Exemption on Interest from Enhanced Compensation u/s 10(37): ITAT Rules It Taxable as Income from Other Sources [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) dismissed the claim for exemption on interest received from enhanced compensation for compulsory acquisition of agricultural land under section 10(37) of Income Tax Act,1961, holding that such interest is taxable as income from other sources.

Kuljeet Singh,appellant-assessee,challenged the order dated 31.08.2023 passed by the Commissioner of Income Tax (Appeals)[CIT(A)], which arose from the assessment order dated 17.03.2021 under section 143(3) read with sections 143(3A) and 143(3B) of the Income Tax Act, issued by the National Assessment Centre, Delhi.

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No appearance was made on behalf of the assessee during the hearing, though notices were repeatedly sent by post and email.

Read More: Interest on Enhanced Compensation is Taxable as Income from Other Sources: ITAT

The two member bench comprising Anubhav Sharma (Judicial Member) and S.Rifaur Rahman( Accountant Member)  examined the submissions of the Departmental Representative and the material on record. It noted that the issue related to the disallowance of exemption claimed under section 10(37) of the Act. The assessee had claimed exemption on interest received from enhanced compensation for compulsory acquisition of agricultural land, but the tax authorities treated it as income from other sources.

The appellate tribunal referred to the Punjab & Haryana High Court’s decision in Mahindra Pal Narang vs. CBDT, where it was held that such interest should not be taxed as income from other sources. The Supreme Court had dismissed the SLP against this decision, making it binding in that jurisdiction.

However, the bench also noted that the Delhi High Court, in PCIT vs. Inderjit Singh Sodhi [HUF], had ruled in favour of the department on a similar issue. The Delhi Benches of the Tribunal had followed the same view in Veena Shah and Bheem Singh cases.

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Considering these rulings, the tribunal found no merit in the claim and dismissed the ground.

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