SHRI NITINKUMAR M. THAKER,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-14(1), AHMEDABAD

By way of its grounds of appeal, the assessee has impugned the action of the Revenue for denial of relief on account of taxability of interest on belated compensation received from land acquisition by the Government and consequent denial of refund of TDS deducted on interest so received.

When the matter was called for hearing, the learned AR for the assessee submitted that the assessee received certain compensation in a land acquisition matter vide Court order dated 13th May, 2005. Pursuant to the aforesaid Court order, the assessee received interest on the compensation received belatedly. The lumpsum interest received of Rs.3,21,278/- pertained to 18 years beginning from 14.12.1991 to 31.12.2007. The learned AR submitted that interest of Rs.15,363/- only relates to the year under question and the rest of the interest belongs to the earlier year where the income of the assessee was below taxable limit. The learned AR pointed out that the assessee has wrongly included the entire interest of 18 years in the return of income filed by it, which was processed under s.143(1) of the Act and a tax demand of Rs.97,100/- was raised on the assessee including interest of Rs.24,468/-. As opposed to this, when the interest accrued of Rs.15,363/- only is taken into consideration against Rs.3,21,278/-, the assessee will be entitled to substantial refund of tax as against the demand on the assessee. The learned AR submitted that as per Section 45 of the Act, the interest on land acquisition is required to be assessed on accrual basis and not on receipt basis in view of the decision of the Hon’ble Supreme Court in the case of K.S. Krishna Rao vs. CIT 181 ITR 408 (SC). The learned AR thereafter referred to the decision of the Hon’ble Delhi High Court in the case of CIT vs.

The learned DR, on the other hand, relied upon the order of the CIT(A) and submitted that there is no error apparent from record.

We have carefully considered the rival submissions. The controversy relates to correction of mistake under s.154 of the Act on account of wrong declaration of interest income of the earlier years during the year for taxation. It is the case of the assessee that it has wrongly offered total interest of Rs.3,21,278/- permeating over 18 years in this year as against the correct accrual concerning assessment year amounting to Rs.15,363/-. This has resulted in excess burden of tax in contravention of the mandate of the Hon’ble Supreme Court in the case of K.S. Krishna Rao (supra). A perusal of the decision of the Hon’ble Supreme Court shows that interest on compensation awarded under Land Acquisition Act cannot be taxed all in a lump-sum on the date on which the Court passes an order. It has to be spread over on an annual basis right from the date of delivery of possession. This being so, an incorrect admission or acquiescence cannot be the foundation for an assessment where the income is returned under an erroneous impression or misconception of law. Thus, the income assessed and tax liability determined thereon suffers from apparent error in contradiction with law laid down by the Hon’ble Supreme Court. The aforesaid error thus is susceptible to rectification under s.154 of the

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