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�थायीलेखासं./PAN NO: AAAHL4804P अपीलाथ�/Appellant ��यथ�/Respondent Hearing through video Conferencing िनधा�रतीक�ओरसे/Assessee by : ShriVineetKrishan, Advocate राज�वक�ओरसे/ Revenue by : Smt. C. Chandrakanta, CIT सुनवाईक�तारीख/Date of Hearing : 17.12.2020 उदघोषणाक�तारीख/Date of Pronouncement : 23.12.2020 आदेश/Order Per R.L. Negi, Judicial Member:
The assessee has filed the present appeal against the order dated 03.10.2019 passed by Commissioner of Income Tax (Appeals), Panchkula [for short ’the CIT(A)’] for the assessment year 2010-11, vide which, the Ld. CIT(A) has allowed the appeal filed by the assessee against the assessment order passed u/s 143(3) of the Income Tax Act, 1961 [for short ’the Act’].
Brief facts of the case are that the appellant/assessee being Karta of HUF, filed its return of income for the assessment year under consideration declaring total income of Rs. 6,37,450/- after claiming exemption of Rs. 6,74,61,917/- u/s 10(37) of the Act. The return was Shri Lakshmi Chander Gupta ('HUF') 2 processed u/s 143(1) of the Act. Subsequently, the Assessing Officer (AO) issued notice u/s 148 of the Act on the ground that the interest income received by the assessee on enhanced compensation on compulsory acquisition has escaped assessment. The assessee did not file fresh return in response to notice u/s 148 of the Act, however, requested to treat the original return filed as return filed in response to notice u/s 148 of the Act. Accordingly, AO issued notice u/s 143(2) and 142(1) calling for information and details. In response thereof, the Authorised Representative (AR) of the assessee appeared before the AO and submitted reply stating that the assessee received the interest amounting to Rs. 6,74,61,917/- along with the enhanced compensation from HUDA for its land acquired in the year 1990 and as per the law laid down by the Hon’ble Supreme Court in the case of Ghanshyam HUF 315 ITR1(SC), interest received on enhanced compensation is exempt u/s 10(37) of the Act. The AO rejected the contention of the assessee holding that exemption u/s 10(37) of the Act is allowable in respect of capital gains arising from transfer of agricultural land through compulsory acquisition and not in respect of interest thereon. Accordingly, AO passed Assessment Order and made addition of Rs. 3,43,68,408/- to the income of the assessee after allowing deduction u/s 57(iv) @ 50% and determined the total income of Rs. 3,43,68,410/-. -Chd/2020- Shri Lakshmi Chander Gupta ('HUF') 3 3. The assessee challenged the assessment order before the Ld. CIT(A)/. The Ld. CIT(A) after hearing the assessee allowed the appeal and deleted the addition made by the AO u/s 56(2)(viii) of the Act, however, directed the AO to verify if the interest received from enhanced compensation was allowable u/s 28 of Land Acquisition Act and give relief to the assessee accordingly. Aggrieved by the said findings of the Ld. CIT(A), the Revenue is in appeal before this Tribunal. 4. The Revenue has challenged the findings of the Ld. CIT(A) by raising the following grounds of appeal:- 1. “Whether on the facts and circumstances of the case the Ld. CIT(A) has erred in law by holding that the interest received u/s 28 of the land acquisition Act, 1894 on the compulsory acquisition of agri. land is in the nature of compensation and exempt u/s 10(37)of the IT Act and is not chargeable to tax under the head income from other sources u/s 56 of the IT Act?
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law by disregarding the statutory provision of sub section 2 of section 56 of the IT Act read with clause (b) of section 145A according to which the interest on con compensation or enhanced compensation is chargeable to tax under the head income from other sources in the year subject to deduction of a sum equal to 50% of such Income under clause (iv) of section 57 of the IT Act?.
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in law by disregarding the decision of the Hon'ble High Court in the case of Shri Lakshmi Chander Gupta ('HUF') 4 Manjeet Singh Vs. UOI & Others reported as (2016) 237 Taxman 116 (P& H) and decision in the case of CIT, PKL Vs. Prem Singh decided on 16.12.2010 in CM No. 27928-29-CII-2010 wherein the decision of the Hon'ble Apex Court in the CIT Vs. GhanshyamDass(HUF) reported as (12209) 315 ITR1SC was considered and it was held that the interest on enhanced compensation u/s 28 is chargeable to tax u/s 56 of the IT Act, as income from other sources.
4. It is prayed that the order of the Ld. CIT(A) be set- aside and that of the AO be restored.
5. The appellant craves leave to add or amend the grounds of appeal before the appeal is heard and disposed off.”
Before us, the Ld. Departmental Representative (DR) relying on the assessment order passed by the AO submitted that provisions of section56(2), 57(iv) and 145A have been amended w.e.f. assessment year 2010-11 and hence, the interest on compensation or enhanced compensation is chargeable to tax under the head ‘income from other sources'. The Ld. DR further submitted that since the impugned order is not in accordance with the judgments of the Hon’ble Punjab and Haryana High Court in the case of Manjeet Singh vs. Union of India 237 Taxman116 (P&H) and CIT vs. Prem Singh CM No. 27928-29-CII-2010, the same is liable to be set aside.
On the other hand, the Ld. Counsel for the assessee supporting the order passed by the Ld. CIT(A) submitted that the Ld. CIT(A) has passed the impugned order by following the judgment of the Hon'ble Shri Lakshmi Chander Gupta ('HUF') 5 Supreme Court in the case of Ghanshyam ('HUF') (supra), wherein, it has been held that the interest received on enhanced compensation through court is in the nature of compensation. Hence, there is no infirmity in the order passed by the Ld. CIT(A) to interfere with. The Ld. Counsel further pointed out that the Chandigarh Bench of the ITAT has decided the identical issue infavour of the assessee in the case of Som Nath vs. ITO in 552/Chd/2016, after considering the judgment of the Hon'ble Punjab & Haryana High Court in the case of Manjit Singh vs. Union of India and others (supra), therefore, there is no merit in the contention of the revenue. Accordingly, the Ld. Counsel submitted that since there is no merit in the appeal of the revenue, the same may be dismissed.
We have heard the rival submissions of the parties and perused the material on record including the cases relied upon by the parties. As pointed out by the Ld. Counsel the Ld. CIT(A) has decided the issue involved in this appeal in favour of the assessee by following the ratio laid down by the Hon’ble Supreme Court in the case of CIT vs. Ghanshyam 'HUF'(supra) and the decisions of the coordinate Benches of the Tribunal in the cases of Som Nath vs.ITO, ITA No. 552/Chd./2016 and in a group case of Surinder Kumar and others in ITA N.539 to 543/Chd./2016, to 551/chd/2016, ITA No. 368//2014, ITA No. 948/Chd/2016and ITA No.949/Chd/2016. The Ld. CIT(A) has ITA No. 68-Chd/2020- Shri Lakshmi Chander Gupta ('HUF') 6 further reproduced the findings of the order of the coordinate Bench. The findings of the coordinate Bench in the group case discussed above read as under:
“7. The core ground involved in these appeals is regarding the taxability of interest received on enhanced compensation u/s 28 of the Land Acquisition Act, 1894. Now, there are two questions involved in these appeals, first issue is regarding the year of taxability of the interest income whether it has to taxed in the year of receipt in the light of the decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) or is to be taxed on the basis of apportionment for each year from the date of acquisition of lands till the receipt of the compensation in the light of the decision of the Hon'ble Supreme Court in the case of Rama Bai (supra); the second issue involved is as to whether the interest awarded u/s 28 of the Land Acquisition Act on enhanced compensation is to be treated as part of the enhanced compensation and will not be taxable separately as interest income under the Head ‘income from other sources’?
8. We find that both these issues are covered by the aforesaid decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) holding the same to be in the nature of compensation itself. The Court also dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in 8 which it is received. The said findings given in the case of Ghanshyam (HUF) (supra) have been reiterated by the Hon'ble Supreme Court in the case of GovindbhaiMamaiya (supra) observing as under:
“In so far as the second question is concerned, that is also covered by another judgment of this Court in Commissioner of Income Tax, Faridabad vs. Ghanshyam (HUF) reported in (2009) 8 SCC 412, 6 albeit, in favour of the Revenue. In that case, the court drew distinction between the “interest” earned under Section 28 of the Land Acquisition Act and the “interest” which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover “interest” and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:
-Chd/2020- Shri Lakshmi Chander Gupta ('HUF') 7 “49. As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.
It is true that “interest” is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards “interest” both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23 (1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act.”
It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible.”
The Ld. counsels for assessee has further brought our attention the latest decision of the Hon'ble Supreme Court in the case of CIT Vs. Chet Ram (HUF) dated 12.9.2017 in Civil Appeal No.13053/2017 wherein also the Hon'ble Supreme Court has again reiterated the proposition laid down in the case of Ghanshyam (HUF) (supra), which we find has been further reiterated in the case of Union of India vs. Hari Singh & others in Civil Appeal No. 1504 of 2017 dated 15.9.2017, as under: 9 Shri Lakshmi Chander Gupta ('HUF') 8 “(2) While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in 'Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF)' [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not.”
9.1 The said decision as rightly pointed out by the Ld. counsel for assessee have been rendered by the Hon'ble Apex Court subsequent to the decision passed by the Hon'ble Jurisdictional High Court in the case of Manjeet Singh(HUF) (supra) which had dealt with the decisions of the Hon'ble Apex Court in Ghanshyam, HUF (supra). Therefore, in view of the same, the proposition laid down in Ghanshyam, HUF (supra) remains and which having been laid down by the Hon'ble Apex Court is the law of the land and has to be followed by all lower authorities. In view of the above, we hold that the interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable. The ratio of the order laid down vide order dt. 09/07/2018 in a group of cases in to 1437/CHD/2016 would apply mutatis-mutandis to the core issue of taxability of interest received on enhanced compensation.
In view of the above discussion, these appeals of the assessees are hereby allowed.”
8. As pointed out by the Ld. Counsel for the assessee, the Ld. CIT(A) has decided the issue involved in this case in favour of the assessee by following the ratio laid down by the Hon'ble Supreme Court as well as the decisions of the Coordinate Benches. We further notice that the coordinate Bench has decided the identical issue in favour of the assessee after considering the judgments relied upon by the Ld DR. Shri Lakshmi Chander Gupta ('HUF') 9 9. The Ld. DR did not bring to our notice any case law contrary to the findings of the Coordinate Bench in the cases referred above to substantiate the contention of the revenue. In our considered view, the findings of the Ld. CIT(A) are based on the ratio laid down by the Hon'ble Supreme Court in the case of Ganshyam HUF (supra) and the decisions of the Coordinate Benches discussed above. We therefore, do not find any reason to interfere with the findings of the Ld. CIT (A) Hence, respectfully following the decisions of the coordinate Benches, discussed above, we uphold the order passed by the Ld. CIT(A) and dismiss the appeal of the Revenue.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on 23.12.2020.