Shri Manish Tuteja vs Principal Commissioner Of Income Tax, Rohtak

- '1 That having regard to the facts and circumstances of the case and in law, the order under section 263 of the Income Tax Act 1961 ("the Act") dated 27 03 2023 passed by the Ld. Principal Commissioner of Income Tax, Rohtak [PCIT*], setting aside the assessment order 143(3) r.w.s. 143(34) & 143(3B) of the Act dated 12.01.2021 passed by the Assessing Officer, National e Assessment Centre ["the Assessing Officer"] as erroneous and prejudicial to the interest of the revenue, is without jurisdiction, bad in law and void-ab-initio.

2.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred, so much so that, the assessment order passed by the Assessing officer do not satisfy the statutory twin conditions prescribed under section 263 of the Act, viz, (i) that the assessment order is erroneous, and (ii) that the assessment order is prejudicial to the interest of Revenue, which are to be cumulatively satisfied

3.

That having regard to the facts and circumstances of the case and in law, the PCIT erred in exercising the revisionary jurisdiction under section 263 of the Act by not appreciating that the assessment order was passed by the assessing officer following the decisions of the Hon'ble Supreme Court in the cases of CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368/315 ITR 1(SC), CIT, Rajkot v. Govindbhai Mamalya (2014) 52 taxmann.com 270/[2015] 229 Taxman 138/[2014] 367 ITR 498(SC), UOI v. Hari Singh [2018] 91 taxmann.com 20 (SC) Being so the assessment order passed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 12.01.2021 was not amenable to revision under section 263 of the Act.

4.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred in exercising jurisdiction under section 263 of the Act in respect of the issue of taxability of interest u/s 28 of the Land Acquisition Act received as part of enhanced compensation, which was duly supported by judicial precedents and therefore, at best, could be said to be debatable issue ousting the jurisdiction under section 263 of the Act

5.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred in exercising jurisdiction under section 263 of the Act in setting aside the issue of taxability of interest u/s 28 of the Land Acquisition Act granted as part of enhanced compensation, which was duly scrutinized by the Assessing Officer while passing the assessment order under section 143(3) r.w.s. 143(3A) & 143(3B) of the Act.

6.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred in not appreciating that even if the Assessing Officer has not specifically mentioned that he has examined/verified a particular issue in the assessment order, that would not ipso facto mean that there was non-application of mind on the part of the assessing officer on this issue.

7.

That the appellant craves the leave to add, modify, amend, or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.*

NOTICE FOR THE HEARING

Subject: Notice for Hearing in respect of Revision proceedings u/s 263 of the THE INCOME TAX ACT, 1961-Assessment Year 2018-19:

In this regard, a hearing in the matter is fixed on 23/01/2023 at 11:00 AM You are requested to attend in person or through an authorized representative to submit your representation, if any alongwith supporting documents/information in support of the issues involved (as mentioned below) If you wish that the Revision proceeding he concluded on the basis of your In this office, on or before the due date, then your personal attendance is not required. You also have the option to file your submission from the incometaxindiaefiling.gov.in the e-filing portal using the link: incometaxindiaefiling.gov.in

Return declaring Income of Rs. 22,05,013/- for the AY. 2018-19 was filed by you on 30.08.2018 which was processed u/s 143(1) of the Income Tax Act, 1961. Subsequently, your case was selected for Limited Scrutiny on the following issues

1 Income from other sources

2.

Refund claim

However, the scrutiny assessment proceedings u/s 143(3) of the Act were completed vide order dated 12.01.2021 accepting the returned income as such.

3.

During the proceedings, it has come to the notice that your land has been compulsorily acquired by HUDA and you have received interest on enhanced compensation amounting Rs. 1,94,53,200/- on which TDS of Rs. 19,45,320/- was also deducted. You have claimed whole of the interest income as exempt and also claimed refund of the TDS which was also allowed to you.

(iii)

As per the amended provisions of Section 56(2) (viii) of the Act introduced by the Finance Act, 2009 effective from the AY 2010-11, an income received by way of interest on compensation or on enhanced compensation referred to in (sub-section (1) of 1458) of the Act is taxable in the year of receipt and deduction @ 50% is allowable from such receipt u/s 57(iv) of the Act

Further the Hon'ble Punjab & Haryana High Court has given its categorical finding that the interest received on compensation or the enhanced compensation will be taxed as per amended provisions of the Act and the judgment of the Hon'ble Supreme Court in the case of CIT v/s Ghanshyam HUF would not come to the rescue of the assessee.

The interest on compensation or enhanced compensation has been brought to tax under the head "income from other sources by way of amendment introduced through Finance (No.2) Act, 2009 w.e.f 01.04 2010. As already mentioned, for the taxing treatment of interest on compensation/enhanced compensation, special provisions has been made by way of Finance (No.2) Act, 2009 by introducing a clause (viii) in sub-section 2 of section 56, clause(iv) in section 57 and clause (b) in Section 145A wet 01.04.2010. From the assessment year 2010-11 onwards, the amount of compensation or enhanced compensation is taxable as "income from other sources after allowing deduction of a sum equal to 50% of such income in the year of receipt. The changes have been brought with a view to put to rest, the controversies surrounding the issues relating to the year of taxability and amount of taxability etc. of the interest on compensation and enhanced compensation. In view of above discussion and the recent decision of Hon'ble Punjab & Haryana High Court which is also the jurisdictional High Court in the case of Mahender Pal Narang Vs Central Board of Direct Taxes, New Delhi and others, the interest income of Rs 1,94,53,200/- received by you is taxable after allowing deduction of Rs.97,26,600/- (@50%) u/s 57(iv) of the Act and Rs 97,26,600/- is required to be added to your income and taxed as per provisions of the Income Tax Act. However, the AO while finalizing the assessment proceedings vide its order dated 12.01 2021 has failed to make the addition and such failure on the part of AO renders the order, erroneous and prejudicial to the interest of revenue.

3.

In view of the above, the assessment completed by the AO is, prima facie erroneous in so far as it is prejudicial to the interest of revenue. The same is, therefore, required to be suitably amended/modified u/s 263 of the Income Tax Act, 1961. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) of the Act should not be passed. In this connection, you may send your written reply along with supporting documentary evidences on the email-id of the office of Pr. Commissioner of Income Tax Rohtak i.e. rohtak [email protected] or through e-proceedings before 11:00 AM on 23.01.2023. In case of no reply is received, it shall be assumed that you do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice/intimation to you.*

*2. During the proceedings it has come to the notice that your land has been compulsorily acquired by HUDA and you have received interest on enhanced compensation amounting Rs. 1,94,53,200 on which TDS of Rs 19,45 320 was also deducted. You have claimed whole of the interest income as exempt and also claimed refund of the TDS which was also allowed to you.

(III)

As per the amended provisions of Section 56(2) of the Act introduced by the Finance Act, 2009 effective from the AY 2010-11, an income received by way of interest on compensation or on enhanced compensation referred to in (sub-section (1) of 1458) of the Act is taxable in the year of receipt and deduction @ 50% is allowable from such receipt u/s 57 (iv) of the Act. Further the Hon'ble Punjab & Haryana High Court has given its categorical finding that the interest received on compensation or the enhance compensation will be taxed as per amended provisions of the Act and the judgment of the Hon'ble Supreme Court in the case of CIT v/s Ghanshyam HUF would not come to the rescue of the assessee.

The interest on compensation or enhanced compensation has been brought to fax under the head "income from other sources by way of amendment introduced through Finance No 21 Act, 2009 w.e.f 01.04.2010 As already mentioned, for the taxing treatment of interest on compensation/enhanced compensation, special provisions has been made by way of Finance (No.2) Act, 2009 by introducing a clause (vii) in sub-section 2 of section 56. clause(iv) in section 57 and clause (b) in Section 145A w.e.f 01.04 2010 From the assessment year, 2010-11 onwards, the amount of compensation or enhanced compensation is taxable as "Income from other sources" after allowing deduction of a sum equal to 50% of such income in the year of receipt. The changes have been brought with a view to put to rest, the controversies surrounding the issues relating to the year of taxability and amount of taxability etc. of the interest on compensation and enhanced compensation. In view of above discussion and the recent decision of Hon'ble Punjab & Haryana High Court which is also the jurisdictional High Court in the case of Mahender Pal Narang Vs Central Board of Direct Taxes, New Delhi and others, the interest income of Rs 1,94,53,200 received by you is taxable after allowing deduction of Rs 97,26,600/-(50%) u/s 57(iv) of the Act and Rs 97,26,600 is required to be added to your income and taxed as per provisions of the Income Tax Act However, the AO while finalizing the assessment proceedings vide its order dated 12.01 2021 has failed to make the addition and such failure on the part of AO renders the order, erroneous and prejudicial to the interest of income.

3.

In view of the above, the assessment completed by the AO is prima facie erroneous in so far as it is prejudicial to the interest of revenue The same is, therefore, required to be suitably amended/modified u/s 263 of the Income Tax Act, 1961. You are, therefore, required to show cause as to why an appropriate order u/s 263(1) of the Act should not be passed in this connection, you may send your written reply along with supporting documentary evidences on the email of the office of Pr. Commissioner of Income Tax Rohtak te rohtak prit@incometax gov in or through e-proceedings before 11:00 AM on 23.01.2023. In case of no reply is received, it shall be assumed that you do not wish to say anything in the matter and the matter would be decided as per material on record without any further notice/intimation to you."

4.

In response to the show cause notice dated 16.01.2023, the assessee vide his reply had stated that order u/s 263 of the Ld. PCIT Hisar for AY-2013-14 in case of those assessees who have received interest on enhanced compensation, was quashed by Hon'ble ITAT Chandigarh and has also given reference of various judgements in support of his contention which is not acceptable as the case laws relied upon by him are either prior to the amendments or are involving distinguishable facts, further the case laws relied upon by the assessee are not of jurisdictional Hon'ble High Courts or ITAT while The undersigned is bound by the judgement of jurisdictional Hon'ble Punjab & Haryana High Court & Hon'ble Apex Court

5.

I have carefully examined the facts of the case and it is evident that the assessee has received interest on enhanced compensation during the assessment year under consideration which ought to be treated as "income from other sources" and should have been taxed accordingly, under the head "income from other sources" by way of amendment introduced through Finance (No.2) Act, 2009 w.e.f 01.04.2010 For the taxing treatment of interest on compensation/enhanced compensation, special provisions has been made by way of Finance (No.2) Act, 2009 by introducing a clause (viii) in sub-section 2 of section 56. clause(iv) in section 57 and clause (b) in Section 145A w.e.f. 01.04.2010 From the assessment year 2010-11 onwards, the amount of compensation or enhanced compensation is taxable as "income from other sources after allowing deduction of a sum equal to 50% of such income in the year of receipt. The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd Vis CIT in 243 ITR 83(SC) has held that both the pre requisites for invoking the provisions of Section 263 must be satisfied that order sought to be revised is erroneous and it must be prejudicial to the interest of revenue

5.1

However, it is seen from records that the A.O. failed to conduct necessary enquiries, in this regard or to consider the judgement of the Jurisdictional High Court le Hon'ble Punjab & Haryana High Court dated 19.02.2020 in the case of Mahender Pal Narang vs Central Board of Direct Taxes, New Delhi wherein the Hon'ble High Court has dealt with all the controversies arising from the judgement of Hon'ble Supreme Court in the case of CIT vs Ghanshyam HUF dated 16th July 2009. The Hon'ble High Court has categorically given its finding that the order of Hon'ble Supreme Court in the case of Ghanshyam HUF, will not come to the rescue of the assessee after the amendments introduced through Finance (No 2) Act 2009 w.cl 01.04.2010. The said judgement of the Hon'ble P & H High Court has also been endorsed by the Hon'ble Supreme Court of India dismissing the SLP against the judgement of Hon'ble High Court in Mahender Pal Narang vs CBDT(2021) 279 Taxman 74(SC) vide its order dated 4th March 2021.

6.

In view of the facts discussed above, it is clear that while passing the order u/s 143(3) r.w.s. 143(3A) & 143(3B) dated 12.01.2021, the A. O has completed the assessment on returned Income only, which makes the said order erroneous and prejudicial to the interest of Revenue. The AO should have taken into consideration, the binding decision of Hon'ble Jurisdictional High Court, confirmed by the Judgement of Hon'ble Supreme Court, related to the taxability of interest received on compensation or enhanced compensation and also the amendments /provisions of Section 56(2)(viii) introduced through Finance Act, 2009 effective from the 01.04.2010 on the above issue, which he has clearly failed to do.

6.1

There are plethora of judgements in support of revision u/s 263 where escapement of Revenue is found The Hon'ble Apex Court in the case of Malabar Industrial Co. Ltd Vis CIT In 243 ITR 83(SC) has held that a bare reading of section 263 of the Act, makes it clear that the pre-requisite to exercise of jurisdiction by the CIT suo-moto under it is that the order of the ITO is erroneous in so far as it is prejudicial to the interest of revenue The CIT has to be satisfied of twin conditions, namely,

(i)

the order of AD sought to be revised is erroneous and

(ii)

it is prejudicial to the interest of revenue if one of them is absent ie if the order of the ITO is erroneous but is not prejudicial to the interest of the revenue or if it is not erroneous but is prejudicial to the interest of revenue. recourse cannot be taken u/s 263 of the Act. It has also held that there can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the AO, it is only when an order is erroneous that the section shall be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous in the same category. Fails orders passed without applying the principles of natural justice or without application of mind. It has also held that the phrase "prejudicial to the interest of revenue" is not an expression of art and is not defined in the Act. Understood in its ordinary meaning, it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted the revenue. If due to an erroneous order of the ITO, the revenue is losing tax lawfully payable by a person, it will certainly be prejudicial to the interests of the revenue. The phrase prejudicial to the interests of the revenue has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopts one of the course permissible in law and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, I cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by the Hon'ble Supreme Court that where a sum not earned by a person is assessed as income in his hands on his so offering, the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue.

In Bismillah Trading Co. V. Intelligence Officer (2001) 248 ITR 292 (Ker), it has been held that the word prejudice to the Revenue' has been the subject matter of a judicial debate. One view was that prejudicial to the interest of the Revenue does not necessarily mean loss of revenue. The expression is not to be construed in a pettifogging manner, but must be given a dignified construction. The interests of the Revenue are not to be equated to rupees and parse merely. There must be grievous error in the order passed by the ITO, which might set a bad trend or pattern for similar assessment which, on broad reckoning, the Commissioner might think to be prejudicial to the revenues administration. The prejudice must be prejudice to the Revenue administration

Further, it has been held in the case of Venkatakrishna Rice Co. V CII (1987) 163 ITR 129 (Mad) It has been held by the Hon'ble Court that the expression prejudicial to the interest of the revenue must be regarded as involving a conception of facts or orders which are subversive of the administration of revenue. There must be same grievous error in the order passed by the ITO which might set a bad trend or pattern for similar assessment which on a broad reckoning the Commissioner might think to be prejudicial to the interest of revenue administration. The scope of the interference under section 263 is not to set aside merely unfavourable orders and bring to tax some more money into the treasury Nor is the section meant to get at sheer escapement of revenue. The prejudice must be prejudice to the revenue administration.

7.

Keeping in view of the facts and circumstances of the case as discussed above, I am of the considered opinion that the AO had passed the order dated 12.01.2021 in a very casual manner without due diligence and without conducting proper enquiries & verification "which should have been made with respect to amended provisions of the Finance Act, 2015 & binding decision of Jurisdictional Hon'ble Punjab & Haryana High Court & Hon'ble Apex Court on the taxability of interest on enhanced compensation. Therefore, the assessment completed u/s 143(3) r.ws 143(3A) & 143(38) of the Act is erroneous so far as it is prejudicial to the interest of the revenue in terms of Explanation 2 of section 263 of the Act. Accordingly, the assessment order passed by the AO on 12.01.2021 u/s 143(3) r.w.s. 143(3A) & 143(38) of the Act for the AY 2018-19 is set aside with the direction to pass an order afresh, after due consideration of the facts and in accordance with law after making requisite enquiries & proper verification with regard to issues mentioned above. The assessee is at liberty to adduce the facts as relevant before the AO at the time of assessment proceedings in consequence to this order. The AO shall allow the assessee, adequate & reasonable opportunity of being heard & make relevant submissions. It may be ensured that assessment order is passed within the prescribed time limit under the Income Tax Act."

"Following grounds have been raised by the assessee:

'1. That the learned Commissioner of Income Tax (Appeals)-42, New Delhi erred both in law and on facts in upholding the determination of total of the appellant at Rs. 4,04,15,500/- as against declared Inc. Rs. 3,08,920/- in an order of assessment dated 23.12.2018 under section 143(3) of the Act.

2.

That the Commissioner of Income Tax (Appeals) has also erred both in law and on fact in sustaining an addition of Rs. 4,01,06,580/- (50% of Rs. 8,02,13,160) representing interest received on enhanced compensation on compulsory acquisition of ITA No. 8808/Del/2019 Inderjit Singh Sodhi 2 agricultural land received u/s 28 of Land Compensation Act 1894 and eligible for exemption u/s 10(37) of the Act.

2.1

That while sustaining the aforesaid addition the learned Commissioner of Income Tax (Appeals) has erroneously sustained the addition relying on the judgment of Hon'ble Apex Court in the case of Bikram Singh VS Land Acquisition Collectors reported in 224 ITR 551 overlooking the following binding judgments of Apex Court:

i)

315 ITR 1 (SC) CIT vs. Ghanshyam (HUF) (dated 16.7.2009) ii) 367 ITR 498(SC) CIT vs. Govindbhai Mamalya (dated 4.9.2014) iii) C.A. No. 13053/2017 CIT vs. Chet Ram (HUF) (dated 12.9.2017) iv) C.A. No. 15041/2017 UOI vs. Hari Singh and ors. (dated 15.9.2017)

v)

C.A. No. 18475/2017 ITO v. Muktanandgiri Maheshgiri (dated 10.11.2017)

2.2

That various adverse findings and conclusions recorded by the Commissioner of Income Tax (Appeals) are factually incorrect and to record, legally misconceived and untenable.

2.3.

That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on fact in sustaining the view taken by learned A Officer of making addition by invoking section 56(2)(viii) re section 57(iv) of the Act."

"The contention that the definition of 'interest' in section 2(28A) is confined only to money-lending business between debtor and the creditor and when interest is paid under provisions of the Land Acquisition Act, it is only a payment in consideration of loss of enjoyment of the possession by the owner and it is not by way of any charge on compensation determined under section 23(1) of the Land Acquisition Act and, therefore, it is not exigible to tax, could not be accepted it is true that in amending the definition of "interest" in section 2(28A), interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. It is seen that the word "Interest" for the purpose of the Act was interpreted by the Inclusive definition. A literal construction may lead to the conclusion that the interest received or payable in any manner in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would be deemed interest. But the question is: whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would be exigible to income-tax? The Court had consistently taken the view that it is a revenue receipt. The amended definition of "Interest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions, the revenue receipt is exigible to tax. The amendment was only to bring within its tax net income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under provisions of the Land Acquisition Act is a taxable event. Therefore, it is a revenue receipt exigible to tax under section 4."

Punjab & Haryana

Delhi High Court

Gujarat High Court

Income Tax Appellate Tribunal- Chandigarh Bench

Bangalore Bench

Pune Bench

"6.

The brief fact relevant to the issue under consideration are that the lands of the assessees were compulsorily acquired by the HSI IDC, Sirsa/Government of Haryana in the year 2005. Subsequently the compensation was enhanced by the Court. The enhanced compensation along with interest thereupon u/s 28 of the Land Acquisition Act, 1894 was received by the assessees in the financial year 2008-09 relevant to assessment year 2009-10. The assessees treated the interest on the enhanced compensation as part of the compensation liable to be taxed under section 45(5) of the Income Tax Act and the transferred land being rural agricultural land exempt from capital Gains tax u/s 10(37) of the Income Tax Act, 1961. Subsequently, from the perusal of the computation of income attached with the return of income filed by the assessee for assessment year 2009-10, the Assessing Officer observed that w.e.f. assessment year 2010-11 the interest received on enhanced compensation was taxable in the year of receipt as per the provisions of section 145A(b) of the Act. However, prior to assessment year 2010-11 interest received on compensation/enhanced compensation was taxable on proportionate basis for the each year in view of the decision of the Hon'ble Supreme Court rendered in the case of Rama Bai Vs. CIT dated 8.11.1989 reported in 181 ITR 400 (SC). The Assessing Officer, therefore, reopened the assessment proceedings of the assessees and applied the ratio of the decision of the Hon'ble Supreme Court in the case of Rama Bal (supra) and held that the interest received by the assessees on the enhanced compensation was to be proportionately allocated to different assessment years as having accrued year after year from the date of delivery of possession of the lands till the date of such order. The Assessing Officer observed that the lands of the assessees were acquired in the year 2005, whereas the interest on the enhanced compensation had been received in the year 2008. He, therefore, calculated the proportionate interest pertaining to each assessment year and added the same as taxable receipt under the head 'other sources' and accordingly, added the proportionate amount of interest in the impugned years in the reopened assessment proceedings u/s 147 r.w.s. 143(3) of the Act.

7.

Before the Ld. CIT (Appeals), the assessee relied upon the decision of the Hon'ble Supreme Court in the case of CIT Vs. Ghanshyam (HUF) (2009) 315 ITR 1 (SC) and contended that as per the ratio laid down in the said decision the interest received u/s 28 of the Land Acquisition Act, 1894 does not partake the character of interest, rather it was a part of compensation of land which was not taxable as per the provisions of section 10(37) of the Income Tax Act. The Ld. CIT(Appeals) after considering the submissions of the assessee as well as considering the nature of compensation and interest thereupon received by the assessee, held that the issue was squarely covered by the decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) and accordingly, allowed the appeal of the assessee.

8.

Subsequently the Assessing Officer moved an application for rectification of the u/s 154 of the Act before the CIT(A) pleading therein that the interest received on enhanced compensation u/s 28 of Land Acquisition Act was chargeable to tax as 'income from other sources' u/s 56(2) (viii) r.w.s. 57(iv) of the Act in the light of the decision of the Hon'ble Pun jab & Haryana High Court in the case of 'Manjeet Singh ITA No. 8808/Del/2019 Inderjit Singh Sodhi 9 (HUF), Karta Manjeet Singh Vs. Union of India & Others' in CWP No .15506 of 2013, date of decision 14.1.2014, wherein, the Hon'ble High Court has held that the interest received by the assessee u/s 28 as well as u/s 34 of the Land Acquisition Act on the additional compensation received was chargeable to tax u/s 56(2) (viii) r.w.s. 57(iv) of the Act. It was further contended that even the SLP filed in that case before the Hon'ble Supreme Court had been dismissed vide order dated 18.12.2014 in SLP No .34642 of 2014. Reliance was also placed on the decision dated 2.2.2016 of the Hon'ble Punjab & Haryana High Court in the case of Jagmal & Another Vs. state of Haryana & Another in RA-CR NO.46 C11 of 2014 in CR No.7740 of 2012, whereby the Hon'ble High Court had recalled its earlier order and held that the interest of the additional award was taxable under u/s 56(2)(viii) r.w.s.57(iv) of the Act.

9.

The Ld. CIT(Appeals) considering the aforesaid decisions and also the decision of the Hon'ble Punjab & Haryana High Court in the case of Sunder Lal & Another Vs. Union of India & Others in CWP No .20014 of 2015, order dated 21.9.2015 and also in the case of CIT Vs. Bir Singh (HUF) in ITA No.209 of 2004, etc. held that in the light of the above decisions, the mistake apparent on record had occurred in his order while allowing the appeal of the assessees while relying upon the decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra). He, therefore, vide the impugned order passed u/s 154 of the Act held that the interest received by the assessee on enhanced compensation on account of acquisition of land was taxable as 'income from other sources'. He, therefore, confirmed the additions made by the Assessing Officer passed in the reopened assessment proceedings carried out u/s 147 r.w.s. 143(3) of the Act.

10.

Now the assessee has come up in appeal before us agitating the above orders passed by the CIT(Appeals) u/s 154 of the Act.

11.

We have heard the rival content ions. It is pertinent to note here that interest under the Land ITA No. 8808/Del/2019 Inderjit Singh Sodhi 10 Acquisition Act can be awarded under sect ion 28 or/and under sect ion 34 of the Land Acquisition Act, 1894. Interest awarded under section 28 of Land Acquisition Act, 1894 is the interest on the excess amount of compensation awarded by the court over the amount awarded by the collector. It is awarded by the Court payable by the collector from the date on which the collector took the possession of the land to the date of payment of such excess into Court. Whereas interest under section 34 of the Land Acquisition Act, 1894 is given when the amount of compensation awarded by the collector is not paid or deposited on or before taking possession of land, such interest is payable from the time of so taking possession till the date of payment of compensation. In the case in hand, the Ld. CIT (Appeals) vide his order dated 14.3.2016 had allowed the appeal of the assessee following the decision in case of Ghanshyam (HUF) (supra), wherein it has held interest u/s 28 of the Land Acquisition Act 1984, unlike interest u/s 34 is an accretion to the value of the land, hence it is part of enhanced compensation or consideration which is not the case with interest u/s 34A. So also additional amount u/s 23(1A) and solatium u/s 23(2) form part of enhanced compensation.

12.

The Ld. CIT(A), however, subsequently, while relying upon the decision of the Hon'ble High Court in the case of Bir Singh (HUF) (supra) and Manjeet Singh (HUF) (supra) & Others as noted above, recalled his orders dated 14.3.2016 and confirmed the additions made by the Assessing Officer.

13.

Undisputedly, the issue involved in these appeals is regarding the taxability of interest received on enhanced compensation u/s 28 of the Land Acquisition Act, 1894. Now, there are two questions involved in these appeals, first issue is regarding the year of taxability of the interest income whether it has to taxed in the year of receipt in the light of the decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) or is to be taxed on the basis of apportionment for each year from the date of acquisition of lands till the receipt of the compensation in the light of the decision of the Hon'ble Supreme Court in the case of Rama Bai (supra); the second issue involved is as to whether the interest awarded u/s 28 of the Land Acquisition Act on enhanced compensation is to be treated as part of the enhanced compensation and will not be taxable separately as interest income under the Head 'income from other sources'?

14.

We find that both these issues are covered by the aforesaid decision of the Hon'ble Supreme Court in the case of Ghanshyam (HUF) (supra) holding the same to be in the nature of compensation itself. The Court also dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. The said findings given in the case of Ghanshyam (HUF) (supra) have been reiterated by the Hon'ble Supreme Court in the case of Govindbhai Mamaiya (supra) observing as under:

"In so far as the second question is concerned, that is also covered by another judgment of this Court in Commissioner of Income Tax, Faridabad vs. Ghanshyam (HUF) reported in (2009) 8 SCC 412, 6 albeit, in favour of the Revenue. In that case, the court drew distinction between the "interest" earned under Section 28 of the Land Acquisition Act and the "Interest" which is under Section 34 of the said Act. The Court clarified that whereas compensation given to the assessee of the land acquired would be 'income', the enhanced compensation/consideration becomes income by virtue of Section 45(5)(b) of the Income Tax Act. The question was whether it will cover "interest" and if so, what would be the year of taxability. The position in this respect is explained in paras 49 and 50 of the judgment which make the following reading:

'49. As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award.

50.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23 (1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act."

8.

It is clear from the above that whereas interest under Section 34 is not treated as a part of income subject to tax, the interest earned under Section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under Section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not permissible."

"(2)

While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) 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 provision amounts to compensation or not."

"1.

The present appeal involves an examination of the taxability of the interest component, earned on compensation or enhanced compensation, ordered under Land Acquisition Act, 1894 ["Act of 1894"].

2.

The instant appeal has been preferred by the Revenue against the order passed by the Income Tax Appellate Tribunal ["ITAT"] dated 19.06.2020, whereby, the ITAT deleted the addition made by the Assessing Officer ["AO"] under Section 56(2)(viii) of the Income Tax Act, 1961 ["Act"] for the Assessment Year ["AY"] 2016-17.

3.

We may note that vide order dated 15.12.2023, we had briefly noticed the substantial questions of law arising in the present appeal in terms of paragraph nos.5 and 5.1, which read as under-

"5.

The central issue which arises for consideration is: whether interest received by the respondent/assessee under Section 28 and 34 of the Land Acquisition Act, 1894 would fall under the provisions of Section 10(37) and Section 56(2)(viii) of the Income Tax Act, 1961 [in short, Act']?

5.1.

We may note that it would also be necessary to examine the provisions of Section 45(5)(c) of the Act.

4.

At the outset, we are formally admitting the instant appeal on the following substantial question of law: -

Whether the ITAT has erred in setting aside the concurrent view of the AO and the Commissioner of Income Tax (Appeals) ["CIT(A)" which held that after amendment of Section 56 of the Act vide Finance (No.2) Act, 2009 (w.e.f. 01.04.2010), no benefit can be derived by the respondent-assessee from the decision of the Hon'ble Supreme Court in the case of CIT v. Ghanshyam (HUF) ((2009) 315 ITR 1 (SC))]?

5.

The facts of the case would show that the respondent-assessee had filed its Income Tax Return "ITR" on 05.08.2016, declaring the income to the tune of Rs.3,08,920/-. The said ITR filed by the respondent-assessee was selected for scrutiny and a notice dated 24.04.2017 was served upon him under Section 143(2) of the Act. Subsequently, another notice under Section 142(1) of the Act was issued, calling upon the respondent-assessee to furnish the relevant information as asked for. The reply to the said notice was duly submitted by the respondent-assessee.

6.

Upon perusal of the aforesaid reply and the material which was placed on record, the AO found that the respondent-assessee had claimed an exemption on the receipt of income amounting to Rs.26,93,84,780/- on the basis of the following grounds: -

1.

Compensation on compulsory acquisition of land amounting to Rs. 18,86,63,176/-.

2.

Interest received on the said acquisition amounting to Rs.8,02,13,161/- and,

3.

Dividend income to the tune of Rs.5,08,443/-.

7.

Thereafter, the AO vide email dated 13.11.2018, made an enquiry under Section 133(6) of the Act from the District Revenue Officer-cum Land Acquisition Collector "Collector", asking about the details of payments of Rs. 18,86,63,176/- and Rs.8,02,13,161/-. It was informed by the Collector that the enhanced compensation was released in light of the judgment in the case titled as Ram Chander & Ors. v. Haryana & Ors. and the respondent-assessee herein was a petitioner in the said case and therefore, he was entitled for the consequential benefits, including the interest on enhanced compensation.

8.

Vide letter dated 14.12.2018, the AO called upon the respondent-assessee to explain as to why the element of interest claimed as exempt should not be treated as income from other sources.

9.

On considering the response submitted by the respondent-assessee to the aforesaid query, the AO, while relying upon various judicial pronouncements, took the view that the receipt of interest must be treated as income chargeable to tax under Section 56(2)(viii) of the Act and therefore, it allowed the statutory deduction of 50% of the 17:00:34 interest income under Section 57 (iv) of the Act. Accordingly, an amount of Rs.4,01,06,580/- was added to the taxable income of the respondent-assessee and vide assessment order dated 23.12.2018, the total income of the respondent-assessee was assessed to be Rs.4,04,15,500/-.

10.

Being aggrieved by the said assessment order, the respondent-assessee preferred an appeal before the CIT(A), wherein, the appeal came to be dismissed vide order dated 30.09.2019. The CIT(A) found that since Section 56 of the Act was amended by the Finance (No.2) Act, 2009, which led to the introduction of Section 56(2)(viii) of the Act with effect from 01.04.2010, therefore, the decision relied upon by the respondent-assessee herein was not applicable as the same pertained to the year prior to the said amendment.

11.

Against the order of the CIT(A), the respondent-assessee preferred an appeal before the ITAT, whereby, vide order dated 19.06.2020, the appeal of the respondent-assessee was allowed. While relying upon the of the in the case judgment Hon'ble Supreme Court of Ghanshyam (supra), the ITAT drew an equivalence between the interest received under Section 28 of the 1894 Act and the enhanced compensation. It was further held that since the interest amounts to accretion to the value of compensation, therefore, the same must be treated as a part of compensation.

12.

It is in the aforesaid context that the Revenue has preferred the instant appeal against the order of the ITAT.

13.

Learned counsel appearing on behalf of the Revenue submitted that the ITAT has erroneously rejected the concomitant findings of the 17:00:34 AO and the CIT(A) that the issue at hand is purely driven by Section 56 of the Act. He contended that the decision relied upon by the ITAT in the case of Ghanshyam (supra) cannot be treated to be an authority to delete the additions made in the income of the respondent-assessee as the said decision was passed before the amendment came in the year 2010. He, therefore, submitted that the addition made by the AO does not suffer from any infirmity as the same was based upon the extant provisions of Section 56(2)(viii) of the Act which came into effect subsequent to the amendment in question.

14.

Learned counsel has relied upon the decisions of the High Court of v Union of India and Ors. (CWP No.15506 of 2013), Puneet Singh CIT [2018 SCC Online P&H 7124], Jagmal Singh & Ors. v. State of Haryana & Anr. (RA-CR No.46 CII of 2014) and Sunder Lal v. Union of India (2015 SCC Online P&H 20525), to substantiate his arguments.

15.

Per contra, learned counsel appearing on behalf of the respondent-assessee vehemently opposed the submissions advanced on behalf of the Revenue to submit that the ITAT has correctly relied upon the decision in the case of Ghanshyam (supra) to conclude that the interest in question is also a part of the enhanced compensation and hence, liable to be exempted.

16.

Learned counsel submitted that the ITAT has given its findings after duly considering the amendment in Section 56 of the Act and therefore, no substantial question of law arises in the present appeal. He further contended that the issue under consideration is already settled as 17:00:34 the interest under Section 28 of the Act of 1894, which is paid on the enhanced compensation on compulsory acquisition of agricultural land, is accretion to the value of land and hence, it is exempt under Section 10(37) of the Act on account of being a part of the enhanced compensation.

17.

We have heard the learned counsels appearing on behalf of the parties and perused the record.

18.

The solitary question which arises for our consideration in the present appeal is whether the interest on enhanced compensation received by the respondent-assessee partakes the character of income from other sources under Section 56(2) (viii) of the Act, to be considered as separable from the enhanced compensation.

19.

At the outset, it is significant to refer to Sections 28 and 34 of the Act of 1894, which deal with the payment of interest on compensation, and read as under: -

"28 Collector may be directed to pay interest on excess compensation: -

If the sum which, in the opinion of the court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of [nine per centum] per annum from the date on which he took possession of the land to the date of payment of such excess into Court.

34.

Payment of interest: When the amount of such is not paid or deposited on or before taking possess the Collector shall pay the amount awarded within interest thereon at the rate of nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited.

Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry."

20.

A reading of Section 28 of the Act of 1894 indicates that the said provision comes into play in cases where the Court finds that some higher compensation ought to have been provided by the Collector. In such situations, the Court may direct for payment of an interest on the excess awarded amount. Whereas, Section 34 of the Act of 1894 stipulates that the Collector shall award interest on the compensation at the rate of 9% per annum from the date of taking possession. It further lays down the condition that in case of non-payment despite expiry of a period of one year, the said interest on the amount of compensation which remains unpaid, shall be awarded at the rate of 15% per annum, calculable from the date of such expiry.

21.

It is the contention of the respondent-assessee that the interest awarded under Section 28 of the Act of 1894, as discussed above, shall constitute a part of the compensation itself. The ITAT has also drawn strength from the observation of the Hon'ble Supreme Court in the of Ghanshyam (supra) and the relevant paragraph of the said decision reads as under: -

"35.

To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for the delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under Section 34."

22.

However, vide Finance (No.2) Act, 2009 (with effect from 01.10.2010), Clause (viii) of sub-Section 2 to Section 56 of the Act was inserted and the same is extracted hereunder as:-

56. Income from other sources. --

(2)

In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head "Income from other sources", namely: --

[(viii) income by way of interest received on compensation or on enhanced compensation referred to in sub-section (1) of Section 145-B)].

23.

For the sake of clarity, Section 145-B of the Act is reproduced as under

"[145-B. Taxability of certain income.—(1) Notwithstanding anything to the contrary contained in Section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received.

(2)

Any claim for escalation of price in a contract or export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved.

(3)

The income referred to in sub-clause (xviii) of clause (24) of Section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year."

24.

A conjoint reading of the aforementioned provisions i.c., Sections 56(2)(viii) and 145-B of the Act vividly stipulate that the income received by way of interest on compensation or on enhanced compensation shall be chargeable to tax under the head income from other sources". -Therefore, since the position with respect to the imposition of tax on interest on compensation or enhanced compensation, as it exists today, came into being only in the year 2010, 17:00:34 the conclusions drawn from the decision in Ghanshyam (supra), which was passed in the year 2009, are unsustainable in the facts of the present case.

25.

Further, much reliance has been placed by the ITAT upon the decision of the Hon'ble Supreme Court in the case of CIT v. Govindbhai Mamalya ((2014) 16 SCC 449), which relies upon the case of Ghanshyam (supra) to hold that the interest on enhanced compensation received under Section 28 of the Act of 1894 is exigible to tax on receipt basis. However, a deeper analysis of the decision in Govindbhai Mamalya (supra) would show that it does not deal with any issue pertaining to the change in the taxability, put in place through the concerned amendment of 2010. Therefore, the said decision lacks any applicability in the facts and circumstances of the present case.

26.

Notably, a three-judges Bench of the Hon'ble Supreme Court in the case of Sham Lal Narula (Dr.) v. CIT [(1964) 53 ITR 1511, while considering the interest under Section 28 of the Act of 1894 to be analogous to the interest under Section 34 of the Act, took the view that the same did not form part of compensation. The relevant extract of the said decision is culled out as under:-

'9. ---As we have pointed out, earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter the owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award he gets compensation for both the rights. Therefore, the interest awarded under Section 28 of the Act, just like under Section 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner.---" [Emphasis supplied]

27.

The decision in Sham Lal Narula (supra) was subsequently followed by the Hon'ble Supreme Court in the case of Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], wherein, it was held that interest under Section 28 of the Act of 1894 was in the nature of a revenue receipt and hence, the same was considered to be taxable. The relevant paragraphs of the said decision read as under: -

'8. The controversy is no longer res integra. This question was considered elaborately by this Court in Sham Lal Narula (Dr) v. CIT ((1964) 53 ITR 151: AIR 1964 SC 1878). Therein, K. Subba Rao, J., as he then was, considered the earlier case-law on the concept of "interest laid down by the Privy Council and all other cases and had held at p. 158 as under:

"In a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use in no sense of the term can it be described as damages or compensation for the owner's right to retain possession, for he has no right to retain possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income Tax Act.

9.

This position of law has been consistently reiterated by this Court in the case of T.N.K. Govindaraju Chetty v. CIT [(1967) 66 ITR 465 : AIR 1968 SC 129], Rama Bal v. CIT [1990 Supp SCC 699: (1990) 181 ITR 400] and K.S. Krishna Rao v. CIT [(1990) 181 ITR 408 (SC)]. Thus by a catena of judicial pronouncements, it is settled law that the interest received on delayed payment of the compensation is a revenue receipt exigible to income tax. It is true that in amending the definition of "interest" in Section 2(28-A), interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. It is seen that the word "interest" for the purpose of the Act was interpreted by the inclusive definition. A literal construction may lead to the conclusion that the interest received or payable in any manner 17:00:34 in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would be deemed interest. That was explained by the Board in the circular referred to hereinbefore." [Emphasis supplied]

28.

In the case of Puneet Singh (supra), the High Court of Punjab and Haryana, while enunciating the effect of Section 145A(b) and Section 56(2)(viii) of the Act, has held as under:-

*19. The cumulative effect of section 145A(b) and section 56(2)(vii) would be that any interest received on compensation or on enhanced compensation shall be taxable under the head "Income from other sources" in the year of receipt.

20.

However, by section 27 of the 2009 Act, a new clause (iv) in section 57 has been inserted with effect from April 1, 2010 which lays down that in the case of income of the nature referred to in section 56(2)(viii), a deduction of a sum equal to 50 per cent. of such income would be allowable thereunder and no deduction would be allowed under any other clause of section 57. The said provision reads thus:

'57. Deductions. The income chargeable under the head income from other sources shall be computed after making the following deductions, namely:

(iv)

in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent. of such income and no deduction shall be allowed under any other clause of this section."

21.

The Assessing Officer in I. T. A. No. 132 of 2018 where the assessee had received Rs. 11,30,561 as interest income, held that the interest payment received on compensation/enhanced compensation to the tune of Rs. 5,65,280 (50 per cent. of Rs. 11,30,561) is taxable as income from other sources as per provisions of sections 56(2)(viii) read with 57(iv) and section 145A(b) of the Act for the assessment year 2010-11. The Commissioner of Income-tax (Appeals) and the Tribunal had upheld the order of the Assessing Officer in that regard.

22.

No illegality or perversity could be pointed out by learned counsel for the assessee in the concurrent findings of fact recorded by 17:00:34 the authorities below which may warrant interference by this court. No question of law, much less, substantial question of law arise in these appeals.

23.

Accordingly, finding no merit in the appeals, the same ora hereby dismissed." [Emphasis supplied]

29.

Considering the foregoing discussion, we affirm the concurrent findings of the AO and CIT(A) and find that the view taken by the ITAT is unsustainable, as the same is based on an incorrect appreciation of law. The 2010 amendment was a conscious departure by the Legislature from the earlier position and the said departure holds good law, as on date. There is no question with respect to the vires of the amendment before us or regarding any ambiguity in the language of the amendment. The only concern is regarding the enunciation of the applicable law and we hold the same to unequivocally mean that interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax.

30.

We, accordingly, answer the substantial question of law which has arisen in the instant appeal in affirmative and in favour of the Revenue. We, thus, hold that the ITAT has erred in relying upon the decision of Ghanshyam (supra), ignoring the changes brought about by Finance (No.2) Act, 2009, which came into effect in the year 2010.

31.

In the light of the aforesaid judicial pronouncements and the concerned amendment, we set aside the order of the ITAT dated 19.06.2020. Consequently, the appeal stands allowed and the 17:00:34 concurrent findings of the AO and CIT(A) are hereby affirmed. Pending application(s), if any, are disposed of."

1.

That having regard to the facts and circumstances of the case and in law, the order under section 263 of the Income Tax Act, 1961 ("the Act") dated 27.03.2023 passed by the Ld. Principal Commissioner of Income Tax, Rohtak ["PCIT"], setting aside the assessment order 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 12.01.2021 passed by the Assessing Officer, National e- Assessment Centre ["the Assessing Officer"] as erroneous and prejudicial to the interest of the revenue, is without jurisdiction, bad in law and void-ab-initio.

2.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred, so much so that, the assessment order passed by the Assessing officer do not satisfy the statutory twin conditions prescribed under section 263 of the Act, viz., (i) that the assessment order is erroneous; and (ii) that the assessment order is prejudicial to the interest of Revenue, which are to be cumulatively satisfied.

3.

That having regard to the facts and circumstances of the case and in law, the PCIT erred in exercising the revisionary jurisdiction under section 263 of the Act by not appreciating that the assessment order was passed by the assessing officer following the decisions of the Hon'ble Supreme Court in the cases of CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368/315 ITR 1(SC); CIT, Rajkot v. Govindbhai Mamalya [2014] 52 taxmann.com 270/[2015] 229 Taxman 138/[2014] 367 ITR 498(SC); UOI v. Hari Singh [2018] 91 taxmann.com 20 (SC). Being so the assessment order passed under section 143(3) r.w.s. 143(3A) & 143(3B) of the Act dated 12.01.2021 was not amenable to revision under section 263 of the Act.

4.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred in exercising jurisdiction under section 263 of the Act in respect of the issue of taxability of interest u/s 28 of the Land Acquisition Act received as part of enhanced compensation, which was duly supported by judicial precedents and therefore, at best, could be said to be debatable issue ousting the jurisdiction under section 263 of the Act.

5.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred in exercising jurisdiction under section 263 of the Act in setting aside the issue of taxability of interest u/s 28 of the Land Acquisition Act granted as part of enhanced compensation, which was duly scrutinized by the Assessing Officer while passing the assessment order under section 143(3) r.w.s. 143(3A) & 143(3B) of the Act.

6.

That having regard to the facts and circumstances of the case and in law, the Ld. PCIT erred in not appreciating that even if the Assessing Officer has not specifically mentioned that he has examined/verified a particular issue in the assessment order, that would not ipso facto mean that there was non-application of mind on the part of the assessing officer on this issue."

आवरण अधिनियम 1961 की धारा 143 (3क) व 143 (3ख) के तहत धारा 143 (2) के अधीन दिनांक Notice under section 143(2) read with Section 143(3A) and 143(3B) of the Income-tax Act, 1961

(निवासी / निवास / निवास / निवास / निवास) Scrutiny (Computer Aided Scrutiny Selection)

To whom: Dear Taxpayer,

आपके द्वारा निवास एवं 2018-19 के लिए दिनांक 30/08/2018 को अपनी सं. 225768760300818 के तहत आवरण निवासी अधिनियम 1961 के लिए आवरण में Thank you for filing your return of income for Assessment Year 2018-19 vide Act. no. 225768760300818 on 30/08/2018.

1.

निवासियों को केवल उन्हीं में आवरण स्थान एवं परिश्रम की समीक्षा करने हेतु, कुछ मुद्दों पर और स्पष्टीकरण की आवश्यकता है, जिसके कारण आवरण नाम निवासियों को समीक्षा (जांच) के लिए जाना गया है, वे मुद्दे समय में निपटाएगा है.

2.

While acknowledging the care and diligence you may have taken in preparing the return, there are certain issues which need further clarification, for which your return of income has been selected for scrutiny and such issues initially are as under:

1. No. / Issues

i. Income from Other Sources ii. Refund Claim

3.

उपरोक्त तथ्यों के आधार पर आप ई-निर्माण केंद्र (www.incometaxtrethling.gov.in) में अपने खाते के माध्यम से ई-निर्माण की सुविधा में ई-निर्माण कर रहे उपरोक्त मुद्दों पर अपनी सुविधानुसार मानक आवरण रखने के सम्बन्ध में किए गए भी इस माध्यम से, जिस पर निवासियों का निवासियों के सम्बन्ध में विचार करता है, अधिक समय होने की तारीख से 15 (मई) दिनों में दिनांक

1.

The case was selected for complete scrutiny assessment under the E-assessment Scheme, 2019 on the following issues:

S. No. / Issues

i.

Income from other sources ii. Refund claim

In the instant case, assessee firm has e-filed its return of income for the A.Y. 2018-19 relevant to the F.Y. 2017-18 declaring total income at Rs.22,05,010/-. Subsequently, the case was selected for scrutiny through CAA. Accordingly, notices u/s 143(2) & 142(1) were issued and duly served upon the assessee. After taking into account all relevant material available on record, assessment is hereby made without making any modification to the returned income and the sum payable or refund of any amount due on the basis of assessment is determined as per the notice of demand."

5.1

However, it is seen from records that the A.O. failed to conduct necessary enquiries, in this regard or to consider the judgement of the Jurisdictional High Court i.e. Hon'ble Punjab & Haryana High Court dated 19.02.2020 in the case of Mahender Pal Narang vs Central Board of Direct Taxes, New Delhi wherein the Hon'ble High Court has dealt with all the controversies arising from the judgement of Hon'ble Supreme Court in the case of CIT vs Ghanshyam HUF dated 16th July 2009. The Hon'ble High Court has categorically given its finding that the order of Hon'ble Supreme Court in the case of Ghanshyam HUF, will not come to the rescue of the assessee after the amendments introduced through Finance (No.2) Act, 2009 w.e.f 01.04.2010. The said judgement of the Hon'ble P & H High Court has also been endorsed by the Hon'ble Supreme Court of India dismissing the SLP against the judgement of Hon'ble High Court in Mahender Pal Narang vs. CBDT(2021) 279 Taxman 74(SC) vide its order dated 4th March 2021.

6.

In view of the facts discussed above, it is clear that while passing the order u/s 143(3) r.w.s 143(3A) & 143(3B) dated 12.01.2021, the A.O. has completed the assessment on returned income only, which makes the said order erroneous and prejudicial to the interest of Revenue. The AO should have taken into consideration, the binding decision of Hon'ble Jurisdictional High Court, confirmed by the judgement of Hon'ble Supreme Court, related to the taxability of interest received on compensation or enhanced compensation and also the amendments /provisions of Section 56(2)(viii) introduced through Finance Act,2009 effective from the 01.04.2010 on the above issue, which he has clearly failed to do."

Ground No. 1: The order is bad in law and void-ab-initio.

S. No. Issues

i.

Income from other sources ii. Refund claim

Revision of orders prejudicial to revenue.

263.

(1) The 99[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner] or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, [including,—

(i)

an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment; or

(ii)

an order modifying the order under section 92CA; or

(iii)

an order cancelling the order under section 92CA and directing a fresh order under the said section].

Explanation 1.—For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,—

(a)

an order passed on or before or after the 1st day of June, 1988 by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall include—

(i)

an order of assessment made by the Assistant Commissioner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A;

(ii)

an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer [or the Transfer Pricing Officer, as the case may be,] conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120;

[(iii) an order under section 92CA by the Transfer Pricing Officer;]

(b)

"record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner;

(c)

where any order referred to in this sub-section and passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.

Explanation 2.—For the purposes of this section, it is hereby declared that an order passed by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] shall be deemed to be erroneous in so far as it is prejudicial to the interests of the revenue, if, in the opinion of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner,—

(a)

the order is passed without making inquiries or verification which should have been made;

(b)

the order is passed allowing any relief without inquiring into the claim;

(c)

the order has not been made in accordance with any order, direction or Instruction issued by the Board under section 119; or

(d)

the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

[Explanation 3.—For the purposes of this section, "Transfer Pricing Officer" shall have the same meaning as assigned to it in the Explanation to section 92CA.]

(2)

No order shall be made under sub-section (1) after the expiry of two years from the end of the financial year in which the order sought to be revised was passed.

(3)

Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.

Explanation.—In computing the period of limitation for the purposes of sub-section (2), the time taken in giving an opportunity to the assessee to be reheard under the proviso to section 129 and any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded."

(a)

the order is passed without making inquiries or verification which should have been made;

(b)

the order is passed allowing any relief without inquiring into the claim;

(c)

the order has not been made in accordance with any order, direction or instruction issued by the Board under section 119; or

(d)

the order has not been passed in accordance with any decision which is prejudicial to the assessee, rendered by the Jurisdictional High Court or Supreme Court in the case of the assessee or any other person.

In addition to the above compensation, it is further directed that:-

(i)

In the light of provisions contained in Section 23 (1-A) of the Act, the petitioners shall be entitled to addition amount @ 12% per annum on the enhance amount of compensation including the compensation granted on account of costs of tubewell and shifting charges.

(ii)

The above-mentioned petitioners shall also be paid statutory solatium @ 30% over and above the enhanced amount of compensation as mentioned above, in the light of Section 23(2) of the Act.

(iii)

In view of Section 28 of the Act, the above-mentioned petitioners shall also be entitled to Interest @ 9% per annum for a period of one year from the date of taking over possession and @15% per annum on the expiry of said period of one year on the aggregate amount of enhanced compensation including solatium and additional amount of 12%.”

34. Payment of interest.

When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited.

Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date or expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry.

28. Collector may be directed to pay interest on excess compensation.

If the sum which, in the opinion of the Court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of nine per centum per annum from the date on which he took possession of the land to the date of payment of such excess into Court.

Provided that the award of the court may also direct that where such excess or any part thereof is paid into court after the date of expiry of a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of such excess or part thereof which has not been paid into court before the date of such expiry."

23.

In addition to the market value of the land, as above provided, 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 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. The compensation awarded by the Court includes the additional compensation awarded under section 23(1 A) and the solatium under section 23(2) of the said Act. 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 for compensation [See: Ram Chand v. Union of India [1994] 1 SCC 44]. In the case of Shree Vijay Cotton & Oil Mills Ltd. v. State of Gujarat [1991] 1 SCC 262, this Court has held that interest is different from compensation.

24.

To sum up, interest is different from compensation. However, interest paid on the excess amount under section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under section 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under section 28 is part of the amount of compensation whereas interest under section 34 is only for delay in making payment after the compensation amount is determined. Interest under section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under section 34.

32.

The issue to be decided before us - what is the meaning of the words "enhanced compensation/consideration" in section 45(5)(b) of the 1961 Act? Will it cover "interest"? These questions also bring in the concept of the year of taxability.

33.

It is to answer the above question that we have analyzed the provisions of sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award. It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23(1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act..." It may also be apt to quote the following part of the decision of the Supreme Court in Ghanshyam (HUF)'s case (supra):

"35 Section ...45(5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/ consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is liable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on the date of notification under Section 4 of that Act. When the court/tribunal directs payment of enhanced compensation under Section 23(1-A), or Section 23(2) or under Section 28 of the 1894 Act it is on the basis that award of the Collector or the court, under reference, has not compensated the owner for the full value of the property as on date of notification."

"Rationalization of provisions for taxation of interest received on delayed compensation or enhanced compensation. The existing provisions of Income-tax Act provide that income chargeable under the head "Profits and gains of business or profession" or "Income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the Hon'ble Supreme Court, in the case of Rama Bai vs. CIT (181 ITR 400) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to taxpayers. With a view to mitigating the hardship, it is proposed to amend section 145A to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it is received, irrespective of the method of accounting followed by the assessee. Further, it is proposed to insert clause (viii) in sub-section (2) of section 56 to provide that income by way of interest received on compensation or on enhanced compensation referred to in sub-section (2) of section 145A shall be assessed as "income from other sources" in the year in which it is received. This amendment will take effect from 1st April, 2010 and shall accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. "

'46. Rationalizing the provisions for taxation of interest received on delayed compensation or on enhanced compensation.

46.1

The existing provisions of Income-tax Act provide that income chargeable under the head "Profits and gains of business or profession" or "income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the Hon'ble Supreme Court in the case of Rama Bai v. CIT (181 ITR 400) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers.

46.2

With a view to mitigate the hardship, section 145A is amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee.

46.3

Further, clause (viii) is inserted in the sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A shall be assessed as "Income from other sources" in the year in which it is received.

46.4

Applicability - This amendment has been made applicable with effect from 1st April, 2010, and will accordingly, apply in relation to assessment year 2010-11 and subsequent assessment years."

"The interest earned under Section 28, which is on enhanced compensation, is treated as an accretion to the value and, therefore, part of the enhanced compensation or consideration making it eligible to tax in the year of receipt under section 45(5) under the head Capital Gain."

"Perusal of relevant provisions of Land Acquisition Act and Income Tax Act and law laid down in aforesaid judgments, it is clear that no tax is to be deducted at source from compensation awarded in lieu of acquisition of agricultural land. In respect of 'interest' it has to be seen whether Interest is a part of compensation. If answer is in affirmative, then tax cannot be deducted at source. If, however, it is for delay in making payment it does not form part of compensation and tax may be deducted at source. Admittedly, in the instant case the land was agricultural land and enhanced compensation, and interest was awarded under Section 28. Thus, in view of specific finding of Hon'ble Supreme Court in Ghanshyam's case (supra) that amount awarded under Section 28 of the Land Acquisition Act is accretion in value of land and interest therein forms part of compensation; income tax cannot be deducted at source since land acquired is agricultural land.

"Considering the relevant provisions of Land Acquisition Act and Income Tax Act and law laid down in aforesaid judgments, this Court in C.R. No. 2509 of 2012 - Haryana State Industrial Development Corporation Ltd. vs. Savitri and another, decided on 29.11.2013 has held that no tax is to be deducted at source from compensation awarded in lieu of acquisition of agricultural land. In respect of 'interest' it has to be seen whether interest is a part of compensation. If answer is in affirmative, then tax cannot be deducted at source. If, however, it is for delay in making payment it does not form part of compensation and tax may be deducted at source. In view of specific finding of Hon'ble Supreme Court in Ghanshyam's case (supra) amount awarded under Section 28 of the Land Acquisition Act is accretion in value of land and interest thereon forms part of compensation; income tax cannot be deducted at source when land acquired is agricultural land. Admittedly, in the instant case the land was agricultural land and enhanced compensation, and interest was awarded under Section 28 of the Act. The aforesaid three revision petitions are squarely covered by the decision of this Court in Savitri's case (supra). In view of above, I do not find any illegality or perversity in the impugned order. "

'11. It has been vehemently contended on behalf of the first respondent that the above decision has been rendered prior to the substitution of section 145A of the I. T. Act by Finance (No. 2) Act, 2009 with effect from 1st April, 2010, and hence, would have no applicability to the facts of the present case. The scope and effect of the substitution (with effect from 1st April 2010) of section 145A, as also amendment made in section 56(2) by Act 33 of 2009 have been elaborated in the following portion of the departmental circular No. 5/2010, dated 3.6.2010, as follows:

'Rationalizing the provisions for taxation of interest received on delayed compensation or on enhanced compensation. -

46.1

The existing provisions of Income Tax Act, 1961, provide that income chargeable under the head "Profits and gains of business or profession" or "Income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further the Hon'ble Supreme Court in the case of Smt. Rama Bal v. CIT (1990) 84 CTR (SC) 164: (1990) 181 ITR 400 (SC) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers.

46.2

With a view to mitigate the hardship, section 145A is amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee.

46.3

Further, clause (viii) is inserted in sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or enhanced compensation referred to in clause (b) of section 145A shall be assessed as "income from other sources" in the year in which it is received.

46.4

Applicability. - This amendment has been made applicable with effect from 1st April, 2010, and it will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years."

Thus, the substitution of section 145A by Finance (No. 2) Act, 2009 was not in connection with the decision of the Supreme Court in Ghanshyam (HUF)'s case (supra) but was brought in to mitigate the hardship caused to the assessee on account of the decision of the Supreme Court in Rama Bal v. CIT [1990] 181 ITR 400/[1991] 54 Taxman 496 whereby it was held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. Therefore, when one reads the words "Interest received on compensation or enhanced compensation" in section 145A of the I.T. Act, the same have to be construed in the manner interpreted by the Supreme Court in Ghanshyam (HUF)'s case (supra)."

13.

The upshot of the above discussion is that since interest under section 28 of the Act of 1894, partakes the character of compensation, it does not fall within the ambit of the expression "interest" as contemplated in section 145A of the I.T. Act. The first respondent - Income Tax Officer was, therefore, not justified in refusing to grant a certificate under section 197 of the I.T. Act to the petitioner for non-deduction of tax at source, inasmuch as, the petitioner is not liable to pay any tax under the head "income from other sources" on the interest paid to it under section 28 of the Act of 1894.

14.

The petitioner had earlier challenged the communication dated 9th February, 2015, whereby its application fora certificate under section 197 of the I. T. Act had been rejected, and subsequently, tax on the interest payable under section 28 of the Act of 1894 has already been deducted at source. Consequently, the challenge to the above communication has become infructuous and hence, the prayer clause came to be modified. However, since the amount paid under section 28 of the Act of 1894 forms part of the compensation and not interest, the second respondent was not justified in deducting tax at source under section 194A of the I. T. Act in respect of such amount. The petitioner is, therefore, entitled to refund of the amount wrongly deducted under section 194A of the I.T. Act."

"(a)

issue writ of mandamus or in the nature of mandamus or any other writ or direction to direct the respondents not to deduct TDS on the interest component awarded under Section 28 of the Land Acquisition Act on the enhanced compensation; and/or

(b)

Issue writ of mandamus or in the nature of mandamus or any other writ or direction directing that the interest component under Section 28 of the Land Acquisition Act is not exigible to tax under Section 56(2)(viii) r/w Section 145A(b) of the Income Tax Act as "income from other sources"; and/or"

"(2)

While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in CIT v. Ghanshyam (HUF) [2009] 182 Taxman 368/315 ITR 1 (SC) in order to ascertain whether the interest given under the said provision amounts to compensation or not."

a)

issue writ of mandamus or in the nature of mandamus or any other writ or direction directing the respondents to apply the judgement and order dated 15.09.2017 in C.A. No. 15041/2017 (Union of India & Ors. vs. Hari Singh & Ors) to the case of all the land owners and rectify the mistake by refunding the tax amount along with interest to the petitioners as the tax is not payable on compensation including interest under Section 28 of L.A. Act received against the acquisition of rural agricultural lands; and/or

b)

pass such order or orders as this Hon'ble Court may deem fit in the facts and circumstances of the case."

"We are not inclined to entertain the writ petition under Article 32 of the Constitution. The writ petition is accordingly dismissed. It shall, be without prejudice to any of the remedies available to the petitioners including praying for a fresh decision on the return filed in pursuance of the judgement of this Court in Civil Appeal No. 15041 of 2017 titled Union of India & Ors. v. Hari Singh & Ors. decided on 15.09.2017. Learned ASG submits that the review petition which was earlier filed to review the judgement dated 15.09.2017 has already been withdrawn hence, steps will be taken for passing the fresh assessment order on the return filed by the petitioner."

The above directions of the Hon'ble Supreme Court are binding on the Income Tax Department and it should be implemented in good spirit whether we like it or not. Instead of implementing the directions given by the Court, surprisingly, in some of the orders, the Assessing Officers while dismissing the order passed under Section 154 of the Act have strangely stated that the department has initiated review petition proposal to be submitted before the Hon'ble Supreme Court against this order and hence, they are dismissing the claim petitions. The Assessing Officers in my view clearly flouted the order of the Supreme Court and are liable for contempt. As long as the order of Supreme Court is in force, the department should give effect to the directions of the Hon'ble Supreme Court at any cost and filing of a review petition is no ground to deny the relief to the taxpayers. Fortunately, the taxpayers have not filed any contempt petitions before the Supreme Court otherwise the Court might have issued contempt notices to the concerned Officers as it is clear violation of the order of the Supreme Court and hence liable for contempt.

Mr. A.N.S. Nadkarni learned ASG has submitted to the Hon'ble Court that the concerned Assessing Officers before whom the returns of income have been filed and refund claim applications are filed may be allowed to pass fresh orders in accordance with law. The respective Assessing Officer before whom return of income are filed or applications for claim of refund of TDS are filed, may be instructed first to ascertain and give a finding as to whether the land acquired by the State Government is an agricultural land or not. If it is an agricultural land, then the benefit of exemption should be given to the assessee."

'6. By now, it is a settled principle of law that the dismissal of the special leave petition in limine does not amount to affirmation of the view taken by the High Court. Unless the judgment of the High Court is affirmed, at least, with short reasoning, the same would not amount to binding precedent."

Questions framed by Learned Accountant Member

1.

Whether the order of Id. PCIT can be upheld as the assessment of the case u/s 143(3) has not been converted into complete scrutiny in violation of the CBDT instructions?

2.

Whether the order of the Id. PCIT can be held to be valid as the order of the Id. PCIT passed u/s 263 is wholly and completely based on the audit objection?

3.

Whether the order of the Id. PCIT can be affirmed as the record clearly proves that the order has been made at the instance of the Assessing Officer himself?

4.

Whether the order of the Id. PCIT can be upheld owing to non-satisfaction of the condition that the order of the Assessing Officer is erroneous as per the provisions of Section 263?

5.

Whether the order of the Id. PCIT can be upheld as the twin condition prescribed u/s 263 of the Act are not met?

6.

Whether the order of the Id. PCIT can be upheld as the Assessing Officer has taken one plausible opinion?

7.

Whether the order of the Id. PCIT can be upheld as the order of the Assessing Officer is based on the order of the Hon'ble Apex Court, the proposition of which has not been reversed by any speaking order by the Hon'ble Apex Court as per an established jurisprudence?

8.

Whether the order can be consented to by placing reliance on the judgment in the case of Rama Bai vs. CIT (181 ITR 400) is on a different context?

9.

Whether the order of the Id. PCIT can be upheld as it is in violation of the judgment of Hon'ble High Court in the case CIT Vs. Vegetable Products Ltd. (88 ITR 192)?"

Question framed by Learned Judicial Member

"Whether, in the given facts and circumstances of the case, the impugned revisional order passed under Section 263 of the Income-tax Act, 1961 by the Learned PCIT is sustainable in the eyes of law, particularly taking into consideration the Judgment passed by Hon'ble Jurisdictional High Court of Punjab & Haryana in the case of Mahender Pal Narang Vs. Central Board of Direct Taxes, New Delhi and Others in CWP No.17971 of 2019, Order dated 19^th February, 2020, wherein it was held that the interest received on compensation or enhanced compensation will be taxed as per the amended provisions of the Act?

In addition to the above compensation, it is further directed that:-

(i)

In the light of provisions contained in Section 23(1-A) of the Act, the petitioners shall be entitled to addition amount @ 12% per annum on the enhance amount of compensation including the compensation granted on account of costs of tubewell and shifting charges.

(ii)

The above-mentioned petitioners shall also be paid statutory solatium @ 30% over and above the enhanced amount of compensation as mentioned above, in the light of Section 23(2) of the Act.

(iii)

In view of Section 28 of the Act, the above-mentioned petitioners shall also be entitled to interest @ 9% per annum for a period of one year from the date of taking over possession and @ 15% per annum on the expiry of said period of one year on the aggregate amount of enhanced compensation including solatium and additional amount of 12%.

"(viii)

Income by way of interest received on compensation or enhanced compensation referred to in clause (b) of section 145A." A plain reading of Section 56(2)(viii) of the Act shows that the same applies only to "Income by way of interest" and presupposes that the receipt is already "Income". The provision, being under Chapter IV (Computation of total income), cannot determine whether a receipt is income, and it only determines the head under which a receipt, once found to be "income", is to be assessed. For determining whether the receipt is an "income", the provisions of Section 2(24) of the Act are to be examined. The relevant extract of Section 2(24) of the Act is extracted below:

"(24)

"income" includes-

(xiii)

any sum referred to in clause (v) of sub-section (2) of section 56; (xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;

(xiv)

any sum of money or value of property referred to in clause (vii) or clause (viii) of sub-section (2) of section 56;

(xv)

any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56;

(xvi)

any sum of money referred to in clause (ix) of subsection (2) of section 56;

(xvii)

any sum of money or value of property referred to in clause (x) of sub-section (2) of section 56;

(xviii)

any compensation or other payment referred to in clause (xi) of subsection (2) of section 56;

(xviii)

any sum referred to in clause (xii) of sub-section (2) of section 56;

(xviii)

any sum referred to in clause (xiii) of sub-section (2) of section 56;" The dates of insertion of each of the provision are as under:

*“56(2) in particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :—

[(viii) Income by way of interest received on compensation or on enhanced compensation referred to in [subsection (1) of section 145B.];]” Further, section 145A of the Income Tax Act, 1961 is as under:

“145B. Taxability of certain income.—(1) Notwithstanding anything to the contrary contained in section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received”. The only relief that has been allowed to the receiver is vide section 57(iv) of the Act wherein it has been stated that a 50% deduction of such income will be allowed to the assessee. The relevant section is reproduced as under:

*“57. The income chargeable under the head “Income from other sources” shall be computed after making the following deductions, namely:-

[(iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty percent of such income and no deduction shall be allowed under any other clause of this section:]”

'9. The scheme with regard to chargeability of interest received on compensation and enhanced compensation has undergone a sea change with the insertion of section 56(2) (viii) and 56(iv) of the 1961 Act. Section 56 deals with income from other sources and a specific provision has been inserted by way of subsection 2 (vIII), whereby the interest received on compensation or enhanced compensation, as referred to in clause(b) to section 145B has been included under the head "Income from other sources". In clause (iv) to section 57, deduction of fifty percent is provided on interest received on compensation or enhanced compensation.

"9...As we have pointed out, earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter the owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award, he gets compensation for both the rights. Therefore, the interest awarded under section 28 of the Act, just like under section 34 thereof cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner..."

"19.

The cumulative effect of section 145A(b) and section 56(2)(viii) would be that any interest received on compensation or enhanced compensation shall be taxable under the head "Income from other sources" in the year of receipt"

"Whether the tax at source is to be deducted on the amounts which are paid as compensation or enhanced compensation, etc. on account of compulsory acquisition of land under the provisions of the Land Acquisition Act,1894'

7.2

While determining as to whether the compensation paid was for agricultural land or not, the assessing Officer (s) 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 provision amounts to compensation or not "

46.

Rationalizing the provisions for taxation of interest received on delayed compensation or on enhanced compensation

46.1

The existing provisions of Income Tax Act provide that income chargeable under the head "Profits and gains of business or profession" or "Income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the Hon'ble Supreme Court in the case of Rama Bai vs. CIT (181 ITR 400) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers.

46.2

With a view to mitigate the hardship, section 145A is amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee.

46.3

Further, clause (viii) is inserted in the sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A shall be assessed as "Income from other sources" in the year in which it is received.

46.4

Applicability - This amendment has been made applicable with effect from 1st April, 2010, and will accordingly, apply in relation to assessment year 2010- 11 and subsequent years "

23.

In addition to the market value of the land, as above provided, 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 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. The compensation awarded by the Court includes the additional compensation awarded under section 23(1A) and the solatium under section 23(2) of the said Act. 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 for compensation [See: Ram Chand v. Union of India [1994] 1 SCC 44], in the case of Shree Vijay Cotton & Oil Mills Ltd. v. State of Gujarat [1991] 1 SCC 262, this Court has held that interest is different from compensation

24.

To sum up, interest is different from compensation. However, interest paid on the excess amount under section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under section 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under section 28 is part of the amount of compensation whereas interest under section 34 is only for delay in making payment after the compensation amount is determined. Interest under section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under section 34.

32.

The issue to be decided before us - what is the meaning of the words "enhanced compensation/consideration" in section 45(5)(b) of the 1961 Act? Will it cover "interest"? These questions also bring in the concept / of the year of taxability.

33.

It is to answer the above question that we have analysed the provisions of sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, Section 23(1-A) provides for additional amount. It takes care of the increase in the value at the rate of 12% per annum. Similarly, under Section 23(2) of the 1894 Act there is a provision for solatium which also represents part of the enhanced compensation. Similarly, Section 28 empowers the court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under Section 23(1-A) and solatium under Section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends on undue delay in making the award. It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act. So also additional amount under Section 23(1-A) and solatium under Section 23(2) of the 1961 Act forms part of enhanced compensation under Section 45(5)(b) of the 1961 Act." It may also be apt to quote the following part of the decision of the Supreme Court in Ghanshyam (HUF)'s case (supra):

'35. ...Section 45(5) read as a whole [including clause (c)] not only deals with reworking as urged on behalf of the assessee but also with the change in the full value of the consideration (computation) and since the enhanced compensation/ consideration (including interest under Section 28 of the 1894 Act) becomes payable/ paid under the 1894 Act at different stages, the receipt of such enhanced compensation/consideration is to be taxed in the year of receipt subject to adjustment, if any, under Section 155(16) of the 1961 Act, later on. Hence, the year in which enhanced compensation is received is the year of taxability. Consequently, even in cases where pending appeal, the court/tribunal/authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in dispute), the same is unable to be taxed under Section 45(5) of the 1961 Act. This is the scheme of Section 45(5) and Section 155(16) of the 1961 Act. We may clarify that even before the insertion of Section 45(5)(c) and Section 155(16) w.e.f. 1-4-2004, the receipt of enhanced compensation under Section 45(5)(b) was taxable in the year of receipt which is only reinforced by insertion of clause (c) | because the right to receive payment under the 1894 Act is not in doubt. | It is important to note that compensation, including enhanced : compensation/consideration under the 1894 Act, is based on the full | value of property as on the date of notification under Section 4 of that Act. | When the court/tribunal directs payment of enhanced compensation under Section 23(1-A), or Section 23(2) or under Section 28 of the 1894 Act it is on the basis that award of the Collector or the court, under | reference, has not compensated the owner for the full value of the property as on date of notification."

'46. Rationalizing the provisions for taxation of interest received on delayed compensation or on enhanced compensation.

46.1

The existing provisions of Income-tax Act provide that income chargeable under the head "Profits and gains of business or profession" or "Income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further, the Hon'ble Supreme Court in the case of Rama Bal v. CIT (181 ITR 400) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers.

46.2

With a view to mitigate the hardship, section 145A is amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee.

46.3

Further, clause (viii) is inserted in the sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A shall be assessed as "income from other sources" in the year in which it is received.

46.4

Applicability - This amendment has been made applicable with effect from 1st April, 2010, and will accordingly, apply in relation to assessment year 2010-11 and subsequent assessment years."

"8.

It is clear from the above that whereas interest under section 34 is not treated as a part of income subject to tax, the interest earned under section 28, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation under section 28 of 1894 Act is taxable, the Court dealt with the other aspect namely, the year of tax and answered this question by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received. It would mean that converse position i.e. spread over of this interest on accrual basis is not admissible..."

"13.

The upshot of the above discussion is that since interest under section 28 of the Act of 1894, partakes the character of compensation, it does not fall within the ambit of the expression "interest" as contemplated in section 145A of the I.T. Act. The first respondent - Income Tax Officer was, therefore, not justified in refusing to grant a certificate under section 197 of the I.T. Act to the petitioner for non-deduction of tax at source, inasmuch as, the petitioner is not liable to pay any tax under the head "income from other sources" on the interest paid to it under section 28 of the Act of 1894.

14.

The petitioner had earlier challenged the communication dated 9th February, 2015 whereby its application for a certificate under section 197 of the I. T. Act had been rejected, and subsequently, tax on the interest payable under section 28 of the Act of 1894 has already been deducted at source. Consequently, the challenge to the above communication has become infructuous and hence, the prayer clause came to be modified. However, since the amount paid under section 28 of the Act of 1894 forms part of the compensation and not interest, the second respondent was not justified in deducting tax at source under section 194A of the I.T. Act in respect of such amount. The petitioner is, therefore, entitled to refund of the amount wrongly deducted under section 194A of the I.T. Act..."

"MOST URGENT / TOP PRIORITY Central Board of Direct Taxes Directorate of Income Tax (Legal & Research) Room No. 303, Drum Shape Building, I.P. Estate, New Delhi – 110 002 Tel. No. 011-23370298 Fax No. 23378132, Email: [email protected] F.No. ADG-II/(L&R)/NZ/Pr. CIT/Gurugram/ASP/112/2018/2556 dated 22.5.2019. The Pr. Commissioner of Income Tax, Vanijya Nikunj, Udyog Vihar, Phase-V, Gurugram-122016 Madam/sir, Subject : WP (C) No. 1226 of 2018 in the case of Jai Bhagwan Singh & Ors. vs. Haryana Development Corporation Ltd. & Ors. – Reg.

Kindly refer to the above cited subject.

In this connection, I am directed to forwards herewith a copy letter dated 20^th may, 2019 alongwith copy of letter dated 8.5.2019, received from Mrs. Anil Katiyar, Addl. Govt. Advocate which is self explanatory, for information and necessary action at your end. Yours faithfully, Encl: As above Sd/-Income Tax Officer (L&R) Supreme Court Cell, New Delhi

"Ministry of Law & Justice Department of Legal Affairs Central Agency Section Supreme Court Compound 20th May, 2019 Director Direct rate of Income Tax (L&R) Drum Shape Building I.P. Estate New Delhi Subject : WP (C) No. 33816/2018 filed by Jai Bhagwan Singh and Others vs. Haryana State Industrial and Infrastructure Development Corporation Ltd. Sir,

The aforesaid matter was listed in this Hon'ble Court on 8th May, 2019 in which Shri ANS Nadkarni, Ld. ASG and Shri HR Rao, Advocate appeared enclosed herewith a letter dated 8.5.2019 of Shri HR Rao, Advocate alongwith Proceedings who assisted Ld. ASG in this matter. The letter is self explanatory in itself.

This is for your information and taking necessary action at your end. Yours faithfully, Encl: a/a Sd/-(Mrs. Anil Katiyar) Advocate on Record

“H. Raghavendra Rao Advocate Supreme Court K-12, Ground Floor, Kailash Colony, New Delhi – 110048 Phone : 011-46061425 Mobile: 9711975569 Email: [email protected] 08.05.2019 Mrs. Anil Katiyar, Government Advocate Central Agency Section Supreme Court of India New Delhi Dear Madam, Subject : WP (C) No. 33816/2018 filed by Jai Bhagwan Singh and Others vs. Haryana State Industrial and Infrastructure Development Corporation Ltd. and others – Reg.

The above writ petition filed by a group of petitioners challenging the orders passed by the Income Tax officer, Ward 2(2), Gurugram, Income Tax Officer, Ward 1(4), Gurugram etc. were listed before Court Hall No. 12, as item 6 today and the said matter was heard by the Hon'ble Supreme Court. The Hon'ble Court after hearing arguments from both sides was pleased to dismiss the writ petition filed by a group of farmers challenging the order of the Assessing Officer passed under section 154 of the Income Tax Act, 1961 but with certain observations and directions. A copy of the order of the Court dated 8.5.2019 is enclosed herewith for your reference.

The issue involved in these cases are whether the tax deducted at source is to be deducted on the amounts which are paid as compensation or enhanced compensation or interest on the said compensation on account of compulsory acquisition of land under the provisions of Land Acquisition Act, 1894. While disbursing the compensation, the Land Acquisition Collector had deducted the tax at source and deposited the same with the Income Tax Department. These petitioners preferred the writ petitions before the High Court stating that no such deduction at source was permissible in view of the provisions of the Section 10(37) and Section 1941 of the Act since the land which was acquired was agricultural land and this provision categorically mentions that in respect of agricultural land tax at source is not be deducted. The High Court allowed the said writ petitions and the Income Tax Department challenged these orders before the Supreme Court in Civil Appeals No. 15041/2017 and connected cases.

The Hon'ble Supreme Court by order dated 15.9.2017 disposed of the said appeals with the following directions:

1.

The respondents shall file appropriate returns before the Assessing Officer(s) in respect of Assessment Years in question within a period of two months from today in case they feel that the compensation in respect of land belonging to them which had been acquired was agricultural land, and claim refund of the tax which was deducted at source and deposited with the Income Tax Department. On the filing of these returns, the Assessing Officer(s) shall go into the aforesaid question and wherever it is found that the compensation was received in respect of 7 C.A. No. 15041/2017 @ SLP (C) No. 28069 / 2010 etc. agricultural land, at the tax deposited with the Income Tax Department shall be refunded to these respondents.

(2)

While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officers(s) will keep in mind the provisions of Section 28 of the Land and Acquisition Act and the law laid down by this Court in Commissioner of Income Tax, Faridabad vs. Ghanshyam (HUF) [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not.

(3)

The direction to refund the amount of Tax Deducted at Source (TDS) to the Land Acquisition Collector is, accordingly, set aside. However, in those cases where the amount has already been refunded, no interference is called for and it will be for the Income Tax Department to proceed in accordance with the provisions of Income Tax Act.

(4)

Where such notices have not already been issued or assessments have not already been made, if such an action is taken within a period of two months from today, issue of limitation would not come in the way of the Income Tax Department. This order is passed having regard to the fact that the present proceedings 8 CA No. 150412/2017 @ SLP (C) No. 28069/2010 etc. were pending in this Court because of which it was not possible for the Income Tax Department to issue these notices earlier.

(5)

In future, Land Acquisition Collectors shall follow the procedure as stipulated by the High Court of Kerala in Nalini's case, which is reproduced above.

"The above directions of the Hon'ble Supreme Court are binding on the Income Tax Department and it should be implemented in good spirit whether we like it or not instead of implementing the directions given by the Court, surprisingly in some of the orders the Assessing officers while dismissing the orders passed under section 154 of the Act have strangely stated that the department has initiated review petition proposal to be submitted before the Hon'ble Supreme Court against this order and hence they are dismissing the claim petitions. The Assessing officers in my view clearly flouted the order of the Supreme Court and are liable for contempt. As long as the order of the Supreme Court is in force, the department should give effect to the direction of the Hon'ble Supreme Court at any cost and filing of a review petition is no ground to deny the relief to the tax payers. Fortunately, the tax payers have not filed any contempt petitions before the Supreme Court otherwise the Court might have issued contempt notices to the concerned officers as it is clear violation of the order of the Supreme Court and hence liable for contempt."

Mr. ANS Nadkarni, learned ASG has submitted to the Hon'ble Court that the concerned Assessing Officers before whom the returns of income have been filed and refund claim applications are filed may be allowed to pass fresh orders in accordance with law. The respective Assessing Officers before whom return of income are filed or applications for claim of refund of TDS are filed, may be instructed first to ascertain and give a finding as to whether the land acquired by the State Government is an agriculture land or not. If it an agricultural land, then the benefit of exemption should be given to the assessee. Interest paid under section 28 and 34 of the Land Acquisition Act cannot be treated as income from other sources in view of the categorical finding given by the Supreme Court in CIT vs. Ghanshyam 2009-8-SCC-412 at paragraph 50 where it was held as under:-

"50.

It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "Interest" both as an accretion in the value of land acquired and interest for undue delay. Interest under section 28 unlike interest under section 34 is an accretion to the value, hence, it a part of enhanced compensation or consideration which is not the case with interest under section 34 of the 1984 Act. So also additional amount under section 23(1-A) and solatium under section 23(2) of the 1961 Act forms of enhanced compensation under section 45(5)(b) of the 1961 Act."

Hence, in my opinion the Assessing Officers may be directed / instructed to give effect to the orders of the Supreme Court in CIT vs. Ghanshyam (2009-8-SCC-412) and Civil Appeal No. 15041/2017 dated 15.9.2017 in good spirit or else the court may take serious view of the matter for flouting its orders.

Thanking you,

Yours sincerely, Sd/- (H. Raghavendra Rao)"

Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely...

(b)

the amount by which the compensation or consideration is enhanced or further enhanced by the court, Tribunal or other authority shall be deemed to be income chargeable under the head 'Capital gains' of the previous year in which such amount is received by the assessee.

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 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...

(b)

interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.

(viii)

income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A.

(iv)

in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.

23.

Applying these settled principles to the facts of the present case, it is evident that the appellant sought deletion of the additional amount under Section 23(1-A), solatium under section 23(2) and statutory interest under section 28. Each of these amounts forms an integral part of the compensation awarded by the Reference Court and consequently forms part of the decretal amount. The appeal was therefore, one relating to compensation within the meaning of Section 8 of the Court Fees Act. The appellant was accordingly liable to pay and ad valorem court fee on the value of the relief claimed, and payment of a fixed court fee of Rs. 10/- was legally impermissible.

'The existing provisions of Income Tax Act, 1961, provide that income chargeable under the head "Profits and gains of business or profession" or "Income from other sources", shall be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. Further the Hon'ble Supreme Court in the case of Smt. Rama Bai vs. CIT (1990) 84 CTR (SC) 164 : (1990) 181 ITR 400 (SC) has held that arrears of interest computed on delayed or enhanced compensation shall be taxable on accrual basis. This has caused undue hardship to the taxpayers. With a view to mitigate the hardship, section 145A is amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be his income for the year in which it was received, irrespective of the method of accounting followed by the assessee. Further, clause (viii) is inserted in sub-section (2) of the section 56 so as to provide that income by way of interest received on compensation or enhanced compensation referred to in clause (b) of section 145A shall be assessed as "Income from other sources" in the year in which it is received.'