Interest on Enhanced Compensation is Taxable as Income from Other Sources: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that interest on enhanced compensation was taxable as income from other sources.

The assessee, Braham Prakash was an individual deriving income from interest from bank and interest income on enhanced compensation/compensation from DRO. The return of income for AY 2013-14 was filed by the assessee on 20/08/2014 declaring total income. The AO on perusal of the bank statement and various details furnished by the assessee observed that assessee had received interest during the year from DRO.

The AO observed that agricultural land belonging to the assessee was acquired by the Govt. and compensation had been paid to the assessee for the same. There was some enhanced compensation also which was paid to the assessee with delay. For the said delay, the assessee was paid interest. The AO applied the provisions of Section 56 (2) (viii) of the Income Tax Act, which was introduced by Finance (No.2) Act, 2009 w.e.f 01/04/2010 wherein interest received on enhanced compensation was sought to be treated as income from other sources.

The AO, however, very fairly applied the provisions of section 57 (iv) of the Income Tax Act also by granting ad hoc deduction to the extent of 50% of income. Accordingly, the AO added 50% of interest received on enhanced compensation as income from other sources and completed the assessment.

Kanv Bali, appeared on behalf of the revenue.

The two-member Bench of M. Balaganesh, (Accountant Member) and Anubhav Sharma, (Judicial Member) relied upon the observation of CIT(A) which held that, “considering the provisions of section 28 of Land Acquisition Act, 1894 and also the decision of  Punjab & Haryana High Court which is the Jurisdictional High Court for the assessee in the case of Manjeet Singh (HUF) Karta Manjeet Singh V/s Union of India and held that the said interest received u/s 28 of Land Acquisition Act would be taxable as income from other sources in the hands of the assessee.”

The Bench accordingly dismissed the appeal filed by the assessee and upheld the addition.

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