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Facts
The assessee received enhanced compensation and interest on delayed compensation for compulsory land acquisition. The Assessing Officer taxed the interest income, which was upheld by the CIT(A). The assessee appealed to the Tribunal, arguing that the interest was part of capital receipt and exempt from tax.
Held
The Tribunal set aside the assessment order and remanded the matter to the Assessing Officer for de novo adjudication. The Tribunal noted that certain documents were not filed before the AO, preventing him from examining the assessee's claim fully.
Key Issues
Whether interest received on compulsory land acquisition is taxable as revenue or exempt as a capital receipt, and whether the matter needs to be remanded due to non-consideration of certain documents by the Assessing Officer.
Sections Cited
250, 139(1), 28, 194A, 143(1), 56(2)(viii), 57(iv), 10(37), 145B, 23(1A), 23(2), 34
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Income Tax Appellate Tribunal, PUNE BENCHES “A” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the assessee is against the order of ld.Commissioner of Income Tax(Appeals)[NFAC], passed under section 250of the Income Tax Act, 1961; dated 20.09.2024for Assessment Year2019-20. The assessee has raised the following grounds of appeal : “1. The learned CTT(A) NFAC erred in law and on facts in confirming addition of Rs.1,38,86,973/- as interest income received on account of compulsory land acquisition u/s 28 of the Land Acquisition Act, thus ignoring the fact that the said interest received is part of enhanced compensation, being in nature of capital receipt, exempt from tax.
2. The learned Commissionaire of Income Tax (A) erred in law and on facts in confirming taxation of interest in the hands of the Appellant thereby ignoring the judgements passed by Pune Tribunal on same set of facts in other cases.
3. The learned CIT(A) NFAC erred in law and on facts, in confirming the addition of Rs. 1,38,86,972/-i.e 50% of entire amount of interest of Rs.2,73,73,947/- in the hand of the Assessee, thereby ignoring the fact that the Assessee share in the interest income is only 1/6th of the total income.
4. The Appellant craves leave to add, amend, alter, modify or omit any of the aforesaid Grounds of Appeal as occasion may arise of demand.” Submission of ld.AR :
2. Ld.AR for the assessee filed a paper book along with written submission.
2.1 Relevant paragraphs of the written submissions are reproduced as under : “1. The Assessee filed the IT Return on 24/07/2019 u/s 139(1) and claimed the interest awarded u/s 28 of the Land Acquisition Act 1894 at Rs.2,73,73,947/- (subjected to TDS u/s 194A by the SLAO) to be exempt. He claimed refund of the tax deducted at source and the same was granted on processing of the return u/s 143(1).
It is an undisputed fact that the agricultural land belonging to the Assessee came under compulsory acquisition. The said agricultural land (which was under cultivation) situating at Village Navhe, was not a capital asset as defined under the Income Tax Act, at the time of acquisition. Neither the Special Land Acquisition Officer nor the Assessing Officer disputed the fact i.e. payer deducted the tax on principal amount of enhanced compensation.
In the assessment proceedings, the Assessee made e-submissions on 26/07/2021 and 16/09/2021 in compliance of questionnaire and substantiated the claim of exempt nature of interest awarded u/s 28 of [A] the Land Acquisition Act 1894 and also stated as to how the amended provisions u/s 56(2)(viii) r.w.s. 57(iv) are not applicable by distinguishing the nature of receipt and claiming the same to be part of enhanced compensation. The copies of e-submissions made are e- furnished herewith as a part of this statement of facts.
The Assessee would like to draw your Honor's attention to Hon'ble Pune Tribunal's SMC Bench in the case of Jyoti Jayantrao Indurkar, IT Appeal No. 291 (PUN) of 2017 decided on 31/08/2018 and reported at (2018) 97 taxmann.com 526 (Pune - Trib.). In the said case, the AO made the addition u/s 56(2)(viii) by bringing to tax 50% of the interest and for that purpose the AO considered the amended provisions u/s 145A (now Sec 145B) and applied the provisions of Sec 56(2)(viii) r.w.s. 57 and ignored the decisions of the Hon'ble Supreme Court in the case of: a) Ghanshyam HUF (315 ITR 1) and also in the case of b) Govindbhai Mamaiya (367 ITR 498) wherein, it has been held that interest received u/s 28 of the LAA, 1894 is part and parcel of the enhanced compensation. The matter was heard before the Tribunal and the Tribunal held that in case if the interest is received u/s 28 of Land Acquisition Act (LAA), then the same is not taxable in hands of Assessee and in case if the interest is received u/s 34 of LAA, the same is taxable in hands of Assessee. The Hon'ble ITAT directed the AO to verify the fact of nature of interest i.e. under which Section of the LAA, 1894 the interest has been awarded, whether Section 28 or Section 34 and accordingly for only this limited purpose the matter was remanded. While rendering this decision, the Hon'ble ITAT Pune followed the earlier decision of ITAT Pune in the case of Dnyanoba Shajirao Jadhav v/s ITO reported at (2018) 90 taxmann.com 285.
5. While deciding the matter in the aforesaid case, the Tribunal discussed and followed the earlier rendered decision of Jurisdictional Tribunal, in the case of Shri. Dnyanoba Shajirao Jadhav (supra). It may be noted that the Hon'ble Tribunal, while deciding the case also followed the decision of Apex Court in the case of CIT v/s Ghanshyam HUF (315 ITR 1). Since the order has been passed by the the Pune Tribunal, which is the jurisdictional Tribunal the order so passed is binding nature and hence should be followed by the lower authorities.
While rendering the decision in para 8, the Hon'ble Tribunal has considered the para 22, 23 & 25 of the decision of the Apex Court in the case of CIT v/s Ghanshyam HUF (315 ITR 1) and thereafter while rendering the decision in para 10 the Hon'ble Tribunal has noted that in the case of CIT v/s Ghanshyam HUF (315 ITR 1) the Hon'ble Supreme Court has clearly marked the distinction between the interest received u/s 23(1A) and 23(2) r.w.s. LAA, 1894 viz-a-viz interest on delayed payment of compensation u/s 34 of the LAA, 1894 and further in the case of Bikram Sing as well as in the case of Ghanshyam HUF the Hon'ble Apex Court have held that payment of interest in delayed compensation u/s 34 of LAA, 1894 are liable to the tax and for the non- availability of material on record about the component of interest u/s 28 or 34, the Hon'ble Tribunal remanded back the matter to the file of AO with direction to examine the facts and determined the nature of interest received and to decide the matter de-nova in accordance with the law laid down by the Apex Court and to follow the principal of natural justice while adjudicating the issue.” 2.2 Ld.AR also filed additional evidence with a prayer to admit it. Ld.AR submitted that the Bank Account in which compensation and interest has been deposited is a Joint Bank Account maintained with Bank of Maharashtra. The Certificate issued by Bank of Maharashtra was submitted by assessee as additional evidence.
2.3 Ld.AR also submitted that the Government of Maharashtra through District Collector has filed an appeal before Hon’ble Bombay High Court against the compensation awarded. Therefore, the compensation and interest on enhanced compensation has not attained finality. If Hon’ble Bombay High Court decides against Assessee, then Assessee will have to refund the amounts. Therefore, the interest on enhanced compensation is not taxable as it is a [A] contingent receipt subject to the decision of Hon’ble Bombay High Court. Therefore, said amount cannot be taxed. Ld.AR filed copy of the document filed by Government Pleader before the Hon’ble Bombay High Court.
Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of Assessing Officer and ld.CIT(A). Ld.DR relied on the order of Hon’ble Punjab & Haryana High Court in the decision of Mahender Pal Narang Vs. CBDT [2020] 423 ITR 13 (P & H). Ld.DR for the Revenue also submitted that the said decision of Hon’ble Punjab and Haryana High Court has been upheld by the Hon’ble Supreme Court as the SLP filed by Mahender Pal Narang has been dismissed vide order dated 04.03.2021[2024] 462 ITR 498 (SC). Ld.DR submitted that hence, the reliance placed by Assessee on the decision of various Tribunal is of no help to assessee as the Hon’ble Supreme Court has upheld the decision of Hon’ble Punjab and Haryana High Court.
Findings & Analysis : 4. We have heard both the parties and perused the records. In this case, Assessee had filed a Return of Income for A.Y.2019-20 on [A] 24.07.2019 disclosing Net Taxable Income of Rs.1,30,660/- which consisted of Pension and Interest on Fixed Deposit.
4.1 During the year, assessee received enhanced compensation of Rs.1,56,01,648/- and interest on delayed compensation at Rs.2,73,73,947/-, on account of compulsory acquisition of land from Special Land Acquisition Officer. The Assessing Officer held that enhanced compensation is exempt under section 10(37) of the Act, accepting assessee’s claim that the land acquired was Rural Agricultural Land beyond 08 kms from the Municipal Limits. However, Assessing Officer held that the interest on enhanced compensation, which was Rs.2,73,73,947/- was taxable under section 56(2)(viii) r.w.s. 145B of the Act. therefore, Assessing Officer made an addition of Rs.1,36,86,973/-, allowing the deduction under section 57(iv) of the Act.
4.2 Aggrieved by the assessment order, Assessee filed appeal before the ld.CIT(A). The ld.CIT(A) upheld the assessment order.
4.3 Aggrieved by the same, assessee filed appeal before this Tribunal.
In this case, the land acquired is admittedly Rural Agricultural Land beyond 08 kms of Municipal Limits. The Assessee filed copy of 7/12 extract to demonstrate that the compensation received belongs to six(06) persons including Assessee. Ld.AR also filed copy of the document demonstrating handing over of land to Deputy Collector (Land Acquisition) which has got six names including assessee. Assessee also filed copies of the letter from Bank of Maharashtra to demonstrate that the compensation was received in the Account No.60311033312 maintained with Bank of Maharashtra and the said account is in the name of six individuals. Therefore, Assessee claimed that Assessee is not the only owner and hence entire amount cannot be taxed in Assessee’s hands. However, it is also a fact that these documents were never filed before the Assessing Officer. In these facts and circumstances of the case, since the documents pertaining to litigation pending before the Hon’ble Bombay High Court and documents pertaining to Bank Account were never filed before Assessing Officer, hence, Assessing Officer had no opportunity to examine the claim of the assessee. Therefore, in the interest of justice, we set-aside the Assessment Order to the Assessing Officer for denovo adjudication. The Assessing Officer shall provide opportunity of being heard to the assessee. Assessee is at liberty to raise all the legal grounds, including the ground that Interest Income is contingent and hence not taxable. Assessee shall file necessary documents before the Assessing Officer. Accordingly, grounds of appeal raised by the assessee are allowed for statistical purpose.