DEVENDER KUMAR,YAMUNANAGAR vs. ITO, YAMUNANAGAR

That the impugned order is bad both on facts and law.

That the Ld.Addl/JCIT (A) wrongly & illegally rectified the order passed by Ld.CIT(A) (being higher authority) u/s 154 read with section 250 by overstepping his juri iction in a highly mechanical manner.

That the Ld.Addl/JCIT (A) wrongly & illegally initiated the rectification u/s 154 read with section 250 and further erred in rectifying the order upholding the taxability of interest of Rs 49,89,244/- as per section 56(2)(viii) without appreciating the fact that a) the issue has not attained finality and cannot be termed as mistake apparent from record, b) no rectification can be made for change of opinion, c) ignorance of law or any specific case law cannot be an excuse for rectification, d) the clear findings of the Apex Court that interest received u/s 28 of LA Act 1894 is capital receipt in the cases of CIT Vs Ghanshyam HUF (2009) 315 ITR 1 (SC), CIT Vs Chet Ram HUF dated 12.09.2017 in Civil Appeal No 13053 of 2017 and in the case of Union of India vs Hari Singh and Ors in Civil Appeal No 1504 of 2017 dated 15.09.2017 which have been followed by ITAT in number of cases, still holds good and the Hon’ble Apex Court has not reversed its finding till date.

That the Ld. Appellate Authority wrongly & illegally upheld the interest levied u/s 234A & 234B.

That the Ld. Appellate Authority wrongly & illegally upheld the demand of Rs ___________/-.

That the Appellant craves permission to add, amend, elucidate any ground of appeal at the time of hearing.

Briefly, the facts of the case are that the assessee, an individual, had originally received compensation of Rs.49,45,643/- for compulsory acquisition of land and thereafter received interest on enhanced compensation amounting to Rs.53,99,554/-. The assessee claimed the entire amount of interest received on enhanced compensation as exempt under section 10(37) of the Income Tax Act, 1961 contending that the same formed part of compensation on acquisition of agricultural land. The original assessment for Assessment Year 2018-19 was completed under section 143(3) read with section 143(3A) of the Act on 10.03.2021 at a total income of Rs.2,83,320/-, wherein the claim of exemption under section 10(37) of the Act was accepted by the Assessing Officer. Subsequently, the Ld. PCIT, Panchkula exercised revisionary juri iction under section 263 of the Act vide order dated 24.03.2023 holding that exemption under section 10(37) was not allowable on the interest component and that only deduction to the extent of 50% under section 57(iv) of the Act was admissible. Accordingly, the assessment was set aside with a direction to frame a fresh assessment.

1 Pursuant to the directions issued under section 263 of the Act, the case was transferred to the Faceless Assessment Unit and notices under section 142(1) dated 12.10.2023 were issued to the assessee. In response, the assessee submitted replies contending that the interest received on enhanced compensation under the Land Acquisition Act partook the character of compensation itself and was therefore exempt under section 10(37) of the Act. However, the Assessing Officer did not accept the submissions of the assessee. Following the directions of the Ld. PCIT and relying upon the provisions of section 56(2)(viii) read with section 57(iv) of the Act, the Assessing Officer held that the interest received on enhanced compensation was taxable under the head “Income from Other Sources” and only 50% deduction therefrom was allowable under section 57(iv) of the Act. Consequently, 50% of the interest amounting to Rs.26,99,77/- was brought to tax and the assessment was completed accordingly.

Against the order of the AO the assessee went in appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the action of the Assessing Officer. The Ld. CIT(A) observed that the provisions of section 56(2)(viii) specifically provides for taxation of interest received on compensation or enhanced compensation and section 57(iv) allows deduction of 50% thereof. The appellate authority further held that the judgments relied upon by the assessee relating to compensation under the Land Acquisition Act were distinguishable in view of the subsequent statutory provisions introduced in the Income Tax Act. The appeal of the assessee was accordingly dismissed.

Against the order of the Ld. CIT(A) the assessee preferred an appeal before the Tribunal.

During the course of hearing the Ld. AR submitted that the interest received on enhanced compensation partakes the character of compensation and is therefore capital in nature. It was argued that interest awarded under section 28 of the Land Acquisition Act forms part of compensation and cannot be taxed separately as income from other sources. Reliance was placed upon the judgments of the Hon’ble Supreme Court in the cases of CIT vs. Ghanshyam (HUF), CIT vs. Chet Ram (HUF) and other judicial precedents. The Ld. AR further submitted that identical issues had been decided in favour of assessees in various earlier decisions of the Tribunal and therefore the addition deserved to be deleted.

The Ld. DR strongly supported the orders of the lower authorities. It was submitted that after insertion of section 56(2)(viii) and section 57(iv), the legislative intent is very clear that interest received on compensation or enhanced compensation is taxable under the head “Income from Other Sources.” The Ld. DR further submitted that the issue now stands covered against the assessee by the decision of the Coordinate Chandigarh Bench of the Tribunal in the case of Ajay Kumar & Others Vs. ITO in ITA No.463/Chd/2023 and connected matters dated 11.11.2025, wherein the Tribunal upheld the taxability of such interest under section 56(2)(viii) of the Act.

We have heard the rival submissions and perused the material available on record. The issue involved in the present appeal relates to taxability of interest received on enhanced compensation under the provisions of section 56(2)(viii) read with section 57(iv) of the Income Tax Act, 1961. 4

1 We find that the identical issue has already been considered and adjudicated by the Coordinate Chandigarh Bench of the Tribunal in the case of Ajay Kumar & Others Vs. ITO in ITA No.463/Chd/2023 and other connected appeals vide order dated 11.11.2025, wherein the Coordinate Bench, after considering the statutory provisions as well as the judicial precedents relied upon by the assessees, held that interest received on compensation/enhanced compensation is taxable under the head “Income from Other Sources” in terms of section 56(2)(viii) of the Act and only deduction as prescribed under section 57(iv) is allowable.

2 Since the facts of the present case are identical to the facts considered by the Coordinate Bench and no distinguishing feature has been brought to our notice by the assessee, respectfully following the aforesaid decision of the Coordinate Chandigarh Bench, we uphold the order of the Ld. CIT(A). Accordingly, the appeal of the assessee is dismissed.

In the result, appeal of the Assessee is dismissed.

""थ"/ The Respondent 3. आयकरआयु"/ CIT 4. आयकरआयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File