. Now, the assessee is in second appeal before the Tribunal.
4. The assessee has raised following grounds of appeal before us :
“1]. The CIT(A) has failed to appreciate and consider the scheme of Land Acquisition Act and accordingly the award of interest under the provisions of section 23(1A) & 23(2) r/w Sec. 28 of the Land Acquisition Act covers under the “Part-III of the LAQ Act, which relates to Reference to court and procedure thereon for enhance the compensation as a value of land and damages for acquisition of land” and hence, it is not revenue receipt and not liable to tax. Therefore, finding of the CIT(A) may please be vacated and it may please be held that interest received u/s. 28 under LAQ is a capital receipts and not liable to tax in the case of appellant. Thus, addition may please be deleted.
2]. On the facts and in the prevailing circumstance of the case and in law, the Learned CIT(A) has grossly erred in holding that the elements of Interest received of Rs.26,48,316/-, on account of acquisition of Agricultural land, under the provisions of section 23(1A) & 23(2) r/w Sec. 28 of the Land Acquisition Act as per court order, is liable to tax. Therefore, addition made by the A.O may please be deleted.
3]. On the facts and circumstances of the case, whether the ld. CIT(A) was right in law and on facts in holding that Interest received under section 28 of the Land Acquisition Act, is a taxable event?
4]. On the facts and circumstances of the case, and with due respect to the decision relied by the CIT(A), appellant would like to rely upon the decision of Hon. Supreme Court in the case of CIT Vs Ghanshyam (HUF) (2009) 315 ITR-1(SC), dt.16-07-2009, which is logically as well as with reference to the scheme of the provision of Sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act, gives the right view in respect of the taxability of compensation received under these provision, as explained in the decision. Therefore, when there are conflicting decisions, the rule of Judicial Precedence demands that the view favorable to the assessee must be adopted, as held by the Hon’ble Supreme Court in the case of CIT vs. Vegetable Products Ltd., 88 ITR 192. Thus, the finding of the CIT(A) may please be vacated and addition may please be deleted.
5]. The Appellate craves the permission to add, amend, modify, alter, revise, substitute, delete any or all grounds of the appeal, if deemed necessary at the time of hearing of the appeal.”
5. The assessee has not filed any separate written submissions before the Tribunal. The only relevant document before us apart from grounds of appeal and orders of authorities below available for consideration on behalf of the assessee are the written submissions dated 14-10-2015 filed before the Commissioner of Income Tax (Appeals). The same are reproduced here-in-below :
“To
The Commissioner of Income Tax (Appeals)-2,
Aurangabad.
Hon’ble Sir,
Sub : Further submission reg….
Ref : i) PAN : AAOPJ6840 M
ii) Appeal No /13-14
iii) Concise revised Grounds of appeal filed on -09-2015
iv) Our earlier submission filed on -09-2015
Please refer to the above
2] With reference to the subject cited above, and in continuation of our earlier submission, it is further submitted as under for your honour’s kind perusal and sympathetic consideration that :
(i) In our earlier submission it was brought to your honour’s kind notice, that “The taxability of the receipt under Land Acquisition Act is defers case to case considering the nature of asset and related facts of the each case.”
(i) Let us see by examples, as to how the taxability differs to the facts of each case.
[A] Shri Rama Patil.
He is agriculturist. His agricultural lands situated in the small village having population of 4000, was acquired under LAQ Act and he has received the following compensation. He had claimed the said compensation as exempt, because of the facts that his agricultural land was outside of the purview of definition of Capital Gain, as per provision of section 2(14) of the I.T Act. Therefore, assessee has claimed entire compensation as exempt.
