Interest From Land Acquisition Cannot Be Taxed Under Income from other Sources: ITAT [Read Order]
The Tribunal ruled in favor of the assessee, holding that interest received under Section 28 of the Land Acquisition Act, 1894, forms part of enhanced compensation and is exempt from tax under Section 10(37) of the Income Tax Act, 1961.
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The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that the interest component of enhanced compensation received under Section 28 of the Land Acquisition Act, 1894, is not taxable as "income from other sources" under the Income Tax Act, 1961. Surender Kumar (assessee) faced proceedings for the Assessment Year (AY) 2017-18, arising from the Commissioner of...
The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that the interest component of enhanced compensation received under Section 28 of the Land Acquisition Act, 1894, is not taxable as "income from other sources" under the Income Tax Act, 1961.
Surender Kumar (assessee) faced proceedings for the Assessment Year (AY) 2017-18, arising from the Commissioner of Income Tax (Appeals) involving proceedings under Section 147 of the Income Tax Act.
The primary issue was the taxability of interest received under Section 28 of the Land Acquisition Act as part of enhanced compensation for the compulsory acquisition of agricultural land.
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Aggrieved by the CIT(A)’ order, the assessee appealed to the ITAT. The assessee’s counsel argued that the interest under Section 28 is an integral part of enhanced compensation, distinguishable from interest under Section 34 of the Land Acquisition Act, which is paid for delays in payment.
The two-member bench comprising Satbeer SinghGodara (Judicial Member) and S. Rifaur Rahman (Accountant Member) relied on the Pawan Kumar V PCIT. It was the recent decision of Delhi tribunal and the tribunal applied the same reasoning to the assessee’s appeal.
It was observed in the Pawan Kumar V PCIT that the decision of Mahender Pal Narang was misplaced, as the Supreme Court’s decision in Hari Singh reaffirmed Ghanshyam HUF and was not brought to the notice of the Punjab & Haryana High Court.
The Tribunal further noted that the dismissal of the Special Leave Petition (SLP) in Mahender Pal Narang did not constitute a binding precedent, as per V.M. Salgaocar and Bros Pvt. Ltd. vs. CIT
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The Tribunal clarified that the amendments to Sections 56(2)(viii), 145A, and 57(iv) by the Finance (No.2) Act, 2009, were intended to address the taxability of interest on an accrual basis, as per Rama Bai vs. CIT and not to alter the character of interest under Section 28 from a capital receipt to a revenue receipt.
The tribunal held that Interest From Land Acquisition Cannot Be Taxed Under Income from other Sources from the binding precedent. The CIT(A)’s order was set aside. The appeal of the assessee was allowed.
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