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Income Tax Appellate Tribunal, DELHI BENCH, ‘SMC-2’: NEW DELHI
Before: SHRI R.K. PANDA
This appeal filed by the assessee is directed against the order dated 17.05.2017 of the learned CIT(A)-1, Gurgaon, relating to AY-2013-14.
Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 19.10.2013 declaring total income of Rs.2,62,880/-. During the course of assessment proceedings vide order sheet entry dated 01.03.2016, the assessee was required to explain why an amount of Rs.42,18,086/- being 50% of interest income of Rs.84,36,173/- received from DRO cum LAC, Gurgaon, may not be brought into tax, keeping in view the amended provisions of Income Tax Act as clause (viii) in sub-section 2 of section 56 introduced by Finance Act, 2009 effective from the assessment year 2010-11, after allowing deduction as per provisions of section 57(iv) of the I.T.
Act, 1961/-. In response to above show cause notice the assessee appeared before the AO but did not make any submission. The AO referring to the provisions of section 56(2)(vii), 57(iv) and section 145A(b) of the Act by the Finance Act (No.2) 2009, which was introduced w.e.f. 01.04.2010, held that from AY 2010-11, the interest received on delayed compensation or enhanced compensation would be liable to tax as income from other sources u/s 56(2)(viii) of the Act. He was of the opinion that no distinction has been made in clause (viii) of subsection (2) of section 56 of the I.T. Act in respect of interest on delayed compensation i.e. interest u/s 34 of Land Acquisition Act 1894 or interest received on enhanced compensation i.e. interest u/s 28 of Land Acquisition Act, 1894. According to him, the issue has been set at rest with the introduction of section 56(2)(viii) and 145A(b) to the I.T. Act, 1961 with effect from 01.04.2010. The interest received would be liable to tax in the year of receipt in view of provisions of section 145A(b) of the I.T. Act. However, deduction to the extent of 50% would be available to the assessee u/s 57(iv) of the I.T. Act. In view of the above, he held that interest received on enhanced compensation to the extent of Rs.84,36,173/- has to be brought to tax as income of the assessee from other sources and deduction u/s 57(iv) of the Act is to be allowed to the extent of 50% of such interest received which comes to Rs.42,18,086/-. Accordingly, the AO made an addition of Rs.42,18,086/- to the total income of the assessee and determined the total income of the assessee at Rs.44,80,970/- as against the returned income of Rs.2,62,880/-.
In appeal, the learned CIT(A) upheld the addition so made by the AO. While doing so he held that after the amendment of the Income Tax Act by way of insertion of Section 56(2)(viii) and section 57(1)(v) by the Finance Act, 2009 w.e.f.
01.04.2010, the issue whether the interest received on enhanced compensation was taxable as income from other sources has been finally settled. In these circumstances the decisions of the Hon’ble Supreme Court in the case of CIT vs Ghanshyam (HUF)
(Supra) and CIT Rajkot vs Govindbhai Mamaiya are not applicable in the appellant’s case.
Aggrieved with such order of the learned CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:-
i. Ld. CIT (A) has erred in law and facts both in making the addition of Rs.42,18,086/- by treating the interest awarded on the enhanced compensation on acquisition of agricultural land u/s 28 of the land act as taxable under section 56(1)(viii) of the I.T. Act. ii. Ld. CIT (A) has not followed the principles of natural justice and passed order in haste manner without taking in to consideration the material available on the record. iii. Ld. CIT(A) has erred in imposing interest under section 234A, B, C and also initiating penalty proceedings under section 271(1)(c) of the IT Act.
The learned counsel for the assessee, at the outset, drew the attention of the Bench to the order of the Tribunal in the case of Nariender Kumar, vide order dated 12th April, 2021 for AY 2014-15 and submitted that identical issue had come up before the Tribunal. Relying on the decision of the Hon’ble Supreme Court in the case of UOI vs Hari Singh in Civil Appeal No.1504/2017, order dated 15th September, 2017, the Tribunal has decided the issue in favour of the assessee. Therefore, this being a covered matter, the appeal of the assessee should be allowed.
The learned Sr. DR, on the other hand, heavily relied on the order of the learned CIT(A).
I have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the learned CIT(A) and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find an identical issue had come up before the Tribunal in the case of Shri Nariender Kumar (supra). I find the Tribunal, following the decision of the Hon’ble Supreme Court in the case of UOI vs Hari Singh in Civil Appeal No.1504/2017, order dated 15th September, 2017 has held that on agricultural Land no tax is payable when the compensation/enhanced compensation is received by the assessee as their land were agricultural land. The relevant observation of the Tribunal at para-7, which reads as under:-
“7. We have heard both the parties and perused the material available on record. It is pertinent to note that the assessee had received Rs. 1.42 crore on account of enhanced compensation of land acquisition, which included compensation of Rs. 56.90 lakhs and interest of Rs. 85.32 Lakhs. The Assessing Office had made addition of Rs. 42.66 Lakhs being 50% of interest of Rs. 85.32 lakhs u/s 56(2)(viii) r.w. Section 57(iv) of the Income Tax Act, 1961. The capital receipt unless specifically taxable u/s 45 under the head capital gain, in principle, is outside the scope of income chargeable to tax and cannot be taxed as income unless it is in the nature of Revenue receipt or specifically brought within the ambit of income by way of specific provision of the Income Tax Act. Thus, the interest received on compensation to the assessee is nothing but a capital receipt and the addition is against the law. From the perusal of the order of the CIT(A), it can be seen that the CIT(A) has not given a separate finding as to why the Assessing Officer is justified in making the addition. This issue has been decided by the Hon’ble Apex Court in case of Union of India Vs. Hari Singh (Civil Appeal No. 15041/2017 order dated 15th September 2017) wherein it is held that on agricultural Land no tax is payable when the compensation/enhanced compensation is received by the assessee as their land were agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. The CIT(A) has not taken cognizance of the decision of the Apex Court in case of Hari Singh (supra). The ratio of the said decision is applicable in the present case. Thus, the appeal of the assessee is allowed.”
Since, the facts of the instance case are identical to the facts already decided by the Tribunal in the case of Shri Nariender Kumar (supra) to which I am a party, therefore, following the order of the Tribunal I hold that the assessee is not liable to tax on the interest received on enhanced compensation.
Accordingly, the order of the CIT(A) in sustaining the addition of Rs.42,18,086/- is deleted and the grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
The order was pronounced in the open court at the time of hearing itself i.e. on 18.05.2021.