NOHAR CHAND,PATIALA vs. INCOME TAX OFFICER, WARD-4, PATIALA, PATIALA

Since common identical grounds have been raised in all the appeals and the issues raised in all the appeals being identical, they were heard together and are being disposed off by this common and consolidated order.

The Registry has pointed out that there was a delay of one day in filing of this appeal and in ITA No. 217/Chd/2024 and delay of 12 days in ITA No. 199/Chd/2023, 29 days in ITA No. 612/Chd/2022 and 108 days in 397/Chd/2025. During the proceedings before us, the ld. Counsel for the Assessee has submitted separate applications / affidavit(s) for condonation of delay.

We have considered the reasoning given in the Applications / Affidavit (s) and inclined to condone the delay.

The ld. DR did not have any objection for this condonation of delay. We shall deal with ITA No. 217/Chd/2023 and ITA No. 6. 612/Chd/2022, as a lead case, wherein the common identical grounds raised are as under: -

The assessee in ITA No. 612/Chd/2022 has preferred the present appeal against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 31.05.2022 for the assessment year 2017-18, arising out of the rectification order passed under section 154 of the Income-tax Act, 1961 by the CPC, Bengaluru.

1 The brief facts of the case are that the assessee is an agriculturist residing in District Fatehabad, Haryana. During the year under consideration, the assessee earned income under the head "Income from Other Sources" in the nature of interest income. Besides the said income, the assessee also received enhanced (group of 07 cases) compensation together with interest on account of compulsory acquisition of his agricultural land. The assessee claimed that the entire amount of enhanced compensation along with the interest received thereon under section 28 of the Land Acquisition Act formed part of the compensation itself and was exempt from tax under section 10(37) of the Act. Accordingly, while filing the return of income, the assessee excluded the said receipts from the computation of taxable income.

2 The return of income was processed by CPC, Bengaluru and thereafter a rectification order under section 154 of the Act was passed wherein the interest amounting to Rs.1,16,81,419/- received on enhanced compensation was brought to tax under the head "Income from Other Sources" by invoking the provisions of section 56(2)(viii) read with section 145B(1) of the Act. Consequently, the total income of the assessee was determined at Rs.1,25,96,860/- as against the returned income of Rs.9,15,440/-.

3 Aggrieved by the aforesaid rectification order, the assessee preferred an appeal before the learned CIT(A). The learned CIT(A), however, upheld the action of the CPC by holding that the exemption under section 10(37) is confined to capital gains arising (group of 07 cases) on compulsory acquisition of agricultural land and does not extend to interest received on enhanced compensation which is specifically taxable under section 56(2)(viii) read with section 145B(1) of the Act. The appeal of the assessee was accordingly dismissed. Being aggrieved, the assessee is now in appeal before the Tribunal.

4 The learned Authorised Representative submitted that the authorities below have erred both on facts and in law in treating the interest received on enhanced compensation as taxable income under the head "Income from Other Sources". He submitted that the agricultural land of the assessee had been compulsorily acquired and, pursuant to the orders passed by the Hon'ble Punjab & Haryana High Court, the assessee received enhanced compensation together with interest under section 28 of the Land Acquisition Act.

5 It was contended that the interest awarded under section 28 of the Land Acquisition Act is not an independent interest receipt but constitutes an integral part of the enhanced compensation itself. Therefore, once the compensation received on compulsory acquisition of agricultural land is exempt under section 10(37) of the Income-tax Act, the interest awarded under section 28, being (group of 07 cases) part of such compensation, is equally entitled to the same exemption.

6 The learned AR further argued that the CPC has misapplied the provisions of sections 56(2)(viii) and 145B(1) of the Act. According to him, section 145B merely prescribes the year of taxability of a receipt wherever such receipt is otherwise taxable. It neither creates a charge of tax nor overrides the exemption specifically available under section 10(37). Therefore, the provisions relating to the method or timing of taxation cannot nullify a statutory exemption available under the Act.

7 The learned AR placed reliance upon the judgment of the Hon'ble Supreme Court in CIT v. Ghanshyam (HUF) (315 ITR 1) to contend that interest awarded under section 28 of the Land Acquisition Act forms part of the compensation itself. Reliance was also placed on the decision of the Hon'ble Supreme Court in Union of India & Others v. Hari Singh & Others, wherein the nature of interest awarded under section 28 was explained. It was submitted that the Revenue authorities failed to appreciate the distinction between interest awarded under section 28 and interest awarded under section 34 of the Land Acquisition Act.

8 The learned AR further submitted that in several similarly placed cases, the Department itself has accepted the exemption claimed by assessees in respect of such receipts. He, therefore, prayed that the addition of Rs.1,16,81,419/- made under the head "Income from Other Sources" deserves to be deleted in entirety.

1 The learned Departmental Representative, on the other hand, strongly relied upon the orders of the CPC as well as the learned CIT(A). He submitted that the rectification order has been passed strictly in accordance with the provisions of the Act and there is no infirmity warranting interference by the Tribunal.

2 The learned DR contended that section 56(2)(viii) specifically provides that interest received on compensation or enhanced compensation shall be chargeable to tax under the head "Income from Other Sources". Further, section 145B(1) clearly stipulates that such interest shall be deemed to be the income of the previous year in which it is received. Therefore, once the assessee admittedly received interest on enhanced compensation during the relevant previous year, the same was rightly brought to tax by the CPC. It was further argued that section 10(37) grants exemption only in respect of capital gains arising from compulsory acquisition of agricultural land and does not extend to interest received on such (group of 07 cases) compensation. The Legislature has consciously enacted a separate charging provision for taxing interest received on compensation and, therefore, the assessee cannot seek exemption by treating the same as part of the compensation.

3 The learned DR accordingly submitted that the learned CIT(A) has correctly interpreted the statutory provisions and rightly confirmed the addition made by the CPC. He, therefore, prayed that the order of the learned CIT(A) be upheld and the appeal of the assessee be dismissed. He had also relied upon the decision of the Coordinate Bench in the case of Ajay Jain.

We have heard the rival submissions and perused the material available on record. The solitary issue arising for our consideration is whether the Assessing Officer was justified in declining to grant the relief sought by the assessee in proceedings under section 154 of the Income-tax Act, 1961. 9.1 It is an admitted position that, on the date of passing the impugned order, the issue relating to the taxability of interest received on enhanced compensation stood concluded by the judgment of the Hon'ble Juri ictional Punjab & Haryana High Court in the case of Manjit Singh Narang, wherein it has been categorically held that the interest received on enhanced (group of 07 cases) compensation is chargeable to tax under the provisions of section 56(2)(viii) read with section 145B of the Act. Once the law has been declared by the Hon'ble Juri ictional High Court, the same becomes binding upon all authorities functioning within its territorial juri iction. Consequently, the Assessing Officer had no option but to follow the law so declared and could not have passed any order allowing or modifying the relief claimed by the assessee contrary to the binding judgment of the Hon'ble Juri ictional High Court.

2 In this regard, we may also profitably refer to the decision of the Hon'ble Telangana High Court in the case of Mylan Laboratories Ltd., wherein the Hon'ble High Court reiterated the settled principle that the authorities functioning under the Act are bound by the judgments of the juri ictional High Court and that the provisions of section 154 cannot be invoked to review, modify or circumvent a binding judicial precedent. The juri iction under section 154 is confined to rectification of mistakes apparent from the record and cannot be exercised to take a view contrary to the law declared by the Hon'ble Juri ictional High Court.

The contention of the learned Authorised Representative that subsequent decisions of the Coordinate Bench of the Tribunal (group of 07 cases) entitle the assessee to relief is equally devoid of merit. It is trite law that a Coordinate Bench of the Tribunal cannot override or dilute the binding effect of a judgment rendered by the Hon'ble Juri ictional High Court. Therefore, any subsequent decision of the Tribunal taking a contrary view cannot furnish a valid basis for invoking the rectification juri iction under section 154 of the Act.

The reliance placed by the learned Authorised Representative on decisions dealing with recall or rectification of orders under section 254(2) of the Act pursuant to subsequent judgments of superior judicial forums is clearly distinguishable. In such cases, the original order of the Tribunal was passed in conformity with the law prevailing at the relevant point of time and the subsequent reversal or modification of that legal position by the Hon'ble Supreme Court justified the exercise of powers under section 254(2). The facts of the present case stand on an entirely different footing. Here, on the very date when the impugned order came to be passed, the issue was governed by the binding judgment of the Hon'ble Juri ictional High Court in Manjit Singh Narang (supra), which was directly against the claim of the assessee. Therefore, no fault can be found either with the action of the Assessing Officer or with the order passed by the learned CIT(A), both of whom have (group of 07 cases) merely followed the law declared by the Hon'ble Juri ictional High Court.

However, before parting with the matter, we consider it appropriate to clarify one important aspect. We find that in certain cases, including the present one, the Assessing Officer, CPC or the learned CIT(A) has subjected the entire amount of interest received on enhanced compensation to tax. Such an approach is not in consonance with the statutory scheme of the Act. Once the interest on enhanced compensation is held to be taxable under section 56(2)(viii) read with section 145B of the Act, the statutory deduction prescribed under section 57(iv) of the Act necessarily follows. The Legislature has specifically provided that a deduction equal to fifty per cent of such interest shall be allowed while computing the income chargeable under the head "Income from Other Sources", and no other deduction shall be admissible. Consequently, only 50% of the interest received can ultimately be brought to tax. Therefore, wherever the Assessing Officer, CPC or the learned CIT(A) has taxed the entire amount of interest without granting the statutory deduction under section 57(iv), such action cannot be sustained. Accordingly, while upholding the taxability of the interest under section 56(2)(viii) read with section 145B of the Act, we (group of 07 cases) modify the orders of the lower authorities to the limited extent of directing the Assessing Officer to allow the statutory deduction of 50% of the interest under section 57(iv), if the same has not already been granted.

Subject to the aforesaid limited modification regarding the statutory deduction admissible under section 57(iv) of the Act, we find no infirmity in the impugned order of the learned CIT(A). Accordingly, the grounds raised by the assessee are dismissed.

Since the issues involved in all the appeals are identical and even the submissions of the ld. Representatives, too, are similar; therefore, the appeals filed by the different assessee for respective assessment years stand dismissed.

In the result, all the appeals of the assessee stand dismissed. Order pronounced in the open court on 14.07.2026 (MANOJ KUMAR AGGARWAL ) JUDICIAL MEMBER rkk (group of 07 cases)

""थ"/ The Respondent 3. आयकर आयु"/ CIT 4. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"ीगढ़/ DR, ITAT, CHANDIGARH 5. गाड" फाईल/ Guard File