The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that no income tax is payable on the amount received as enhanced compensation for the compulsory acquisition of the agricultural land under Land Acquisition Act.
The bench was hearing an appeal filed against the order of the first appellate authority wherein the authority held that the interest received under section 28 of the Land Acquisition Act in case of compulsory acquisition of agricultural land is in the nature of interest income.
The assessee, on second appeal, contended that the above finding is in contravention of the judgment of Hon’ble Supreme Court in case of Union of India & ors Vs. Hari Singh & Ors and the interest paid under section 28 of the Land Acquisition Act amounts to enhance compensation and is not taxable as interest income.
The Tribunal noticed the admitted fact that the assessee has not received interest under section 28 of the Land Acquisition Act, 1894.
“This issue has been decided by the Hon’ble Apex Court in case of Union of India Vs. Hari Singh (Supra) wherein it is held that on agricultural Land no tax is payable when the compensation/enhance compensation is received by the assessee as their land was agricultural land. The compensation was received in respect of agricultural land belonging to the assessee which had been acquired by the state government. Therefore, the same comes under the purview of Section 28 of the Land Acquisition Act,” the Tribunals said.
In the light of the judicial decisions, the Tribunal held that the assessee is eligible for the exemption under section 10(37) of the Act in respect of the interest received by the assessee u/s. 28 of the Land Acquisition Act, 1894.
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