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Income Tax Appellate Tribunal, DELHI “SMC” BENCH: NEW DELHI
Before: SHRI KUL BHARAT
ORDER
PER KUL BHARAT, JM :
This appeal filed by the assessee for the assessment year 2016- 17 is directed against the order of Ld. CIT(A), Karnal dated 06.08.2020. The assessee has raised following grounds of appeal:-
1. “That the Ld.CIT(A) is not justified in confirming that the 50% interest on enhanced compensation on compulsory acquisition of agricultural land amounting to Rs.18,83,783/- is liable to tax under the head “Income from other sources” and not a part of enhanced compensation being exempt.
2. That the order of CIT(A) Karnal is arbitrary, illegal and against the facts. Page | 1
That the CIT(A) Karnal has passed the speaking orders and has not clarified that how the case differ from the judgements/observations of apex courts/Hon’ble Supreme Courts. The assessee craves, leave to add, amend, alter the grounds of appeal
before your honor at the time of hearing of appeal.”
2. At the time of hearing, no one appeared on behalf of the assessee. It is seen from the record that despite having given opportunities to the assesse, no one appeared. Further, it is seen that the notice sent by the Registry through speed post is duly served as acknowledgement due is on record. Therefore, the appeal is taken up for hearing in the absence of the assessee.
3. The only effective ground in this appeal is against the sustaining of addition of Rs.18,83,783/- being 50% of the total amount receivable on enhanced compensation. FACTS OF THE CASE 4. Facts giving rise to the present appeal are that the assessee filed his income tax return through electronic mode, declaring income at Rs.NIL plus agriculture income at Rs.50,500/- on 11.09.2017. The case was selected for scrutiny through CASS and the assessment was framed vide order dated 18.12.2018 u/s 143(3) of the Income tax Act, 1961 (“the Act”). While framing the assessment, the Assessing Officer (“AO”) made addition of Rs.18,83,783/- in respect of the interest received on enhanced compensation. 5. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions, dismissed the appeal of the assessee by observing as under:-
3.2. Findings:- “In this case, an addition was made on account of receipt of interest on enhanced compensation. The latest judgement of the hon’ble Punjab & Haryana High Court in the case of Mahender Pal Narang vs CBDT, New Delhi and others in CWP No.17971 of 2019 dated 19.02.2020 holds that interest received on enhanced compensation on compulsory land acquisition is to be treated as income from other sources. Therefore, the addition was rightly made and I confirm the same.”
Now, the assessee is in appeal before this Tribunal.
I have heard the contention Ld.Sr.DR and material placed on record and gone through the orders of the authorities below. The only issue is with regard to taxability of interest on the enhanced compensation. The AO has made addition by observing as under:-
The assessee is an individual showing NIL Income during the year under consideration. The assessee has agriculture Income at Rs.50,500/-. During the assessment proceedings, it was noticed that assessee had received Interest at Rs.37,67,566/- & shown in Page | 3 his return of Income under the head Income from other sources. Further a deduction u/s 57 of the I. T. Act, 1961 was claimed at Rs.37,67,566/- & shown NIL Income in the return of Income. In the reply downloaded from the system, it was revealed that assessee had received Interest an amount of enhanced compensation on compulsory acquisition of land & claimed deduction u/s 57 of the I. T. Act, 1961. During the assessment proceedings, a show cause notice was issued through e-filing portal that as per provision of section 56(2)(VII) r.w.s. 57(iv) & section 145 A(b) of the I. T. Act, 1961 a deduction of 50% of the total interest amount is allowable & balance 50% of the total interest amount taxable in the year of receipt. In the reply, it is noticed that the assessee has followed the judgement of Hon'ble ITAT, Chandigarh bench, Chandigarh passed vide order dated 02.02.2016. In the said order, orders of Hon’ble Apex Court passed in the case of Ghanshyam Dass (HUF) order was passed in the year 2009 & after that, amendment brought out by finance Act (2) 2010 w.e.f. 01.04.2010 which was applicable w.e.f. the assessment commencing after the assessment year 2010-11 onwards. This amendment is fully applicable in the present case. Therefore, a deduction of Rs.18,82,783/- is allowable @ 50% of total Interest amount receivable at Rs.37,67,566/- & remaining amount of interest at Rs.18,83,783/- in chargeable to tax for the said assessment year.
From the above finding of the authorities below, it is evident that the component of the interest in the enhanced compensation was brought to tax u/s 56 of the Act. However, it is noticed that Page | 4 authorities below have not admitted to the submission of the assessee. Therefore, the impugned order is hereby set aside and the assessment is restored to the file of AO to make assessment afresh. The AO would consider the objection of the assessee qua taxability of interest received on enhanced compensation. Thus, ground raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.