KRISHAN PAL SINGH HUF,JAIPUR vs. ASSESSING OFFICER, JAIPUR

4. The CIT (A) has committed a mistake on facts and circumstances prevailing in the case by holding and confirming the AO that income from interest (Under Section 28 of Land Acquisition Act 1894) on enhanced compensation of Land Acquisition as assessable under the head 'Income from other sources'.

5. That CIT (A) has committed a grave mistake in respect law of precedents that by not following case laws decided by Supreme Court. The AO as well as CIT(Appeals) has not followed the case laws: Ghanshyam Dass (HUF) and subsequent decisions delivered by the Supreme Court.

19, as per 26AS, Rs. 1,27,13,420/- was received by the assessee from Land Acquisition Office for which TDS was deducted. The assessee has claimed that Rs. 1,27,13,420/- received by him. The said amount was received enhanced compensation of his land under the Land Acquisition Act 1894. Such income has been claimed as exempt income in the statement of income under section 10(37) of the Act on the grounds that the interest received was under section 28 of the Land Acquisition Act 1894. The assessee has shown an amount of Rs. 12,71,342/- as TDS and has been deducted by the deductor -Land Acquisition Office. While verifying it ld. AO noted that TDS has been deducted on the interest of the Land Acquisition Compensation, and the LAC interest has wrongly shown exempt under 10(38) instead of exempt under section 10(37). Details were called for regarding land has been acquired compulsorily, orders issued by the competent authority to acquire the land, details of compensation etc.

The assessee vide his reply attached population certificate issued by village Gokalgarh. The assessee also stated land parcels acquired by the land acquisition office viz. survey No. District, village, location of land, total area of land, date of acquisition / possession by Land Acquisition officer, Compensation received, date of receipt of compensation. Compensation on compensation Rs.1,27,13,424 and TDS amount of Rs. 12,71,342 also paid by the assessee. The assessee has submitted the Land Acquisition Officer's order of acquisition, the break-up of the award of interest on enhanced compensation u/s 28 of the Land Acquisition Act 1894 and relevant documents pertaining to agricultural activity on the said land from competent authorities. The assessee has put forth the claim that interest received u/s 28 of the Land Acquisition Act on enhanced compensation forms part of the compensation and hence is exempt in the case of agricultural land.

3.2 On the issue of Interest on enhanced compensation as part of compensation the assessee submitted that his agricultural land has been acquired by the State of Haryana. The refund has been claimed since the assessee has been paid an interest under section 28 of the land Acquisition Act on land Acquisition Award of Rs. 1,27,13,424/- by Land Acquisition Authority paid on LAC award (as directed by Court). The fact is itself self-evident from Form 26AS and LAC Officer Letter. The assessee has claimed that amount as exempt under section 10 in view of the Supreme Court rulings and CBDT Circular No. 36/2016 dated 25th Oct 2016,". the Supreme Court in Union Of India And Ors. Versus Hari Singh And Ors, which further places reliance on CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368. The decisions of the apex court in these cases are relied upon by the assessee to claim the interest on enhanced compensation as an exempt income. Since there is reference to the judgement of the Supreme Court in CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368, it is necessary to understand the judgement. The question before the Supreme Court was regarding whether interest paid on excess compensation under section 28 of the Land Acquisition Act 1894 could be treated as part of the compensation under section 45(5) of the Income-tax Act 1961. The ld. AO then referring to clause (viii) which was inserted in the sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A shall be assessed as income from other sources in the year in which it is received. Since that amendment was after the decision cited by the assessee the claim of the assessee was rejected and accordingly amount of Rs. 1,12,13,424/- was charged to tax as income of the assessee u/s. 56(2)(viii) r.w.s. 145B(1) after allowing the benefit of section 57(iv) of the Act.

4. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:

6.2.1 I have gone through the facts of the case and the submissions of the appellant and also the assessment order. Vide Finance (No.2) Act, 2009 (with effect from 01.10.2010), Clause (viii) of sub-Section 2 to Section 56 of the Act was inserted and the same is reproduced hereunder:-

"56. Income from other sources - Section 56 (2)(viii):

The Finance (No.2) Act, 2009 (with effect from 01.10.2010), Clause (viii) of sub- Section 2 to Section 56 of the Act was inserted and the same is extracted hereunder as: -

(2) In particular and without prejudice to the generality of the provisions of sub- section (1), the following incomes shall be chargeable to income tax under the head "Income from other sources", namely: -

[(viii) income by way of interest received on compensation or on enhanced compensation referred to in (sub-section (1) of Section 145-BJ

6.2.2) For the sake of clarity, Section 145-B of the Act is reproduced as under-

"[145-B. Taxability of certain income.

(1) 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.

(2) Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realization is achieved

(3) The income referred to in sub-clause (xviii) of clause (24) of Section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year.]"

Krishan Pal Singh vs. ITO 6.2.3) A conjoint reading of the aforementioned provisions i.e.. Sections 56(2)(viii) and 145-B of the Act vividly stipulate that the income received by way of interest on compensation or on enhanced compensation shall be chargeable to tax under the head "Income from other sources". Therefore, since the position with respect to the imposition of tax on interest on compensation or enhanced compensation, as it exists today, came into being only in the year 2010, the contention drawn by the appellant from the decision in the case of Ghanshyam (supra), which was passed in the year 2009, are unsustainable to the facts of the present case.

6.2.4) Thus, interest, whether on compensation or on enhanced compensation, received on account of acquisition of land under section 28 and 34 of Land Acquisition Act, 1894 shall be considered as income from other sources under section 56(2)(viii) and shall be exigible to income-tax. In view of the above, the action of the AO is upheld and the addition made u/s 56(2)(viii) of the Act is sustained and the relevant grounds are dismissed.”

5. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A)/NFAC, the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds raised by the ld. AR of the assessee, has filed a written submissions which reads as follows :

“That in a nutshell it has undisputed fact that the appellant has been paid interest under Section 28 of the Land Acquisition Act,1894. It is only issue remains with the taxability of the Interest paid under Section 28 of Land Acquisition of the Act is taxable or not. The appellant hereby submits Paras nos. from the relevant Cases Laws being relied upon by the Appellant as part and parcel of his written submission being submitted in support of his appeal. [2009] 182 taxman 368(SC)/ [2009] 315 ITR 1(SC) / [2009] 224 CTR 522 (SC) [16-07-2009] SUPREME COURT OF INDIA Commissioner of income tax, Faridabad v. Ghanshyam (HUF) S.H KAPADIA AND AFTAB ALAM, JJ. CIVIL APPEAL NOS.4401 TO 4420, 4422 TO 4426 OF 2009 JULY 16, 2009 Krishan Pal Singh vs. ITO Section 45 read with section 155 of the income tax act 1961 and Sec 23, 28 and 34 of the Land Acquisition Act 1894 capital gains year in which assessable – assessment year 1999- 2000 whether even in cases where pending appeal court /tribunal/ authority, before which appeal is pending permits claimant to withdraw against security or otherwise enhanced compensation (which is in dispute) same is liable to be taxed under section 45(5) in year of receipt- Held, yes - Whether additional amount under section 23(1A) solatium under section 23(2) and Interest on excess compensation under section 28 of Land Acquisition act form part of enhanced compensation under section 45(5) in year of receipt- held, yes. [2018] 91 taxmann.com 20 (SC) [2018] 254 TAXMAN 126(SC) [2018]302 CTR 458(SC) [15-09-2017] In re: Union of India Vs Hari Singh IT: where land acquisition collector while disturbing compensation had deducted tax at source and deposited same with income tax department matter should have been remitted to assessing officer to decide nature of land acquired and whether tax was payable on compensation/enhanced compensation received on said land. In the said decision in para 8(2) has re-affirmed the decision of the CIT Vs Ghanshyam (HUF) (2009) 182 Taxman 368/315 ITR 1 (SC) as follows : “(2) While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in CIT V. Ghanshyam (HUF) (2009) 182 Taxman 368/315 ITR 1 (SC) in order to ascertain whether the interest given under the said provisions amounts to compensation or not.”

(2016) 70 Taxmann.Com 45/388ITR 343 (Gujarat) Para 14 : In re : Movaliya Bhikhubhai Balabhai Vs ITO In the above mentioned case the HC has held while relying upon the judgment upon the Apex Court decision Ghanshyam (HUF) in respect of the amount paid under Section 28 of the Land Acquisition Act 1894 forms part of compensation and not interest. The same principles has been followed by the various ITAT from since long a few of them are as follows : 1. [2023] 150 taxmann.com 153 (Pune- Trib.) / [2023] 200 ITD 575 (Pune- Trib.) [08-02-2023] In re: Sanjay Bhimrao Patil Vs Income Tax Officer (Para 21 to 23) IT: Interest received by assessee u/s 28 of Land Acquisition Act 1894 on enhanced compensation received for compulsory acquisition agriculture land for period from acquisition of land till payment of compensation to assessee was part of compensation and thus same was not taxable and amendment by way of substitution of section 145A and insertion of clause (iii) in section 56 (2) would not be applicable on same.

Krishan Pal Singh vs. ITO 2. [2018] 96 taxmann.com 541 (Bangalore – Trib.) \ [2018] 172 ITD 332 (Bangalore – Trib.) [20-07-2018] In re : Income Tax Officer Vs Sangappa S. Kudarikannur : (See Par 14) : Interest awarded to assessee U/s 28 of Land Acquisition act 1894 on enhanced compensation paid for acquisition of agriculture land would be eligible for exemption under section 10 (37). 3. [2018] 99 taxmann.com 90 (Bangalore ITAT): 173 ITD 399. [12-10-2018]: In re : Income Tax Officer Vs Vinayak Hari Palled (See Para 13) IT: interest awarded on enhanced compensation paid by government for acquisition of agricultural land of assessee u/s 28 of Land Acquisition act would partake of character of compensation and would be eligible for exemption under section 10(37)

4. [2019] 104 taxmann.com 99 (Delhi ITAT):176 ITD 1 In re: Baldev Singh Vs Income Tax Officer (See Para 9 and 10) IT: where assessee’s agriculture land was acquired by government enhanced compensation including interest received would be eligible for exemption.

5. [2020]113 taxmann.com 572 (Bangalore ITAT); 182 ITD 408 [22-11-2019] In re : Smt Lakshmamma Vs Income Tax Officer (See Para 16,17) Income tax: interest received on enhanced compensation u/s 28 of Land Acquisition Act 1894 is eligible for exemption under section 10(37)

6. [2018] 95 taxmann.com 106 (Bangalore –Trib.) [01-06-2018] In re : I T O Vs Basavaraj M Kudarikannur (See Para 11 and 14) IT: interest awarded u/s 28 of the Land Acquisition Act 1894 on enhanced compensation paid for compulsory acquisition of agriculture land would be eligible for exemption under section 10(37)

7. In re: Sumesh Kumar Vs I T O (ITAT New Delhi ) (Paras 7) IT: Para 7: … The Assessing Officer as well as the CIT (A) have not given any finding as to the fact that the assessee has not received interest under Section 28 of the Land Acquisition Act,1894. This issue has been decided Hon’ble Apex Court in case of Union of India vs Hari Singh (Civil Appeal No. 15041/2017) order dt 15th Sept 2017).

8. In re: Narender Kumar Vs ITO (ITAT New Delhi) (Para 7) IT: Para 7. Thus the interest received on compensation to the assessee is nothing but a capital receipt and the addition is against the law. From the perusal of the Order of the CIT(A), it can be seen that the CIT(A) has not given a separate finding as to why the Assessing Officer is justified in making the addition. This issue has been decided by the Hon’ble Apex Court in the case Union of India vs Hari Singh (Civil Appeal No. 15041/2017) order dt 15th Sept 2017) ….

9. Jai Parkash Vs Principal Commissioner of Income Tax (2024) 161 Taxmann.com 735 (Delhi): That in the Judgment the ITAT, Delhi has specifically

10. Shri Kusum Jayram Thakur Dhutum Vs Income Tax Officer (ITAT Pune) dt. 03/05/2024. It has been held that the Interest under Section 28 of the Land Acquisition Act,1894 is a capital receipt and forms part of compensation under Sectio 10(37) hence exempt from tax. Para 5 and 6 of the Judgement speaks as follows:

“ 5.We have heard the foregoing vehement rival contentions. It transpires that the instant issue of taxability of the assessee’s interest income received under section 28 of the Act is covered in assessee’s favour as per the hon’ble high court’s Bombay bench holding that the same is not taxable under section 56(2)(viii) of the Act as against the Revenue’s contentions that the Aurangabad bench of the very hon’ble jurisdictional high court has taken a divergent view against the taxpayer in Shivajirao and Others Vs. State Writ Petition No.5042/2013 dated 27.08.2013(supra).

6. Faced with the situation, we are of the opinion that it is the Bombay and not Aurangabad bench of the hon’ble jurisdictional high court whose decision would prevail in the given facts and circumstances as the assessee, his land/capital asset forming subject matter of compulsory acquisition as well as “situs” of the Assessing Officer who has framed assessment before us dated 28.11.2017, are covered within its territorial jurisdiction notified from time to time. We thus quote PCIT Vs. ABC Paper Limited [2022] 447 ITR 1 (SC) and decide the instant sole substantive ground as well as the main appeal is assessee’s favour. Ordered accordingly.”

Krishan Pal Singh vs. ITO “4. In view of the aforesaid judgment of the Apex Court, this amount is to be treated as part of compensation itself and is not to be treated as interest. Therefore, the question of law framed above does not survive any more.” Hon'ble Himanchal Pradesh High Court in the case of CIT v. Keshwa Devi (2012) 19 Taxman.com 220 (HP) which after relying upon the judgment of Hon'ble Supreme Court in the case of Ghanshyam, HUF [2009] 182 Taxman 368 /315ITR 1 (SC) has held that interest received under section 28 of the Land Acquisition Act on enhanced compensation is not interest under section 34 but is in the nature of compensation and therefore, was not taxable as interest. That therefore it is requested to please consider the above mentioned ruling while deciding the appeal.”

6. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee is in receipt of enhanced compensation as provisions of section 28 of the Land Acquisition Act for the compulsory acquisition of the land and to support that contention, ld. AR of the assessee has filed the copy of order demonstrating that the compensation so received by the assessee was in accordance with the provisions of section 28 of the Land Acquisition Act which is exempt from income tax as per provision of section 10(37) of the Act. He also submitted that though there has been an amendment in the provision of section 56 and 145B of the Act but when there is no consequential amendment in the provision of section 10(37) of the Act the said section considered the income as not chargeable to tax that prevails over the other provisions of the Act. authorities and submitted that the interest chargeable to tax subjected to tax as per provisions of section 56C(2)(viii) of the Act. Ld. DR also submitted that the assessee received interest on which TDS has also been deducted as the same is chargeable to tax and therefore, it covers as per provisions of section 56(2)(viii) r.w.s 145(B) of the Act. Based on that argument ld. DR supported the finding recorded in the order of ld. CIT(A) vide para 6.2 and prayed to sustain the addition made by the lower authorities.

8. In the rejoinder to the submission of the ld. DR, ld. AR of the assessee submitted that it is not under dispute that the acquisition was made, and compensation was received as per provisions of section 28 of the Land Acquisition Act. Ld. AR of the assessee stated that though the provisions of section 56(2)(viii) was amended but the benefit which is granted as per provisions of section 10(37) of the Act shall prevail.

9. We have heard the rival contentions and perused the material placed on record. The bench noted that in the present appeal the assessee raised multiple grounds of appeal. However, at the time of hearing of the appeal we note that the only issue raised in this appeal was income of Rs. 10(37) of the Act or is chargeable to tax as per provision of section 56(2)(viii) of the Act. As is evident from the record that the assessee has received enhanced compensation as per provision of section 28 of the Land Acquisition Act for an amount of Rs. 1,27,13,424/-. The assessee while filling the return of income claimed the said income as exempt as per provision of section 10(37) of the Act and claimed the refund of TDS deducted on the said compensation. In the assessment proceeding ld. AO treated the said compensation as chargeable to tax as per provision of section 56(2)(viii) r.w.s 145(B) of the Act. When the matter carried to ld. CIT(A) he confirmed the addition based on the reasoning supported by the ld. AO. Before us the ld. AR of the assessee supported the claim as per provision of section 10(37) of the Act and he serviced the various judicial precedent cited on the issue and thereby prayed for the relief as claimed.

Krishan Pal Singh vs. ITO 3. Suffice to say, the assessee's sole substantive grievance raised herein seeks to reverse both the learned lower authorities action assessing it's interest received u/sec.28 of the Land Acquisition Act, 1894 granted by the learned Reference Court, u/sec.56(2)(viii) r.w.s.145A of the Act qua the amount in question of Rs.2,65,38,689/- in the Assessing Officer's assessment herein dated 27.12.2018. Both the learned Assessing Officer as well as the NFAC herein are of the opinion that in light of the foregoing statutory amendment in the Act, such an interest income of enhanced land acquisition compensation is no more exempt from taxation.

4. Both the learned representatives reiterated their respective stands during the course of hearing. It transpires during the course of hearing that the Assessing Officer before us is learned ITO, Ward-3, Panvel. This being the clinching fact, it is noticed that the tribunal's recent coordinate bench(es) order in Raghunath Budhaji Patil, Uran v. ITO [IT Appeal No. 235 (PUN.) of 2023, dated 27-4-2023] has already settled the issue in assessee's favour and against the department going by jurisdictional bench of hon'ble high court as under : "3. We have given our thoughtful consideration to vehement rival stands against and in support of the lower authorities findings holding the assessee's interest income received under section 28 of the Land Acquisition Act, 1894 as taxable under the head income from "Other" sources under section 56(2)(viii) of the Act. The assessee's case before us is that such an interest income is part of the land acquisition compensation itself and not taxable, therefore, in light of Ghanshyam (HUF) v. CIT [2009] 224 CTR 522/315 ITR 1/182 Taxman 368 (SC). Learned counsel thereafter quoted [2016] 138 DTR 229 (Guj) Moraliya B Balashai v. ITO and [2019] 471 ITR 169 (Bom), Ruesh R.Shah v. Union of India and vehemently contended that the learned lower authorities action under challenge is hardly sustainable in law.

Krishan Pal Singh vs. ITO 4. 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 v. Ghanshyam (HUF)[2009] 224 CTR 522/315 ITR 1/182 Taxman 368 (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 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".

10. 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 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. 0104-2010, 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."

Krishan Pal Singh vs. ITO 5. We have heard the foregoing vehement rival contentions. It transpires that the instant issue of taxability of the assessee's interest income received under section 28 of the Act is covered in assessee's favour as per the hon'ble high court's Bombay bench holding that the same is not taxable under section 56(2)(viii) of the Act as against the Revenue's contentions that the Aurangabad bench of the very hon'ble jurisdictional high court has taken a divergent view against the taxpayer in Shivajirao and Others v. State Writ Petition No.5042/2013 dated 27.08.2013 (supra).

6. Faced with the situation, we are of the opinion that it is the Bombay and not Aurangabad bench of the hon'ble jurisdictional high court whose decision would prevail in the given facts and circumstances as the assessee, his land/capital asset forming subject matter of compulsory acquisition as well as "situs" of the Assessing Officer who has framed assessment before us dated 28.11.2017, are covered within its territorial jurisdiction notified from time to time. We thus quote PCIT v. ABC Paper Limited [2022] 141 taxmann.com 332/447 ITR 1/289 Taxman 150 (SC) and decide the instant sole substantive ground as well as the main appeal is assessee's favour. Ordered accordingly.

5. We adopt the detailed discussion mutatis mutandis "for Panvel" to accept the assessee's instant sole substantive grievance on merits. No other ground/argument raised or pressed before us during the course of hearing.

6. This assessee's appeal is allowed in above terms.

On being consistent with the finding so recorded we consider the assessee’s appeal on the solitary ground in their favour.

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

Order pronounced in the open court on 19/02/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 19/02/2025 Krishan Pal Singh vs. ITO *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Krishan Pal Singh HUF, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward 1(4), Jaipur 3. vk;dj vk;qDr@ The ld CIT vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. 6. xkMZ QkbZy@ Guard File (ITA No. 1268/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत