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Facts
The assessee, an agriculturist, received compensation of Rs. 61,73,207.39 for the compulsory acquisition of ancestral agricultural land by Mahanadi Coalfield Ltd. The Assessing Officer treated Rs. 19,96,996.00 of this compensation as interest income and brought it to tax, citing a variation between the disclosed amount and Form 26AS.
Held
The Tribunal perused the compensation order issued by Mahanadi Coalfield Limited (MCL). It noted that the entire amount of Rs. 61,73,207.39 was clearly stated as compensation for the acquisition of agricultural land, which was also the assessee's ancestral land. Therefore, this amount was not taxable.
Key Issues
Whether the compensation received by the assessee for the compulsory acquisition of agricultural land, including ancestral property, can be treated as taxable interest income.
Sections Cited
Section 194A
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Income Tax Appellate Tribunal, CUTTACK BENCH CUTTACK
Before: SHRI GEORGE MATHAN & SHRI MADHUSUDAN SAWDIA
आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order dated 3.9.2025 passed by CIT(A), NFAC, Delhi in Appeal No.NAFC/2017-18/10220297 for the assessment year 2018-19. 2. Shri Anil Kumar Agarwal, ld AR appeared for the assessee and Shri Sanjib Banerjee, ld Sr DR appeared for the revenue. 3. It was submitted by ld AR that the only issue in this appeal was against an addition of Rs.19,96,996.00, which has been treated by the Assessing Officer as interest on the compensation awarded to the assessee. It was the submission that the assessee is an agriculturist. The ancestral property of the assessee had been 2 आयकर अपील सं/ (�नधा�रण वष� / Assessment Year : 2018-19)
acquired by the Mahanadi Coalfield Ltd., and the assessee was awarded total compensation of Rs.61,73,207.39 towards land and Rs.59,29,999.39 was credited in the bank account of the assessee on 13.7.2017 after deduction of TDS u/s 194A of the Act. The TDS deduction was Rs.2,43,208/- on the amount of Rs.24,32,082.21 as per Form 26AS. The Assessing Officer brought to tax Rs.19,96,996/- towards interest received on the ground that there was variation between the amount disclosed by the assessee and the amount shown in Form 26AS.
Ld AR placed before us the copy of the compensation (translated in English) as received by the assessee which reads as under:
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The original certificate issued in Odia language reads as follows:
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It was the submission that the total compensation amount is Rs.61,73,207.39 and there is no interest component shown in the said notice of the compensation. It was the submission that there are no interest portion and the entire compensation received by the assessee would not be taxable as the same is in the compulsory acquisition of agricultural land by Mahanadi Coalfield Ltd.
In reply, ld Sr DR submitted that the bank account statement supplied by the assessee was not certified by the bank and the English translated copy of the compensation was not provided before the ld CIT(A). He vehemently supported the order of the Assessing Officer and ld CIT(A).
We have considered the rival submissions. A perusal of the compensation order as issued by Mahanadi Coalfield Limited (MCL) clearly shows the entire amount of Rs.61,73,207.39 as compensation on the acquisition of agricultural land, which is also ancestral land of the assessee. This being so, as the compensation certificate issued by MCL clearly shows that the amount is of compensation, same goes out of the tax in view of the fact that what has been acquired by MCL is agricultural land. This being so, the addition as made by the Assessing Officer and confirmed by ld CIT(A) stands deleted. 7. In the result, appeal of the assessee stands allowed. Order dictated and pronounced in the open court on 23/02/2026.