GOPAL RADHAKISHAN BRIJWASI,LATUR vs. ITO, WARD 1, NANDED, NANDED

Ld. AR filed paper book. The Ld. AR submitted that the ITO had erred in not following the direction of the ITAT. The Ld. AR submitted that on identical facts in the case of assessee’s father Mr. Radhakishan Devkinandan Brijwasi, the Assessing Officer held that interest is not taxable which was received on enhanced compensation. Ld. AR filed copy of the assessment order. Ld. AR submitted that acquired land is same. Ld. AR relied on the various decisions filed in the paper book.

Ld. DR relied on the order of the AO and the Ld. CIT(A).

We have heard both the parties and perused the records. In this case admitted facts are that the land compulsorily acquired by Government under Land Acquisition Act was agricultural land used for agricultural purposes. Assessee had claimed entire amount of compensation exempt u/s 10(37) of the Act. It is an admitted fact that assessee received compensation of Rs.2,77,61,035/- out of which interest amount was Rs.1,92,63,234/-. The Assessing Officer held that interest received u/s 28 of the Land Acquisition Act is taxable u/s 56(2)(viii) of the Act.

This question has been decided by the Hon’ble Kerala High Court in favour of the assessee. The Hon’ble Kerala High Court in the case of Shri Anvar Ali Poolakkodan Vs. ITO, Tirur, ITA No. 32 of 2023 vide order dated 11.04.2025, (2025) 344 CTR 551 held as under : Quote, “ 9. Going by the nature of the payment of interest under the LAA, we are inclined to hold that the payment of interest on delayed payment of compensation to an assessee, be it under Section 28 or Section 34 of the LAA, would partake the character of the principal compensation itself since it is essentially paid to compensate the assessee for the loss he suffered on account of not having the use of the principal compensation amount at the time when it fell due. We cannot lose sight of the fact that compensation amounts paid to a person towards compulsory acquisition of his property traces its roots to the constitutional obligation to pay such compensation under Article 300A of the Constitution. ………….. 10. In the light of the discussion above, we hold that interest amounts received by an assessee in respect of delayed payment of compensation under the LAA will be treated as accruals to the principal compensation amount and be classified as “Capital Gains’ for the purposes of the I.T. Act. Consequently, the interest amounts will also get the benefit of Section 10 (37) of the I.T. Act if the land compulsorily acquired is agricultural land. Further, since the interest amounts so received are not in the nature of interest as defined under Section 2 (28A), the provisions of Section 56 of the I.T. Act will not be attracted in such cases. While the provisions of Section 56 (2)(viii) deal with interest on compensation or enhanced compensation, the said reference to compensation or enhanced compensation need not be seen as made in connection with compulsory acquisition of property. The

No contrary decision of Hon’ble Jurisdictional High Court brought to our notice by the Ld. DR. In this case, assessee’s father’s land and assessee’s land was compulsory acquired by the Government under the Land Acquisition Act. Ld. AR filed the relevant order of the special land acquisition officer. The Assessing Officer in the case of assessee’s father has held that the interest paid on compensation is not taxable. The AO cannot take different view on the same facts in the case of assessee, when the impugned land is same. Even otherwise Hon’ble Kerala High Court (supra) has held that interest received on compensation under Land Acquisition Act u/s 28 and 34 of the Land Acquisitions Act are not taxable u/s 56(2)(viii) of the Income Tax Act and it is exempt u/s 10(37) of the Income Tax Act. In these facts, we direct the AO to delete the addition. Accordingly, the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.