HASMUKHBHAI KADVABHAI RAMANI,SURAT vs. INCOME TAX OFFICER, WARD - 2(3)(2), SURAT

�नधा�रती क� ओर से /Assessee by Shri Suraj P. Soni, CA राज�व क� ओर से /Revenue by Shri Vinod Kumar, Sr-DR अपील पंजीकरण/Appeal instituted on 18.08.2023 सुनवाई की तारीख/Date of hearing 10.11.2023 उ�घोषणा क� तार�ख/Date of 10.11.2023 pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “Ld. NFAC/Ld. CIT(A)”] dated 21.06.2023 for assessment year 2016-17, which in turn arises from the addition made by the Assessing Officer in assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 07.12.2018. The assessee has raised the following ground of appeal: - Section Issue Ground of Appeal Sec.10(27) Solatium received u/s Since, the appellant has received 28 of Land Acquisition solatium u/s 28 of the Land on Act be held as not Acquisition Act along with increased interest chargeable u/s compensation the same is not an 56 of the Inc Tax Act interest received as envisaged in 1961 Section 56 of the Income Tax Act 1961, and is not chargeable to tax, since, the same is received on compulsory (A.Y 16-17) Hasmukhbhai K Ramani acquisition of the Agricultural Land Situated in the remote area having a population of less than 10000. Section 56. Addition of Since the solatium/interest received Rs.42,07,939 on along with increased compensation is account of solatium on in the nature of capital receipt is not increased covered by Section 56(2)(viii) hence is compensation. not taxable to Income Tax. Interest received on increased compensation partake the character of capital receipt which is not taxable u/s 56(2)(viii). Misc. Misc. The appellant craves leave to add, amend, alter or delete any other ground or grounds at any time during the pendency of the appeal.

2. Rival submission of Ld. Authorized Representative (Ld.AR) for the assessee and Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue heard and record perused. The Ld.AR for the assessee submits that during the relevant financial year under consideration, the assessee received compensation on account of compulsory acquisition of assessee’s rural agricultural land by Government of Gujarat. The assessee received enhanced compensation as well as compensation awarded by Land Acquisition Collector. Initially land acquisition collector determined compensation which was not adequate and on the request of assessee and other persons, whose lands were acquired by common Notification of Government of Gujarat under, the Land Acquisition Collector made reference for to Civil Court. The Ld. Principal Senior Civil Judge, Gondal, Rajkot vide order dated 07.04.2014 enhance the compensation. The assessee received his enhanced compensation under section 28 of Land Acquisition Act, 1894. Copy of award passed by Ld. Principal Senior Civil Judge, Gondal is filed. The Ld. AR for the assessee submits that the enhanced compensation does not contain any interest as per (A.Y 16-17) Hasmukhbhai K Ramani Section 34 of Land Acquisition Act, 1894. The compensation, enhanced compensation, solatium and interest on such enhanced compensation is not taxable as per the decision of Hon’ble Apex Court in the case of CIT vs. Ghanshyam (HUF) 315 ITR 1, 182 Taxman 368 (SC). The Ld. AR for the assessee further submits that Ld.CIT(A) allowed 50% relief to assessee, which is without basis.

3. On the other hand, Ld. Sr-DR for the Revenue supported the order of NFAC/Ld. CIT(A) and submits that assessee has already got 50% relief. Though, ld CIT(A) allowed partial relief and the revenue has not filed due to low tax effect. The additional compensation, the interest received on additional compensation is liable to be taxed under section 56 of the Act under “income from other sources”. 4. I have considered the rival submissions of both the parties and perused records carefully. I have also deliberate on case law relied on by Ld. AR for the assessee. I have also considered the written submission filed by the assessee though, such written submissions are filed without seeking permission of the Bench at the time of hearing. I find that the Assessing Officer while passing assessment order noted that on verification of details in Form 26AS that assessee has received interest income of Rs.42,07,939/- and Rs.1,62,283/- from Executive Engineer and Central Bank of India respectively. On further verification, the Assessing Officer found that assessee has received total interest income of Rs.43,70,222/- from State Government on which Tax Deducted at Sources. The Assessing Officer by issuing show cause notice asked the assessee as to why 3 (A.Y 16-17) Hasmukhbhai K Ramani the total entire receipt be not treated under the head “income from other sources” as per the details in Form-26AS. In response to show cause, the assessee filed his reply and contended that he has received interest on delayed compensation on account of compulsory acquisition of his rural agricultural land acquired by the Government of Gujarat. The interest income received by assessee does not fall under the head “income from other sources” and for remaining part of interest income of Rs.1,62,284/- the assessee received from Central Bank of India, the assessee stated that such interest could not be included in total income due to mistake. The assessee submitted that he has no objection if interest received from Central Bank of India is added to his income. Though, the assessee objected for making addition on part of compensation received against acquisition of such land. The Assessing Officer not accepted the contention of assessee and entire compensation included the interest thereon treated as “income from other sources”.

5. Aggrieved by the addition made by Assessing Officer the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) assessee submitted that his agricultural land was acquired by State Government of Gujarat under the Land Acquisition Scheme notified during 1998 to 2000 for a Government project named Servo Irrigation Scheme. The assessee and other co-owners were not satisfied with the compensation and sought reference to Civil Court for enhanced compensation. On the reference, Ld. Principal Senior Civil Jude, Gondal vide order dated 07.04.2014 awarded additional 4 (A.Y 16-17) Hasmukhbhai K Ramani compensation along with interest and solatium. The assessee received such additional compensation and solatium in the year under consideration. The assessee submitted that he has received additional compensation of Rs.18,36,320/-, interest & solatium on additional compensation of Rs.42,07,939/- thereby aggregated compensation of Rs.60,44,259/-. The compensation falls within the purview of Section 10(37) of the Act and same is exempted. Interest part of Rs.42,07,939/- is received under section 28 of the Act form part of compensation and is not taxable under section 56.

by assessee is allowed.

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