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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. Suchitra Kamble & Shri Waseem Ahmed
आदेश/ORDER PER : SUCHITRA KAMBLE, JUDICIAL MEMBER:-
This is an appeal filed against the order dated 26-08-2022 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2016-17.
The grounds of appeal are as under:-
Page No Shri Jayantilal Paghadal vs. ITO
“1. On the facts and circumstances of the case and in law The Income Tax Officer Ward 1(2)(3) Rajkot Grossly erred in taxing the Interest amount granted by the Land Acquisition Officer U/s 28 of the Land Acquisition Act and making an addition of Rs. 51,31,595/= U/s 56 to the total Income of the appellant. Further, the Commissioner of Income Tax (A) National Faceless Appeal Center Delhi also erred in not allowing the appeal of the appellant on wrong interpretation of the Judgments of the Honorable Supreme Court.
2. The Appellant carves leave to add, amend alter or delete any other ground or grounds at any time during the pendency of the appeal.”
The assessee filed return of income declaring nil income at Rs. 6,10,530/- on 22-03-2017. The case was selected for scrutiny for the reason that gross receipt shown in schedule 0S of ITR is less than the receipts reported in 26AS u/s. 193 and large agricultural income. Accordingly, the notice u/s. 143(2) was issued on 19-09- 2017 and duly served upon the assessee. Subsequent statutory notices were served to the assessee. In compliance thereto, the Chartered Accountant and Authorized Representative of the assessee submitted letter dated 18-10-2018 and filed the reply. The same was taken on record by the Assessing Officer and held that since the assessee’s agricultural land was acquired by the Government of Gujarat and initial compensation on compulsory acquisition of land was challenged by the assessee and the assessee was awarded additional compensation along with the interest and therefore the interest component to the extent of 50%
Page No Shri Jayantilal Paghadal vs. ITO enhanced compensation has to be taxed u/s. 56(2)(viii) under the head “income from other sources”.
4. Being aggrieved by the assessment order, the assessee filed appeal before the ld. CIT(A). The CIT(A) dismissed the appeal of the assessee.
5. At the time of hearing, none appeared on behalf of the assessee despite giving the notices which was duly served to the assessee thereby the postal remark that the name mentioned at the address is not available. No new address has been filed by the assessee before the registry. Hence, we are proceeding on the basis of submission made by the assessee before the Assessing Officer as well as before the CIT(A) which are reproduced in the respective orders.
6. The ld. D.R. has given written submissions as follows:-
“2. The sole issue for adjudication in this case is as to whether interest on enhanced compensation should be exempt u/s 10(37) as claimed by the assessee or should be taxable u/s 56(2)(viii) r.w.s. 145A(b) and 57(iv) as held by the Department. The assessee in this case has mainly relied on the decision of Hon'ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai Vs ITO, TDS-1, Surat 388 ITR 343 which, relying upon the Hon'ble Supreme Court judgement in the case of CIT Vs Ghanshyam (HUF) [2009] 182 taxman 368/315 ITR 1 (SC) has held that interest paid on compensation/enhanced compensation u/s 28 of Land Acquisition Act forms part of compensation and not interest as contemplated u/s 145A and therefore is not taxable under the head income from other sources.
Page No Shri Jayantilal Paghadal vs. ITO
3. The above decision and the other decisions relied upon by the assessee have been discussed in the orders of the authorities below, namely the Assessing Officer and Ld. CIT(A) and the decisions discussed therein are being relied upon before your honours. Moreover, in a recent judgement, the Hon'ble Supreme Court in the case of Mahender Pal Narang Vs CBDT [2021] 126 taxmann.com 105 (SC) dismissed the special leave petition filed against the order of Hon'ble High Court of Punjab and Haryana [2020] 120 taxmann.com 400 (Punjab and Haryana High Court) wherein it was held that the interest on enhanced compensation under Land Acquisition Act, 1894 is to be treated as income from other sources and not under the head 'capital gains'. While discussing the decision of Apex Court in Ghanshyam's case (supra) the High Court noted that 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.
Further, while discussing the Hon'ble Gujarat High Court decision in the case of Movaliya (supra) the Hon'ble High Court noted as under:
"Gujarat High Court in Movaliya Rhikhubhai 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 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 subsections and clauses. Supreme Court in I.T.C, Ltd. v. CCE [2004] 7 SCC 591 held as under:
..... 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 Page No Shri Jayantilal Paghadal vs. ITO
ambiguity in the statutory language, reference may be made to 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."
Further in a recent judgment by the Pune Tribunal in the case of Madhav Pandharinath Kande Vs ITO [2022] 140 taxmann.com 105 (Pune Tribunal), the Hon'ble Tribunal relying upon the decisions of Hon'ble Bombay High Court, Aurangabad Bench held that the decision in Bikram Singh case (supra) was given by Three Member Bench of Hon'ble Apex Court whereas the decision in Ghanshyam (HUF) case (supra) was given by a Two Judge Bench of the Hon'ble Supreme Court. Hence, the decision given by the larger Bench shall prevail over the decision given by the smaller Bench, even though the same may be of a later date. The Hon'ble Bombay High Court, Aurangabod Bench looked into the decisions given in the case of Ghanshyam (HUF) and Bikram Singh (supra) and decided in the following words:
"We have perused para-24 & 25 of the judgement of the Apex Court in "Commissioner of Income Tax v. Ghanshyam" (supra), We find that the Hon'ble Apex Court there was not called upon to look into the larger bench judgment delivered earlier in the case of Bikram Singh (supra). In para-7 the Honourable larger bench has found that the interest paid u/s 28 is not by way of any charge on compensation determined u/s 23(1). We, therefore, with respect, follow the large Bench judgement of the Honourable Apex Court."
The Hon'ble Apex Court has consistently held in a catena of judicial pronouncements in the cases of Dr. Shamlal Narula Vs. CIT [1964] 53 ITR 151, T.N.K. Govindaraju Chetty Vs CIT [1967] 66 ITR 465, Rama Rai V. CIT [1990] 181 ITR 400 and K.S. Krishna Rao V. CIT [1990] 181 ITR 408 and have settled the law that the interest received on delayed payment of the compensation or the additional compensation is a revenue receipt exigible to income tax.
7. Thus, relying on the case laws cited above and in view of the specific amendment brought in the Act to section 145A(b), 56(2)(viii) and 57(iv) by Finance Act, 2009, the legislative intent is clear and the addition of 50 per cent of the interest on enhanced compensation
Page No Shri Jayantilal Paghadal vs. ITO has been correctly done and hence it is prayed that the addition may be confirmed and orders of authorities below may be upheld.”
6.1 Thus, the ld. D.R. submitted that in light of decision of Hon’ble Apex Court in case of Bikram Singh Vs. Land Acquisition Collector (1997) 224 ITR 551. The interest u/s. 28 of the 1894 Act was a revenue receipt and is taxable. The ld. D.R. further submitted that the Hon’ble Punjab & Haryana High Court in case of Mahendra Pal Narang Vs. CBDT 120 taxmann.com 400 has also considered the decision of Hon’ble Apex Court in case of CIT vs. Ghanshyam (HUF) 315 ITR 1 and also the decision of Pune Tribunal in case of Madhav Kande vs. ITO (2022) 140 taxmann.com 105 and the decision of Hon’ble Gujarat High Court in case of Movaliya Balabhai Vs. ITO 388 ITR 343 as well as the Ghanshyam HUF decision was also taken into account and the issue is decided against the assessee.
We have heard both the parties and perused all the relevant material available on record. In the present case, the applicability of the Hon’ble Apex Court in case of Ghanshyam HUF (supra) will not be applicable as the interest u/s. 28 is not on delayed payment but was enhanced compensation. But in present assessee’s case, the interest has been granted by the Hon’ble Principal Senior Civil Judge while awarding additional compensation to the assessee. Therefore, the decision of Hon’ble Apex Court which is a three judge bench decision in case of Bikram Singh (supra) will be applicable wherein it is clearly held that the interest was not intended to exclude the revenue receipt on interest on delayed
Page No Shri Jayantilal Paghadal vs. ITO payment of compensation from taxability. Hence, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed.
Order pronounced in the open court on 13-12-2023