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Judgment
PER S.RIFAUR RAHMAN,AM:
This appeal is filed by the assessee against the order passed by the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [for short ‘ld. CIT (A)] dated 08.01.2026 for the Assessment Year 2014-15.
Brief facts of the case are, Assessee has not filed its return of income. Based on the above, assessment was reopened. Based on the information available on AIMS module, the assessee has received cash of Rs.35,33,013/- on account of interest under section 194A of the Income-tax Act, 1961 (for short ‘the Act’). Accordingly notice under section 148 was issued and served on the assessee. Subsequently, assessee filed its return of income as required under section 148 of the Act on 30.10.2021 electronically declaring total income of Rs.1,03,687/-. Accordingly notices under section 143(2) and 142(1) were issued and served on the assessee. During assessment proceedings, AO observed that assessee has received enhanced interest income from Land Acquisition Officer of an amount of Rs.36,33,013/- on which TDS under section 194A was deducted. He observed that assessee has claimed the same as exempt income in its return of income. When the details were called for, assessee has submitted as under:
“I have received compensation against compulsory acquisition of agriculture land. LAO has wrongly deducted TDS on interest of enhanced compensation which I received under section 28 of land acquisition act, 1894 and this interest should be exempt under section 10(37) of the Income Tax Act. Further in financial year 2013-14. I have received only 50 percent interest of enhanced compensation and 50% of enhanced principal amount. Enhanced compensation including interest received on enhanced compensation under section 28 of land acquisition act is exempted from tax.”
After considering the assessee's submissions, AO rejected the same and relying on several decisions proceeded to make the addition to the extent of 50% of the compensation received by the assessee i.e. to the extent of Rs.18,16,507/-.
Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi. After considering the detailed submissions, NFAC, Delhi sustained the additions made by the AO.
Aggrieved with the above order, assessee is in appeal before the ITAT raising following grounds of appeal :-
“1.That the impugned order passed u/s 250 of the Act is contrary to law, facts on record and judicial precedents and therefore deserves to be quashed.
2.That the Ld. CIT(A) has erred in law in upholding the reopening of assessment u/s 147 of the Act, which is bad in law, void ab initio and without any independent application of mind.
3.That the Ld. CIT(A) has erred in law in upholding the reopening of assessment u/s 147 of the Act which is based on incorrect reasons to believe solely based on surmises and conjectures.
4.That the Ld. CJT(A) has erred both in law and on facts in confirming the addition of Rs.18,16,507/- made by the Ld. AO on account of alleged interest on enhanced compensation.
5.That on the facts and circumstances of the case and in law, the Ld. AO as well as the Ld. CIT(A) have erred in not granting credit of Tax Deducted at Source (TDS) amounting to Rs.3,63,301/- deducted by the Land Acquisition Officer and duly reflected in the Form 26AS of the appellant.”
At the time of hearing, learned AR of the assessee submitted that assessee has received interest on enhanced compensation. In this regard, he brought to my notice pages 6 and 7 of the paper book and submitted that assessee has received interest on enhanced compensation under section 28 of the Land Acquisition Act and not under section 34 of the Act. In this regard, he brought to my notice page 114 of the case law paper book, wherein exact similar facts were dealt by the coordinate Bench in the case of ITO vs. Girish Kumar in ITA No.5084/Del/2019 for AY 2016-17 order dated 06.07.2022 and decided the issue in favour of the assessee.
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. I observed that assessee has received enhanced interest compensation under section 28 of the Land Acquisition Act. The coordinate Bench in the case of ITO vs. Girish Kumar (supra) has dealt with the above issue. The relevant findings of the aforesaid decision is reproduced below :-
“7.We have heard the parties, verified the material on record and gave our thoughtful consideration. The only question arises as to whether interest received u/s 28 of Land Acquisition Act, 1894 is taxable u/s 56(2) (viii) read with Section 57(iv) and 145A of the Income Tax.
8.As per Section 10(37) of the Act, any income chargeable under the head of capital gain arising from transfer of agricultural land by way of compulsory acquisition under the law is exempt from taxation. Further, as per provisions of Section 56(2) (vi) of the Act, income by way of interest received on compensation on an enhanced compensation is taxable and a deduction of a sum equal of 50% of such income is allowable u / s 57 (iv) of the Act on that interest. The interest under Land Acquisition Act, is payable under two different Sections i.e. Section 34 & Section 28 of Land Acquisitions Act. There is no dispute in so far as payment of interest u/s 34 of the Land Acquisition Act is concerned. Now, the question whether the interest paid under the provisions of Section 28 of Land Acquisition Act is a part of enhanced compensation or is it taxable as interest income or not. The said issue has been considered by the Hon'ble Supreme Court in the case of CIT Vs. Ghanshyam HUF 315 ITR 1 held that the interest paid on the excess amount u/s 28 of Land Acquisition Act, 1894, depends upon a claim by the person whose land is acquired, where as interest u/s 34 of Land Acquisition Act is for delay in making payment. Interest u/s 28 of Land Acquisition Act is a part of enhanced value of land which is not the case in the matter of payment of interest u/s 34 of the Land Acquisition Act. The relevant portions of the Judgment of the Apex Court are hereunder.-
“In addition to the market value of the land, the Court shall in every case award a sum of 30 per cent on such market value, in consideration of the compulsory nature of acquisition. This is under section 23(2) of the 1894 Act. In short, section 23(2) talks about solatium. Award of solatium is mandatory. Similarly, payment of additional amount under section 23(1 A) is mandatory. The award of interest under section 28 of the 1894 Act is discretionary. Section 28 applies when the amount originally awarded has been paid or deposited and when the Court awards excess amount. In such cases, interest on that excess amount alone is payable. Section 28 empowers the Court to award interest on the excess amount of compensation awarded by it over the amount awarded by the Collector. This award of interest is not mandatory but is left to the discretion of the Court. Section 28 is applicable only in respect of the excess amount, which is determined by the Court after a reference under section 18 of the 1894 Act. Section 28 does not apply to cases of undue delay in making award of compensation. [Para 23."] 9. The above ratio has also been followed by the Hon'ble Supreme Court in its order dated 15/09/2017 in the case of Union of India Vs. Hari Singh & ors in Civil Appeal No. 15041/2017 wherein the Hon'ble Supreme Court has held as follows:-
“While determining as to whether the compensation paid was for agricultural land or not, the AOs will keep in mind the provisions of section 28 of the Land Acquisition Act and the law laid down by this court in commissioner of Income Tax, Faridabad V. Ghanshyam (HUF) (2009 (8) SCC 412) in order to ascertain whether the interest given under the said provisions amounts to compensation or not."
10.The Ld.CIT(A) has considered all the judgments mentioned in the present grounds of Appeal and since the judgment of Hon'ble Supreme Court in the case of Hari Singh & Ors (Supra) and also in the case of Ghanshyam HUF (Supra) are binding precedents, relied on the same.
11.In our considered opinion, the Ld.CIT(A) has committed no error and there is no infirmity in allowing the Appeal of the assessee. We are also of the view that the judgment rendered in the case of Ghanshyam HUF and Hari Singh (Supra) of the Hon'ble Supreme Court are applicable to the present case having binding effect over the High Court Judgments relied by the Revenue. Therefore, the Grounds of Appeal of the Revenue are dismissed.”
Respectfully following the above decision, the grounds raised by the assessee are allowed. Accordingly, the appeal filed by the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.