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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: HON’BLE SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 381/JP/2022
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 381/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2016-17. cuke Shri Kesar Lal Bairwa, The Income Tax Officer, Vs. A-24, Varun Colony, Ward 2(4), Mandara Stand, Jaipur. New Sanganer Road, Mansarovar, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. CGYPB 7846R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal, C.A. jktLo dh vksj ls@ Revenue by : Ms Monisha Choudhary (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 15/02/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 11/05/2023 vkns'k@ ORDER PER: SANDEEP GOSAIN, J.M.
This appeal by the assessee is directed against the order of ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 30.08.2022 for the assessment year 20116-17. The assessee has raised the following grounds of appeal :-
The ld. CIT (A), NFAC has erred on facts and in law in holding that interest on enhanced compensation is taxable u/s 56(2)(vii) and thereby confirming the addition of Rs. 11,53,600/-.
2. The appellant craves to alter, amend and modify any ground of appeal
3. Necessary cost be awarded to the assessee.
The brief facts of the case are that the assessee filed his return of income declaring total income of Rs. NIL for the year under consideration on 27.03.2017. In the return, compensation of Rs. 7,50,709/- and statutory interest of Rs. 23,07,200/- was received from Rajasthan Housing Board in pursuance to the decision of Hon’ble Supreme Court on acquisition of land was claimed exempt. The AO reopened the assessment by issuing notice u/s 148 of the IT Act, 1961 on the basis that during the year 1982, agricultural lands situated at village Bardeori, Mansarover, Jaipur held by 48 persons including the assessee were compulsorily acquired by the Rajasthan Housing Board. These persons refused to accept the compensation describing it to be having been determined at a lower amount and the same was contested up to Hon’ble Supreme Court. The Hon’ble Supreme Court vide its order dated 01.05.2015 held that the compensation decided by the Single Bench of the Hon’ble High Court to be appropriate and Rajasthan Housing Board was directed to pay enhanced compensation along with other permissible statutory benefit thereon to all the persons affected within a period of three months. In pursuance to these direction, RHB paid enhanced compensation of Rs. 7,50,709/- and statutory interest on such enhanced compensation of Rs. 23,07,200/- to the assessee. Accordingly, notice under section 148 dated 01.02.2018 was issued to tax the said amount. In compliance to the said notice, assessee again filed return on 24.03.2018 declaring same income of Rs. NIL and claiming amount of Rs. 30,57,909/- (Rs. 7,50,709 + 23,07,200) as exempt. Thereafter, notices under section 142(1) and 143(2) dated 07.08.2018 and 29.09.2018 respectively were issued. In response, the assessee explained that interest is paid under section 28 of the Land Acquisition Act which is a part of the compensation itself. The compensation itself being exempt under section 10(37) of the Act, the interest received on such enhanced compensation is also exempt. The AO, in the reassessment proceedings rejected the claim of assessee that the amount so received being capital receipt is not liable for taxation by holding as under :-
(i) Supreme court decision in case of CIT vs. Ghanshyam (HUF) was pronounced on 16.07.2009 whereas section 56(2)(viii) was amended thereafter w.e.f. 01.04.2010 after the order of Hon’ble Supreme Court and thus the judgment of Apex court is not applicable in this case.
(ii) The contention of the assessee that the amendment was not in connection with the decision of the Supreme Court in Ghanshyam
(HUF)’s case is not correct.
(iii) Although the enhanced compensation received is exempt from taxation as per section 10(37) of the Income Tax Act, 1961 but interest received on enhanced compensation amounting to Rs. 23,07,200/- is taxable in the hands of the assessee in AY 2016-17 as per provisions of section 56(2)(viii) of the IT Act.
Accordingly, the AO made addition of Rs. 23,07,200/- to the income declared by the assessee. On appeal, the ld. CIT (A) allowed part relief by holding that section 56(2)(iii) of the IT Act brings to tax interest on compensation or enhanced compensation and the same is taxable on receipt basis subject to deduction of 50% under section 57(vi) and accordingly he directed the AO to assessee the income at Rs.11,53,600/-.
Aggrieved by the order of ld. CIT (A), the assessee is in appeal before us.
Before me, the ld. A/R of the assessee challenged the finding of ld. CIT (A) by submitting that interest so paid is statutory interest under section 28 of Land Acquisition Act and not an interest simplicitor under section 34 of the said Act. In order to appreciate the difference between interest received under section 28 and interest received under section 34 of the Act, the ld. A/R reproduced both these sections as under :-
“ 28. If the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of nine per centum per annum from the date on which he took possession of the land to the date of payment of such excess into Court.” “ 34. When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited.”
From the plain reading of section 28, it can be noted that if the Court award the compensation in excess of the sum which the Collector awarded, the court may direct for payment of interest on such excess @ 9% per annum from the date on which the Collector took the possession of the land till the date of payment of such excess. In the present case, the notification for acquisition was issued on 12.01.1982 and the possession was taken on 22.05.1982. However, the amount of compensation awarded was not paid since it was disputed. Thereafter the civil court determined the compensation vide order dated 23.01.1994 @ Rs. 260/- per sq. yd. but the Hon’ble High Court vide order dated 22.03.1999 reduced it to Rs. 100/- per sq. yard and additionally directed to consider allotment of 25% of the developed land. The Hon’ble Supreme Court vide para 57 of its order approved the compensation of Rs. 100/- per sq. yd. but set aside the direction to grant 25% of the developed land. Thus the Hon’ble Supreme Court directed the Collector/land acquisition officer to ensure that compensation is disbursed directly to the khatedars or their legal representative within a period of 3 months from the date order along with other permissible statutory benefits. Thus, the interest calculated from 22.05.1982 to 08.10.2015 is a statutory interest under section 28 of the Land Acquisition Act and is exempt under section 10(37) of the Act. In this regard, the ld. A/R relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Ghanshyam (HUF), 315 ITR 1 (SC) wherein it has been held as under :-
“ 24. To sum up, interest is different from compensation. However, interest paid on the excess amount under section 28 of the Land Acquisition Act, 1894 depends upon a claim by the person whose land is acquired whereas interest under section 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under section 28 is part of the amount of compensation whereas interest under section 34 is only for delay in making payment after the compensation amount is determined. Interest under section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under section 34.”
Thus the ld. A/R submitted that the amount received as interest by the assessee falls under section 28 and is not taxable and for this proposition, he relied on the judgment of the Hon’ble Supreme Court in the case of CIT vs. Ghanshyam (HUF), supra.
4.1 The ld. A/R further argued that clause (viii) is inserted in sub section (2) of 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.” Thus the ld. A/R submitted that the amendment is made to mitigate the undue hardship caused by the decision of Hon’ble Supreme Court in the case of Rama Bai vs. CIT and do not override the decision of Hon’ble Supreme Court in the case of CIT vs. Ghanshyam (HUF) (supra) and for this proposition he relied upon the decision of Hon’ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai vs. ITO (2016) 139 DTR 223 (Guj.), decision in the case of Shri Nitya Nand vs. ITO dated 30.01.2020 (Delhi Tribunal) and decision in the case of Shri Surendra Laxmanrao Vaidya vs. ITO dated 03.01.2020 (Bang. Tribunal).
On the other hand, the ld. D/R while supporting the order of ld. CIT (A) submitted that in view of the amendment made by Finance (No. 2) Act, 2009 by inserting section 56(2)(viii), income by way of interest received by way of compensation or enhanced compensation is chargeable to tax and in this regard the ld. D/R relied upon the latest decision of Hon’ble Punjab & Haryana High Court in the case of Mahender Pal Narang vs. CBDT (2020) 120 taxmann.com 400 (Punjab & Haryana) wherein it is held as under :-
“ 9. The scheme with regard to chargeability of interest received on compensation and enhanced compensation has undergone a sea change with the insertion of Sections 56(2)(viii) and 57(iv) of the 1961 Act. Section 56 deals with income from other sources and a specific provision has been inserted by way of sub-section 2(viii), whereby the interest received on compensation or enhanced compensation, as referred to in clause (b) to Section 145A has been included under the head 'Income from other sources'. In clause (iv) to Section 57, deduction of fifty per cent is provided on interest received on compensation or enhanced compensation.
10. In view of the amendments, the decision of Apex Court in Ghanshyam's case (supra) does not come to the rescue of the petitioner to claim that interest received under Section 28 of the 1894 Act is to be treated as compensation and to be dealt with under "Capital gains". The fact that there is no amendment carried out under Section 10(37) of the 1961 Act will not change the position. Section 10 deals with deductions and sub- section (37) thereof deals with capital gains arising from transfer of agricultural land, it no where provides as to what is to be included under the head "Capital gains". The argument raised is not well founded.
11. Learned counsel has relied on Circular No. 5 of 2010 by merely reading clause 46.1. The said clause talks about undue hardship being caused as arrears of interest being taxable on accrual basis. Clause 7 of 9 CWP No. 17971 of 2019 [8] 46.2 states that Section 145A is amended to overcome the difficulty, by deeming the income for the year in which it is received. Clause 46.3 has been ignored in which Section 56(2)(viii) is dealt with that interest on compensation or on enhanced compensation referred to in clause (b) of Section 145A shall be assessed as "income from other sources".
12. Gujarat High Court in Movaliya Bhikhubhai Balabhai's case (supra) while dealing with deduction of tax at source relying upon Circular No. 5 of 2010 held that amendment to the provisions of the 1961 Act by Finance Act, 2010 Act was not in connection with the decision of Supreme Court in Ghanshyam's case (supra) but to mitigate the hardship caused by the decision of Supreme Court in Rama Bai's case (supra). It was held that interest under Section 28 of the 1894 Act continues to part take the character of compensation and will not fall within the ambit of expression "interest". In view of discussion above, we with utmost respect are not in agreement with the view taken by Gujarat High Court. There is another aspect, i.e. the language of Sections 56(2)(viii) and 57(iv) of the 1961 Act is plain, simple and unambiguous. There is no scope of taking outside aid for giving an interpretation to newly inserted sub-sections and clauses. Supreme Court in M/s I.T.C. Ltd. v. Commissioner of Central Excise, New Delhi and another, 2004(7) SCC 591 held as under:
"23. ........ These decisions exemplify the general rule of statutory construction that words have to be construed strictly according to their ordinary and natural meaning, particularly when the statute is a fiscal one irrespective of the object with which the provision was introduced. Of course if there is ambiguity in the statutory language, reference may be made to 8 of 9 CWP No. 17971 of 2019 [9] the legislative intent to resolve the ambiguity. But if the statutory language is unambiguous then that must be given effect to. The legislature is deemed to intend and mean what it says. The need for interpretation arises only when the words used in the statute are, on their own terms ambivalent and do not manifest the intention of the legislature."
13. In view of the above, it is held that the interest received on compensation or enhanced compensation is to be treated as "income from other sources" and not under the head "Capital gains".
We have heard the rival contentions, perused the material on record and gone through the orders of the revenue authorities. After analyzing all the judgments cited by both the parties and also evaluating the facts of the present case, we find that it is an undisputed fact that the decision in the case of CIT vs. Ghanshyam (HUF), supra, was passed on 16.07.2009 whereas section 56(2)(viii) was amended thereafter w.e.f. 01.04.2010 after the order of Hon’ble Supreme Court and thus the judgment of Hon’ble Apex Court is not applicable in the present case.
Moreover, Hon’ble Punjab & Haryana High Court in the case of Mahender Pal Narang vs. CBDT has categorically held that –
“ 9. The scheme with regard to chargeability of interest received on compensation and enhanced compensation has undergone a sea change with the insertion of Sections 56(2)(viii) and 57(iv) of the 1961 Act. Section 56 deals with income from other sources and a specific provision has been inserted by way of sub-section 2(viii), whereby the interest received on compensation or enhanced compensation, as referred to in clause (b) to Section 145A has been included under the head 'Income from other sources'. In clause (iv) to Section 57, deduction of fifty per cent is provided on interest received on compensation or enhanced compensation.
In view of the amendments, the decision of Apex Court in Ghanshyam's case (supra) does not come to the rescue of the petitioner to claim that interest received under Section 28 of the 1894 Act is to be treated as compensation and to be dealt with under "Capital gains". The fact that there is no amendment carried out under Section 10(37) of the 1961 Act will not change the position. Section 10 deals with deductions and sub- section (37) thereof deals with capital gains arising from transfer of agricultural land, it no where provides as to what is to be included under the head "Capital gains". The argument raised is not well founded.
Learned counsel has relied on Circular No. 5 of 2010 by merely reading clause 46.1. The said clause talks about undue hardship being caused as arrears of interest being taxable on accrual basis. Clause 7 of 9 CWP No. 17971 of 2019 [8] 46.2 states that Section 145A is amended to overcome the difficulty, by deeming the income for the year in which it is received. Clause 46.3 has been ignored in which Section 56(2)(viii) is dealt with that interest on compensation or on enhanced compensation referred to in clause (b) of Section 145A shall be assessed as "income from other sources".
Gujarat High Court in Movaliya Bhikhubhai Balabhai's case (supra) while dealing with deduction of tax at source relying upon Circular No. 5 of 2010 held that amendment to the provisions of the 1961 Act by Finance Act, 2010 Act was not in connection with the decision of Supreme Court in Ghanshyam's case (supra) but to mitigate the hardship caused by the decision of Supreme Court in Rama Bai's case (supra). It was held that interest under Section 28 of the 1894 Act continues to part take the character of compensation and will not fall within the ambit of expression "interest". In view of discussion above, we with utmost respect are not in agreement with the view taken by Gujarat High Court. There is another aspect, i.e. the language of Sections 56(2)(viii) and 57(iv) of the 1961 Act is plain, simple and unambiguous. There is no scope of taking outside aid for giving an interpretation to newly inserted sub-sections and clauses. Supreme Court in M/s I.T.C. Ltd. v. Commissioner of Central Excise, New Delhi and another, 2004(7) SCC 591 held as under:
"23. ........ These decisions exemplify the general rule of statutory construction that words have to be construed strictly according to their ordinary and natural meaning, particularly when the statute is a fiscal one irrespective of the object with which the provision was introduced. Of course if there is ambiguity in the statutory language, reference may be made to 8 of 9 CWP No. 17971 of 2019 [9] the legislative intent to resolve the ambiguity. But if the statutory language is unambiguous then that must be given effect to. The legislature is deemed to intend and mean what it says. The need for interpretation arises only when the words used in the statute are, on their own terms ambivalent and do not manifest the intention of the legislature."
In view of the above, it is held that the interest received on compensation or enhanced compensation is to be treated as "income from other sources" and not under the head "Capital gains".
Therefore, the pith and substance of the judgment of Hon’ble High Court was that the interest received on compensation or enhanced compensation under Land Acquisition Act is to be treated as “ income from other sources “ and not under the head “ capital gains “.
6.1 Although, while filing further submissions, the ld. A/R submitted that the Delhi Benches of the ITAT in the case of Pranav Saran vs. ACIT in after considering all the judgments on this issue has recorded its finding in favour of the assessee by holding that when there are divergent views on the taxability of interest on the enhanced compensation awarded under section 28 of the Land Acquisition Act wherein the Hon’ble Punjab & Haryana High Court has consistently taking a view that it is an income to be treated under the head “income from other sources”. The Hon’ble Gujarat High Court has decided this issue in favour of assessee following the decision of Hon’ble Supreme Court in the case of Ghanshyam (supra). Since the AO in the case of Pranav Saran vs. Asstt. Commr. of Income-tax (supra) falls under the jurisdiction of Hon’ble Delhi High Court, therefore, while following the dictum that, if one High Court is in favour of the assessee, then in absence of any jurisdictional High Court, that should be followed in favour of the assessee. Thus it was held that the ratio of Hon’ble Punjab & Haryana High Court may not have any binding decision over the Delhi Benches of the Tribunal.
Therefore, it was held that the interest on the enhanced compensation under section 28 of the Land Acquisition Act is not taxable. However, with all humility and humbleness, I disagree with this proposition as while deciding the present case, I am also conscious of the fact that when contrary views have been taken by different High Courts, then the latest view taken by the High Court should have precedence over the view taken in earlier judgment. Moreover, it is also true that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. This principle has been consistently followed by the various authorities. In another Supreme Court judgment in the case of Petron Engineering Construction P. Ltd. vs. CBDT, (1988) 75 CTR (SC) 20, it has been reiterated that the above principle of law is well established and there is no doubt about that. The Hon’ble Supreme Court had, however, on some occasions deviated from this general principle of interpretation of taking statute which can be construed as exception to this general rule. It has been held by the Hon’ble Supreme Court that the rule of resolving ambiguities in favour of tax payer does not apply to exemptions, deductions and exceptions which are allowable only when clearly authorized. This exception has been laid down in the case of Littman v. Barron (1952) (2) AIR 393 and followed by Hon’ble Apex Court in the case of Mangalore Chemicals & Fertilizers Ltd. vs. Deputy Commissioner of CCT (1992) Suppl. 1 SCC 21 and Novopa India Ltd. vs. CCE & C (1994) 73 ELT 769 (SC) and it has been summed up in the words of Lord Lohen,” in case of ambiguity, a taxing statute should be construed in favour of a tax-payer does not apply to a provision giving tax payer relief in certain cases from a section clearly imposing liability”. Therefore, keeping in view the above principles, this exception, in my view, has applicability under the facts of the present case, more particularly, when the latest view of Hon’ble Punjab & Haryana High Court in the case of Mahender Pal Narang vs. CBDT (supra) wherein it has been held that interest received on compensation on enhanced compensation under Land Acquisition Act is to be treated as “income from other sources” and not under the head “capital gains”. I also want to place on record that this order of Hon’ble High Court was challenged before the Hon’ble Supreme Court. However, the SLP filed against the order of High Court was dismissed which in my view is a seal of approval by Hon’ble Supreme Court on the dictum/order passed by the High Court in the case 12 Kesar Lal Bairwa, Jaipur. of Mahender Pal Narang vs. CBDT (supra). Therefore, while relying upon the latest judgment of Hon’ble Punjab & Haryana High Court in the case of Mahender Pal Narang vs. CBDT (supra), I am of the view that interest received on compensation or enhanced compensation under Land Acquisition Act is to be treated as “income from other sources” and not under the head “capital gains”. Thus keeping in view the totality of facts and circumstances of the case and also legal position as discussed above, I dismiss the appeal of the assessee.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 11/05/2023.
Sd/- ¼lanhi xkslkbZ½ (SANDEEP GOSAIN) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 11/05/2023. Das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-Shri Kesar Lal Bairwa, Jaipur. 2. izR;FkhZ@ The Respondent- The ITO, Ward 2(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 381/JP/2022} vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत