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Income Tax Appellate Tribunal, PUNE BENCHES : PUNE
Before: SHRI SATBEER SINGH GODARA & DR. DIPAK P. RIPOTE
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.No.574/PUN./2020 Assessment Year 2013-2014 Shri Ram Laxmanrao The Income Tax Officer, Mitkari, Post-Dhanora Ward – 3, Swati PIN - 413 523 Taluka – Ahmedpur Chambers, Opp. Stadium vs., District – Latur. Ausa Road, Latur – Maharashtra. PAN BYVPM6888E 413523. Maharashtra. (Appellant) (Respondent) For Assessee : Shri Bharat Shah For Revenue : Shri M.G. Jasnani Date of Hearing : 14.10.2022 Date of Pronouncement : 23.11.2022 ORDER PER SATBEER SINGH GODARA, J.M. This assessee’s appeal for A.Y. 2013-14, arises against the CIT(A)-2, Aurangabad’s dated 27.05.2016, passed in Case No.ABD/CIT(A)-2/319/2015-16, in proceedings under section 143(3) of the Income Tax Act, 1961 [“In short Act”].
Heard both the parties. Case file perused.
A perusal of the assessee’s pleadings reveals that his sole substantive grievance raised in the instant appeal challenges
2 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. correctness of both the learned lower authorities’ action assessing his interest income of Rs.56,48,961/- received u/s 28 of the Land Acquisition Act, 1894 as taxable u/s 56(2)(viii) r.w.s. 57(iv) of the Act. The CIT(A)’s detail discussion affirming the Assessing Officer’s action to this effect reads as follows :-
“ 9. In view of the decisions of the Hon'ble Apex Court in Bikram Singh case (supra) wherein it has been held that the interest received as income on the delayed payment of the compensation determined u/s. 28 or 3l of the Land Acquisition Act, is a taxable event, Manjeet Singh (HUF) case and Balasah Raosaheb Bidwe and others (supra) cited above, I hold that there is no infirmity in the order passed by the Assessing Officer, whereby compensation received u/s.28 of the L.A. Act was brought to tax in terms of section 56(2)(viii) of the I.T. Act.
The assessee has also contended that he has received only 25% of the amount deposited in the court out of 50% of the amount which was permitted to be withdrawn by furnishing solvent security. It was stated whether the matter has not reached the final stage, the question about levy of tax thereon does not arise. The assessee also relied on certain decisions in support of this contention. He specifically relied on
3 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. the decision given in the case of CIT vs., Abdul Mannan Shah Mohammad [2001] 248 ITR 614 (Bombay). In the case of Abdul Mannan (supra) the assessee's land was acquired by the government. He was awarded a sum of Rs.33,80,172/- which included a sum of Rs. 13.50 lakhs as interest on additional compensation. The State Government moved to the High Court against the decision of the award given by the reference Court. Pending of the appeal, the assessee was permitted to withdraw the amount on giving a surety. The question which arose for determination is whether the additional compensation which was deposited in the court and permitted to be withdrawn on furnishing a surety would be taxable at that stage are not. The Tribunal had held that the amount of compensation including the interest on additional compensation which was permitted to be withdrawn on furnishing of security was not taxable at that stage. In an appeal, the Hon'ble Bombay High Court, citing the decision given in the case of CIT Vs. Hindustan Housing & Land Development Trust Ltd [1986] 161 ITR 524 (SC) wherein it was held that when the Government has appealed against the award and the additional amount of compensation was deposited in the court, it was not taxable at that stage as the
4 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. additional compensation would not accrue as income when it was specifically disputed by the Government in appeal dismissed the appeal filed by the Department.
l have given due consideration to the submissions made by the assessee. Undisputedly, the Hon'ble Apex Court has held that the amount of compensation which was deposited in the court cannot be taxed at the stage as additional compensation when the compensation itself was specifically disputed by the Government in appeal. However, I also note that the above decision was given in the year 1986 when the provision of clause-(b) of section 145A was not in existence. Section 145A has been substituted by the finance (No.2) Act, 2009 w.e.f. 01/04/2010 and a new Clause-(b) was introduced in the section. This clause states that interest received by an assessee on compensation or enhanced compensation, as the case may be, shall be deemed to be the income of the year, in which it is received. In view of the new enactment in section 145A of the Act the amount of compensation or enhanced compensation shall be taxable in the year of its receipt. Therefore, 1 direct the assessing officer to find out the exact, amount of interest received by the assessee
5 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. as a result of compensation enhanced compensation and bring only that amount to tax u/s.56(2)iii) of the Act in the year in which it was received. If any amount has been kept as fixed deposits on the direction of the Hon'ble Court, then the same shall also brought to tax due to the fact of the assessee having received the said amount. The amount of interest which has not been received by the assessee cannot be brought to tax by virtue of operation of the provisions of section 145 clause-(b). 12. As far as the reliance of the proviso to section 45(5) after clause (b) of sub-section (5) of section 45 by the Finance (No.2) Act, 2014 with effect from 01/04/2015 is concerned, I hold that the same shall be applicable in respect of compensation received on or after 01.04.2015. This is for the reason that the Act does not specify the retrospective operation of the said proviso. Since in this case it appears that compensation was received by the assessee pursuance of the order of the Hon'ble High Court dated 10/07/2013, contents of the proviso to section 45(5) after clause-(b) shall not apply.”
Mr. Shah vehemently argued in support of the assessee’s pleadings that both the learned lower authorities have erred in law and on facts in taxing the impugned interest income. We find that this tribunal recent coordinate bench decision in ITA
6 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. No.1012/PUN/2017 Basweshwar Mallikarjun Bidwe vs. ITO decided on 05.10.2020 has already accepted the Revenue’s identical contention as follows :- “3. Succinctly, the facts of the case are that the assessee filed his return declaring total income of Rs.42,370/-. He received enhanced compensation at Rs.38,19,709/- and interest u/s.28 of the LAA amounting to Rs.68,32,020/- on compulsory acquisition from The Special Land Acquisition Officer (MIW), Latur against the land situated at Village Khadgaon, Tq. Latur. In the column of exempt income in the return, the assessee showed figures of total interest at Rs.68,32,020/- and agriculture income at Rs.2,37,900/-. On being called upon to explain as to why the interest was not shown separately as income u/s.56(2)(viii) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) Act, the assessee made certain submissions which did not find favour with the Assessing Officer (AO). Treating 50% of the interest income as deductible in terms of section 57(iv), the AO added net interest income of Rs.34,16,010/- u/s. 56(2)(viii) of the Act. The ld. CIT(A), relying on certain decisions, which we will advert to in the later part of the order, jettisoned the claim of the assessee thereby approving the view of the AO in bringing to tax the interest income
7 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. u/s.56(2)(viii) of the Act. Aggrieved thereby, the assessee has approached the Tribunal.
We have heard both the sides through virtual court and cogitated over the relevant material on record. Indisputably, the amount of net interest income computed by the AO u/s.56(2)(viii) of the Act pertains to section 28 of the LAA. The assessee treated such amount as part of the enhanced compensation of land and claimed the same as exempt from tax on the ground that the land itself was agricultural. To buttress the contention that interest u/s 28 of the LAA is a part of compensation and hence not chargeable to tax, the ld. AR chiefly relied on the judgment of the Hon’ble Supreme Court in CIT Vs. Ghanshyam (HUF) (2009) 315 ITR 1 (SC) before the Tribunal in which it has been held that interest u/s.28 under The Land Acquisition Act, is to be taxed as part of consideration on receipt basis. This judgment was delivered on 16-07-2009. The Finance (No.2) Act, 2009 w.e.f. 01-04-2010 inserted clause (viii) to section 56(2) providing that: “income by way of interest received on compensation or on enhanced compensation referred to in sub-section (1) of section 145B” shall be chargeable to income-tax under the head “Income from other
8 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. sources”. Section 145B(1) provides that: “Notwithstanding anything to the contrary contained in section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received”. Thus it is palpable that post the decision in Ghanshyam (supra), a statutory amendment has been carried out providing that income by way of interest received on compensation or on enhanced compensation shall be chargeable to income-tax under the head “Income from other sources”.
The question of taxability of interest received u/s 28 of the LAA came up for consideration before Hon’ble Punjab & Haryana High Court in the case of Manjet Singh (HUF) Karta Manjeet Singh Vs. Union of India (2016) 237 Taxman 0116 (P&H). It noted another judgment of three Judges of the Hon’ble Apex Court in Bikram Singh vs. Land Acquisition Collector, (1997) 224 ITR 551(SC) following Dr. Shamlal Narula vs. CIT (1964) 53 ITR 151 (SC) holding that interest under Section 28 of the 1894 Act was a revenue receipt and is taxable. After considering all the available relevant material including the judgment in Ghanshyam (HUF) (Supra) and also the statutory
9 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. amendments carried out w.e.f. A.Y. 2010-11, the Hon’ble High Court, vide its judgment dated 14.01.2014, decided this issue in favour of the Revenue by holding that interest u/s.28 of LAA was chargeable to tax u/s. 56(2)(viii) of the Act. The SLP filed against the judgment in the case of Manjet Singh Vs. Union of India has since been dismissed by the Hon’ble Supreme Court on 18-12-2014 (SLP No. 34642 of 2014) holding that “Heard ld. Counsel for the petitioners and perused the relevant material. We do not find any legal and valid ground for interference. The special leave petitions are dismissed.”
Question of deduction of tax at source on interest u/s 28 of the LAA once again came up for consideration before the Hon’ble jurisdictional High Court in a batch of 13 petitions with the lead case of Shivajirao S/o Dnyanoba Ghanwat & Ors. VS. The State of Maharashatra & Ors. (WP No. 5402 of 2013). The petitioners contended that the tax was deducted at source on the entire amount of compensation awarded in Land Acquisition proceedings, including the interest u/s 28 of the Land Acquisition Act, which was not deductible in the light of the judgment of the Hon’ble Supreme Court in Ghanshyam (HUF) (supra). Per contra, the Respondent made out a case that tax at source was rightly
10 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. deductible as there was no difference between the interest granted u/s 28 and 34 of the LAA. This view was bolstered on the basis of an earlier judgment of the Hon’ble Supreme Court in Bikram Singh (supra) 224 ITR 551 (SC). The Hon’ble Bombay High Court, vide its judgment dated 27.08.2013 (copy at pages 69 onwards of the assessee’s paper book), recorded the petitioner’s contention in para 8 and that of the respondent in paras 3 read with 4. In para 5 of the judgment, their Lordships found that: ‘Section 34 casts obligation upon Collector to pay interest after compensation is worked out. Section 28 puts similar obligation upon the Court when the Court finds that the compensation awarded under section 11 was inadequate. Therefore, there is no change in nature of interest either u/s.28 or section 34. Even if court hikes compensation for land and interest is awarded under Section 28 of the Act, upon such increased compensation, in the light of larger Bench judgment, the Department and Disbursing Authorities are bound to effect deduction of TDS’. On the interplay between the Hon’ble Apex Court judgments in Ghanshyam (supra) & Bikram Singh (supra), the Hon’ble Bombay High Court in para 4 found the: `issue to be squarely covered by the larger Bench judgment
11 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. of the Apex court’ in Bikram Singh (supra). Then it noted in para 9 of the judgment that: “We have perused para 24 and 25 of the judgment of the Apex Court in Commissioner of Income Tax Vs. Ghanshyam (supra). We find that the Hon’ble Apex Court there, was not called upon to look into the Larger Bench judgment delivered earlier in case of Bikram Singh (supra). In para 7, the Hon’ble Larger Bench has found that the interest paid u/s.28 is not by way of any charge on compensation determined u/s.23(1). We, therefore, with respect, follow the larger Bench judgment of the Hon’ble Apex Court”. Thus it is plentifully lucid that the Hon’ble jurisdictional High Court has categorically held that interest u/s 28 of the Land Acquisition Act is chargeable to tax.
The ld. AR submitted that the Hon’ble jurisdictional High Curt has not correctly appreciated the legal position inasmuch as the decision in the case of Ghanshyam (supra) was binding and ought to have been followed. He unsuccessfully tried to convince the Tribunal that the decision rendered by the Hon’ble Bombay High Court should not be preferred over certain other decisions in favour of the assessee. We find that in certain decisions, the issue has been decided in assessee’s
12 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. favour. Notwithstanding any contrary view expressed by a non- jurisdictional Hon’ble High Court, the Tribunal, being an authority inferior in hierarchy to its jurisdictional High Court, is bound by the verdict of its superior Hon’ble High Court and cannot read, consider or understand the judgments of the Hon’ble Supreme Court in a way different from the one understood by the Hon’ble jurisdictional High Court unless such a view has been subsequently reversed/modified by the Hon’ble Supreme Court.
The ld. AR then submitted that the Hon’ble Supreme Court in Union of India and others Vs. Hari Siingh and others (2018) 302 CTR 0458 (SC) has considered a similar issue and decided the same in favour of the assessee. It was then contended that since the judgment of the Hon’ble jurisdictional High Court was rendered prior to that of Hon’ble Supreme Court in Hari Singh and others (supra), the latter should be followed in preference to the former.
We are unable to find any relevance of the judgment of Hon’ble Supreme Court in Hari Singh and others (supra), insofar as the issue under consideration is concerned. In that case, the Land Acquisition Collector deducted tax at source from compensation on account of
13 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. compulsory acquisition of land and deposited the same with the exchequer. A writ petition was filed in the High court urging that no deduction of tax at source was permissible in view of the provisions of section 194LA of the I.T. Act, since the land which was acquired was agricultural land and this provision categorically mentions that in respect of agricultural land, tax at source was not to be deducted. The Hon’ble High Court directed the Income-tax Department to refund the amount to the collector and held: “that the Collector will determine whether the compensation paid is for property other than the agricultural land or otherwise and whether deduction of tax at source was permissible under other provisions of law…..”. Aggrieved thereby, the Revenue approached the Hon’ble Supreme Court pleading that the matter should have been remitted to the AO for deciding the nature of land acquired and not the Collector as it was the AO who was to come to the conclusion whether land was agricultural or not. Accepting the contention on behalf of the Revenue, the Hon’ble Supreme Court held that the claimant should approach the concerned AO and raise the issue that no tax was payable on compensation/enhanced compensation which was received by them as
14 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. their land was agricultural land. It was further observed that, while determining as to whether the compensation paid was for agricultural land or not, the AO will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in CIT, Faridabad Vs. Ghanshyam (HUF) in order to ascertain whether the interest given under the said provision amounts to compensation or not. It is abundantly clear that the judgment in the case of Hari Singh and others (supra) is based an altogether different factual matrix in which the question was as to whether it was the Collector or the AO who will decide as to whether any tax was payable on compensation/enhanced compensation. This issue came to be decided by Hon’ble Supreme Court by holding that the AO was the competent authority. There is no adjudication on the point as to whether interest u/s.28 of the Land Acquisition Act is chargeable to tax separately or part of enhanced compensation. There is a simple direction to the AO to consider this aspect of the matter.
In view of the foregoing discussion, it is manifest that the judgment of the Hon’ble jurisdictional High Court holding that interest u/s.28 under the LAA is chargeable to tax, is intact and has not been
15 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. disturbed in any manner by the Hon’ble Supreme Court in the case of Hari Singh and others (supra). On a specific query, the ld. AR could not point out as to whether the judgment of the Hon’ble jurisdictional High Court in Shivajirao (supra) has been reversed or modified in any manner by the Hon’ble Supreme Court. Respectfully following the judgment of the Hon’ble jurisdictional High Court in Shivajirao (supra) and the judgment of Hon’ble Punjab & Haryana High Court in Manjeet Singh (supra) along with the statutory amendment carried out to section 56(2) inserting clause (viii) w.e.f. 01-04-2010, it is overt that the ld. CIT(A) has taken an unexceptionable view in the matter pertaining to the A.Y. 2013-14. We, therefore, uphold the same. This ground is not allowed.
The only other issue which survives in this appeal is against the confirmation of addition of Rs.38,58,365/- as long term capital gain on acquisition of land.
The facts anent to this issue are that the assessee received a sum of Rs.39,19,709 on compulsory acquisition of land. The AO noticed that the land acquired was situated at Village Khadgaon, Tq. Latur. Since the land in question comprising 45R was well within the
16 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. municipal limits of Latur, as was mentioned in para 17 of the award, the AO called upon the assessee to prove his claim of agricultural land. He held that for the purpose of claiming exemption u/s 10(37), it was obligatory on the part of the assessee to prove that the land was being used for agricultural purposes in A.Y. 1994-95 and 1995-96. The assessee could not file any proof regarding the cultivation of land in the above years. The 7/12 extracts submitted by the assessee were found to be pertaining to land at Vasangaon Gut no. 11, which was not acquired by the Government. He held that the land at Khadgaon, acquired by the Government, was an asset u/s 2(14) of the Act. He made a reference to the DVO for determining the value of the said land as on 1.4.1981, which was found at Rs.16,000/- per hector. On this basis, he computed long term capital gain at Rs.38,58,365/-. The ld. CIT(A) affirmed the order of the AO on this count.
Before us, the ld. AR contended that the authorities below erred in considering the correct piece of land acquired by the assessee. It was submitted that, in fact, land at Gut No.11, Vasangaon was acquired in respect of which the extant compensation was awarded. He submitted that the AO wrongly took note of some different land at Khadgaon, Tq.
17 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. Latur, which was not acquired. In support of his contention, the ld. AR placed on record a Notice with reference to land at Vasangaon. Certain additional evidence were also sought to be placed on record to demonstrate that the land of the assessee acquired by the competent authority, which resulted into receipt of the amount, was at Gut No.11 Vasangaon and not Khadgaon, Tq. Latur.
There is complete contrast in the version of the AO and the assessee. Whereas the case of the AO is that the land acquired was situated at Khadgaon, the assessee is contending that it was at Gut No. 11 Vasangaon. In support of such a claim, the assessee has filed certain additional evidence, which has not passed through the eyes either of the AO or the CIT(A). In our considered opinion, it would in the interest of justice, if the impugned order is set aside on this score and the matter is restored to the file of AO for determining as to whether the land acquired was at Khadgaon or Gut No. 11 at Vasangaon in the light of the entire material and thereafter to decide whether it was an agricultural land or a capital asset. We order accordingly. Needless to say, the assessee will be at liberty to place
18 ITA.No.574/PUN/2020 Sh Ram Laxmanrao Mitkari, Latur. any material before the AO in support of his case as he considers expedient. 15. In the result, the appeal is partly allowed for statistical purposes.”
We thus adopt the foregoing discussion mutatis mutandis to affirm the CIT(A)’s action upholding the impugned assessment findings regarding taxability of both sec.28 and sec.34 interests. The assessee’s sole substantive grievance raised in the instant appeal fails. 5. This assessee’s appeal is dismissed in above terms. Order pronounced in the open Court on 23.11.2022.
Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 23rd November, 2022 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Pune Bench, Pune 6. Guard File. //By Order//
Assistant Registrar, ITAT, Pune Benches, Pune.