AJAY KUMAR,FATEHABAD, HARYANA vs. ITO, WARD-1, FATEHABAD, FATEHABAD, HARYANA

It has been brought to our notice that, in certain appeals, there is a delay in filing the same before the Tribunal as pointed out by the Registry. Considering that the issue involved is purely legal in nature, and respectfully following the ratio laid down by the Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji& Others [(1987) 167 ITR 471 (SC)]*, which emphasizes that substantial justice should prevail over technical considerations, we condone the delay in filing these appeals.

We shall take appeal of the assessee in ITA No. 463/Chd/2023 for A.Y 2018-19 as a lead case for discussion wherein assessee has raised the following effective grounds:

That having regard to the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) has erred both in law and on facts in confirming the addition of Rs. 34,65,610/- made by the Ld. Assessing Officer under the head "Income from other sources" u/s 56(viii) of the Income-tax Act referring to the provisions of section 199 of the Act, which is not relevant to determine nature of receipt of interest u/s 28 of the Land Acquisition Act 1894 as to whether it is a capital receipt forming part of enhanced compensation or a revenue receipt chargeable u/s 56(viii) of the Act.

Briefly the facts of the case are that the assessee, Shri Ajay Kumar, filed his original return of income for A.Y. 2018-19 on 29.09.2018 declaring total income of Rs.3,51,090/-, which was processed u/s 143(1). The case was subsequently selected for Complete Scrutiny under the e-Assessment Scheme, 2019 on two issues, namely, (i) reduction of income in the revised return coupled with claim of refund, and (ii) mismatch between interest/winnings reported in Form 26AS and the income shown under “Income from Other Sources” in the return. Statutory notices u/s 143(2) and 142(1) were issued calling for details.

In response, the assessee submitted that he had received enhanced compensation of Rs.56,34,922/- from the Land Acquisition Officer, Hisar (HUDA), Haryana, pursuant to compulsory acquisition of agricultural land. It was explained that the original award was passed on 31.03.2008, subsequently enhanced by the Additional District Judge on 24.12.2013 and further enhanced by the Hon'ble High Court on 22.07.2015. During the relevant previous year, the assessee received enhanced compensation along with interest of Rs.34,65,610/-, on which TDS of Rs.3,46,561/- was deducted by the Land Acquisition Officer u/s 194A.

It was further stated that in the original return the assessee had inadvertently offered the said interest amount to tax, however, upon realising that the interest received was interest u/s 28 of the Land Acquisition Act, 1894, being part of compensation and exempt u/s 10(37) of the Income-tax Act, he revised the return and withdrew the interest income while claiming refund of TDS. The assessee relied on the nature of interest u/s 28 being integral to compensation. During the course of assessment proceedings, the AO examined the submissions and found that, although the assessee claimed exemption on the interest component in the revised return, he continued to claim credit for TDS deducted thereon, which was duly reflected in Form 26AS. A show-cause notice dated 10.12.2020 was issued, proposing to treat the interest as taxable u/s 56(2)(viii) read with section 145B(1). In reply, the assessee reiterated that interest u/s 28 forms part of compensation and is exempt. The AO, however, held that section 10(37) applies only to capital gains arising from transfer of agricultural land, and not to interest on delayed payment; that interest received on enhanced compensation is deemed to be taxable u/s 56(2)(viii) in the year of receipt; and that the assessee could not reduce income in a revised return while simultaneously claiming full TDS credit u/s 199. Accordingly, the AO held the interest of Rs.34,65,610/- to be taxable, added the same to the returned income, determined assessed income at Rs.38,16,700/-, and initiated penalty proceedings u/s 270A for under-reporting of income.

Feeling aggrieved by the order passed by the Ld. Assessing Officer the assessee preferred the appeal before the Ld. CIT(A) / NFAC. The Ld. CIT(A) considered the assessment order, the written submissions of the assessee, and the material available on record. At the outset, the Ld. CIT(A) observed that the Assessing Officer had made an addition of Rs.34,65,610/- on account of interest on enhanced compensation received by the assessee in respect of compulsory acquisition of agricultural land, and that the assessee had claimed TDS credit on such interest while not offering the corresponding income in the revised return. It was noted that the assessee had initially filed the return, declaring interest income. Subsequently, it revised the return to withdraw the same on the grounds that interest received under Section 28 of the Land Acquisition Act forms part of compensation and is exempt under Section 10(37). The Ld. CIT(A) recorded that the Assessing Officer had examined this claim and determined that the assessee's reliance on section 10(37) was misplaced, as that provision applies to capital gains arising from compulsory acquisition of agricultural land and does not extend to interest received on delayed payment of compensation.

The appellate authority / CIT(A) further concurred with the AO's

The Ld. CIT(A) also took note that although the assessee contended that the land acquired was agricultural and the interest was part of compensation exempt u/s 10(37), the assessee had not offered any capital gains computation in either the original or revised return to demonstrate the applicability of section 10(37). It was held that exemption under section 10(37) cannot be presumed and must be reflected through proper computation, which was lacking in the present case. The Ld. CIT(A) also echoed the AO's view that filing a revised return to exclude the interest income while retaining TDS.

Feeling aggrieved by the order passed by the Ld. CIT(A) the assessee is in appeal before us on the grounds mentioned hereinabove.

The Id. AR, Shri Suraj Bhan Nain, Advocatethereafter, placing reliance on the scheme of the Land Acquisition Act and the judicial position, invited our attention to the judgment of the Hon'ble Supreme Court in CIT vs. Ghanshyam (HUF) [2009] 315 ITR 1 (SC) = 182 Taxman 368 (SC). It was submitted that the Hon'ble Supreme Court, after dealing with the statutory framework of the Land Acquisition Act, particularly Sections 23(1A), 23(2), 28 and 34, has categorically held that interest awarded under Section 28 forms part and parcel of compensation, whereas interest awarded under Section 34 is in the nature of interest simplicitor, merely compensating for delay in payment.

Our attention was specifically drawn to paragraphs 30 to 36 of the said judgment. The Id. AR emphasized that the Hon'ble Supreme Court, in unequivocal terms, held that the interest awarded u/s 28 has the same colour and character as compensation and, therefore, is liable to be treated as part of the enhanced compensation for income-tax purposes, whereas interest u/s 34 stands on a distinct footing being compensatory in nature on account of delay in making payment. It was stressed that the legislative intent behind Section 28 is to provide recompense/restitution for the deprivation of property and, therefore, it assumes the character of compensation in entirety.

It was further argued that the Apex Court clarified that the entire enhanced compensation, including interest u/s 28, becomes taxable in the year of receipt under the provisions of section 45(5) of the Income-tax Act. In contrast, interest u/s 34 is to be taxed as income from other sources. Thus, the Id. AR submitted that the interest component in the present case-being interest awarded on enhanced compensation under Section 28 of the Land Acquisition Act—is to be treated as compensation and not as interest simplicitor.

The Id. AR also pointed out that the Hon'ble Supreme Court distinguished the statutory scheme wherein Section 28 of the LA Act relates to compensation determination, while Section 34 of the LAAct falls within the realm of payment mechanism. Therefore, interest awarded u/s 28 is intrinsically linked with the judicial determination of compensation, and is inseparable from the award, thereby qualifying as part of the compensation itself. In CIT vs. Ghanshyam (HUF) [2009] 315 ITR 1 (SC) = 182 Taxman 368 (SC)it5 was held as under:- "

For the said purpose, the cost of acquisition is to be taken as Nil [See: Explanation (i)]. Also, where the enhanced compensation is received by any person, other than the transferor by reason of the death of the transferor or for any reason, the amount of such additional compensation or additional consideration is to be deemed to be the income of the recipient of the previous year in which such amount is received by him.

Two aspects need to be highlighted. Firstly, section 45(5) of the 1961 Act, deals with transfer(s) by way of compulsory acquisition and not by way of transfers by way of sales etc., covered by section 45(1) of the 1961 Act. Secondly, section 45(5) of the 1961 Act talks about enhanced compensation or consideration which in terms of L.A. Act, 1894 results in payment of additional compensation.

The issue to be decided before us what is the meaning of the words "enhanced compensation/consideration" in section 45(5)(b) of the 1961 Act? Will it cover "interest"? These questions also bring in the concept of the year of taxability.

It is to answer the above questions that we have analysed the provisions of sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, section 23(1A) provides for additional amount. It takes care of increase in the value at the rate of 12 per cent per annum. Similarly, under section 23(2) of the 1894 Act, there is a provision for solatium which also represents part of enhanced compensation. Similarly, section 28 empowers the Court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under section 23(1 A) and solatium under section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the Court after reference under section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award. It is true that "interest" is not compensation. It is equally true that section 45(5) of the 1961 Act, refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act, which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under section 28 unlike interest under section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act. In fact, what we have stated hereinabove is reinforced by the newly inserted clause (c) in section 45(5) by the Finance Act, 2003 with effect from 1-4-2004. This newly added clause envisages a situation where in the assessment for any year,- - the capital gain arising from the transfer of a capital asset is computed by taking the - compensation or consideration referred to in clause (a) of section 45(5) or, as the case may be, enhanced compensation or consideration referred to in clause (b) of section 45(5), and subsequently such compensation or consideration is reduced by any Court, Tribunal or other authority.

In such a situation, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such Court, Tribunal or other authority to be the full value of the consideration. For giving effect to such recomputation, the provisions of the newly inserted (with effect from 1-4-2004) section 155(16) by the Finance Act, 2003 (32 of 2003), have been enacted.

It was urged on behalf of the assessee that section 45(5)(b) of the 1961 Act deals only with re-working, its object is not to convert the amount of enhanced compensation into deemed income on receipt. We find no merit in this argument. The scheme of section 45(5) of the 1961 Act was inserted with effect from 1-4-1988 as an overriding provision. As stated above, compensation under the L.A. Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale etc. Hence, the legislature had to step in and say that as and when the assessee-claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in section 45(5) with effect from 1-4-2004 and section 155(16) which refers to a situation of a subsequent reduction by the Court, Tribunal or other authority and recomputation/amendment of the assessment order. Section 45(5) read as a whole (including clause "c") not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under section 28 of the 1894 Act) becomes payable/ paid under 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the Court/Tribunal/Authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

Having settled the controversy going on for last two decades, we are of the view that in this batch of cases which relate back to assessment years 1991-92 and 1992-93, possibly the proceedings under the 1894 Act have ended. In number of cases we find that proceedings under the 1894 Act have been concluded and taxes have been paid. Therefore, by this judgment we have settled the law but we direct that since matters are decade old and since we are not aware of what has happened in Land Acquisition Act proceedings in pending appeals, the recomputation on the basis of our judgment herein, particularly in the context of type of interest under section 28 vis-a-vis interest under section 34, additional compensation under section 23(1A) and solatium under section 23(2) of the 1894 Act, would be extremely difficult after all these years, will not be done.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23 (1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of section 45(5)(c) and section 155(16) with effect from 1-4-2004, the receipt of enhanced compensation under section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year OF receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the Government, came to the respondents on inheritance from their father i.e. by the operation of law. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assesseesbut it is the result of the act of the Government in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in Meera & Co. (supra) inasmuch as it is not a case where any "Association of Persons" was formed by volition of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case.

Insofar as the second question is concerned, that is also covered by another judgment of this Court in CIT v. Ghanshyam (HUF) [2009] 8 SCC 412, albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium under section 23(2) of the 1961 Act forms part of enhanced compensation under section 45(5)(b) of the 1961 Act."

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible. Here again, we would like to reproduce the discussion contained in paras 53 and 54 which gives the rational in coming to the said conclusion. Paras 53 and 54 read as under:

The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1-4-1988 as an overriding provision. As stated above, compensation under the L.A.Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale, etc. Hence, the legislature had to step in and say that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as "deemed income" and taxed on receipt basis. Our above understanding is supported by insertion of clause (c) in Section 45(5) w.e.f. 1-4-2004 and Section 155(16) which refers to a situation of a subsequent reduction by the court, tribunal or other authority and recomputation/ amendment of the assessment order.

Section 45 (5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/ consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the Court/Tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.

The Id. AR submitted that the sum and substance of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) is that interest awarded on enhanced compensation—irrespective of whether it is described as interest or solatium—forms an integral part of the compensation and is, therefore, liable to be taxed under section 45(5)(b) of the Income-tax Act, 1961 (“the Act”). It was further submitted that the said decision was delivered by the Hon'ble Supreme Court on 16.07.2009. The decision of the Hon'ble Supreme Court in the case of 'Ghanshyam' was later on followed in the case of ‘CIT, Rajkot vs Govindbhai Mamalya' [2014] 52 taxmann.com 270 (SC). "

In the present case, the admitted facts are that the property in question which was acquired by the