SHRI RAJENDER SINGH,FARIDABAD vs. ITO, FARIDABAD

The brief facts of the case is that the assessee is an individual who filed his return of income on 11.09.2009 declaring agricultural income of Rs. 2071828/-. The ld AO noted that the agricultural land of the assessee was Page | 1 Rajender Singh Vs ITO, (Assessment Year: 2009-10) acquired by HUDA and the assessee has received compensation as well as interest thereon but same was not shown as income. The assessee does not maintain any books of account. The assessee submitted that assessee has received Rs. 2071828/- from HUDA on account of enhanced compensation and interest thereon which is already shown by the assessee as agricultural income. The assessee further submitted that it does not have the details and therefore, has applied for the same under the RTI Act. The assessee further submitted that enhanced compensation is taxable in the year of receipt u/s 45(5) of the Act and further same is exempt u/s 10(37) of the Act.

The ld AO rejected the contention of the assessee and held that the compensation received by the assessee of Rs. 1913321/- is u/s 28 of the Land Acquisition Act and as the assessee is following cash system of accounting same is taxable on receipt basis. Therefore, the addition of this sum was made. With regard to the sum of Rs. 158507/- is compensation so he held that above sum is exempt u/s 10(37) of the Act. Consequently, the order u/s 143(3) of the Act was passed on 20.12.2011. 4. Aggrieved, the assessee preferred appeal before the ld CIT(A), who held that out of addition of Rs. 1913321/- a sum of Rs. 21763/- is on account of interest on enhanced compensation and therefore, not chargeable to tax in this year. However, Rs. 1886158/- as interest received u/s 34 of the Land Acquisition Act and therefore, it is correctly charged to tax. He further held that exemption u/s 10(37) of the Act is not allowable to the Page | 2 Rajender Singh Vs ITO, (Assessment Year: 2009-10) assessee as conditions are not fulfilled. Therefore, the assessee aggrieved has preferred this appeal before us.

The ld AR submitted that assessee has received compensation u/s 28 of the Land Acquisition Act, therefore, same is part of compensation for land acquisition. The interest received is not interest u/s 34 of the Land Acquisition Act. He therefore, submitted that if the interest is u/s 28 of the Land Acquisition Act then assessee is entitled to deduction u/s 10(37) of the Act. To support his contention he referred to the letter dated 26.07.2011 by the ld AO as well as certificate of Govt of Haryana. He therefore, submitted that the order of the ld CIT(A) is erroneous.

The ld DR relied upon the orders of the lower authorities.

We have carefully considered the rival contentions and perused the orders of the lower authorities. The Hon'ble Supreme Court in CIT Vs. Ghanshyam Dass (HUF) 224 CTR 522 (SC) has held that interest received by the assessee u/s 28 of the Land Acquisition Act is a part of enhanced value of land and therefore, is part of land compensation only. Therfore it emerges that Interest received by the assessee u/s 28 of the Land Acquisition Act is part of the compensation and is not in the nature of the interest. Therefore it is chargeable to tax under the head capital gain u/s 45 (4) of the act. Further interest received u/s 34 of the land Acquisition Act is in the nature of the interest and is chargeable to tax as interest Income under the head Income from Other sources in accordance with the method of accounting regularly followed by the assessee. The ld AO in the impugned case has categorically held that compensation received by Page | 3