Jagpal Vs PCIT (ITAT Delhi)
Revision u/s 263 – Taxability of Interest on Enhanced Compensation u/s 28 of the Land Acquisition Act, 1894
The appeal concerned the validity of revisionary proceedings initiated under Section 263 of the Income-tax Act for AY 2018–19 in relation to the taxability of interest received on enhanced compensation under Section 28 of the Land Acquisition Act, 1894. The assessee had received interest of ₹82,88,672 on enhanced compensation for compulsory acquisition of agricultural land and claimed it as exempt under Section 10(37). The Assessing Officer accepted the claim in reassessment proceedings. The Principal Commissioner, however, held that the Assessing Officer failed to conduct proper enquiry in light of Sections 56(2)(viii), 145B(1), and 57(iv), and binding judicial precedents, and therefore treated the assessment as erroneous and prejudicial to the interests of revenue. The Income Tax Appellate Tribunal, Delhi upheld the revision, holding that interest on enhanced compensation is taxable as “income from other sources” post the 2010 amendment and is not covered by the exemption under Section 10(37). The assessee’s appeal was dismissed.
Core Issue: Whether interest received on enhanced compensation for compulsory acquisition of agricultural land under Section 28 of the Land Acquisition Act, 1894 is:
- exempt under Section 10(37) of the Income-tax Act, 1961 as part of compensation; or
- taxable as “Income from Other Sources” under Section 56(2)(viii) read with Sections 145B(1) and 57(iv), post amendment w.e.f. 01.04.2010;
and whether failure of the Assessing Officer to examine this issue justified revision under Section 263.
