Interest on Enhanced Compensation for Land Acquisition: No Addition Even If TDS was Deducted, rules ITAT [Read Order]

In a significant ruling on the Interest on enhanced compensation for land acquisition, the Delhi bench of the Income Tax Appellate Tribunal has held that addition will not sustain even if TDS was deducted.

The revenue was represented by Sh. Govind Ram Keswani and the assessee were represented by Sh. Lalit Kishore.

The assessee received Rs.2.58 Cr. on account of compulsory acquisition of his land comprising an amount of Rs.79.17 lacs on account of compensation and Rs.178.92 lacs on account of interest on land compensation. The AO treated the interest u/s 56(2)(viii) r.w.s. 145A(b) and allowed deduction u/s 57(iv). The CIT(A) confirmed the order of the AO. The assessee produced certificate from the DRO-Land Acquisition Collector stating that interest was given to the assessee u/s 28. The DROLAC has also deducted the TDS on the compensation. The CIT(A) confirmed the addition by holding that since TDS is deducted, the amount falls u/s 34.

The assessee filed a copy of the certificate from the District Revenue Officer stating that the interest was given u/s 28. This certificate was not filed before the AO and the appellant has not made any request under Rule 46A for admission of additional evidence. The AO enquired the District Revenue Officer cum Land Acquisition Collector (DRO-LAC) of the State Government and it has been clarified that interest has been paid along with enhanced compensation.

It was observed that the interest u/s 28 was a part of the amount of compensation whereas interest u/s 34 is only for a delay in making payment after the compensation is determined. Interest u/s 28 is a part of the enhanced value of the land.

Dr B. R. R. Kumar, Accountant Member, and Shri Yogesh Kumar U S, Judicial Member held that the amount of Rs.3.91 Cr. and Rs.3.80 Cr. has been reconciled, and the addition on the capital account at Rs.6.31 Cr. which includes the compensation received. Hence, the is liable to be deleted. The appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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