Vinod Prabhudayal Agrawal Vs ITO (ITAT Pune)
NHAI Acquisition Interest Is Part of the Exempt Award: Section 96 Overrides Taxability u/s 56(2)(viii)
The Pune Bench of the Income Tax Appellate Tribunal considered the tax treatment of interest received on enhanced compensation arising from compulsory acquisition of rural agricultural land by the National Highways Authority of India (NHAI) for Assessment Year 2018-19. The assessee, an individual and legal heir of late Mrs. Rama Vinod Agrawal, had received total compensation of Rs.2,52,35,936/-, comprising compensation of Rs.1,88,91,675/- and interest of Rs.63,44,261/- under section 28 of the Land Acquisition Act, 1894. TDS of Rs.6,34,427/- had been deducted from the interest amount. The assessee claimed the receipt as exempt, relying, inter alia, on section 10(37) of the Income-tax Act and section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (RFCTLARR Act).
During assessment proceedings, the Assessing Officer accepted the compensation component as exempt but treated 50% of the interest received as income from other sources under section 56(2)(viii), after allowing the 50% deduction contemplated by section 57(iv), resulting in an addition of Rs.31,72,131/-. The CIT(A)/NFAC upheld the assessment. The assessee contended before the Tribunal that the interest awarded under section 28 of the Land Acquisition Act formed part of enhanced compensation and that section 96 of the RFCTLARR Act, which provides exemption from income tax in respect of qualifying awards or agreements, applied to the compulsory acquisition.
