IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `G' NEW DELHI
BEFORE SHRI G.D. AGARWAL, VICE PRESIDENT
&
SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER
ITA No.2971/Del/2015
Assessment Year 2011-12
Shri Opinder Singh Virk vs Income-tax Officer,
Pravesh Kumar Sharma, R/o 493- Ward-2, Karnal.
L, Model Town,
Karnal.
PAN: AEPPV9041P
Appellant Respondent
Assessee by Shri Gurjeet Singh, CA
Revenue by Shri S.S. Rana, CIT DR
Date of Hearing 14.03.2019
Date of Pronouncement 14.03.2019
ORDER
PER K. NARASIMHA CHARY, JM
The present appeal filed by the assessee is directed against the order dated
25.3.2015 in Appeal No.IT/91/KNL/CIT(A)/KNL/2013-14 passed by the
Learned Commissioner of Income-tax(Appeals), Rohtak["CIT(A)"] in relation
to Assessment Year 2011-12.
2. Brief facts of the case are that the assessee is an agriculturist and inherited
land from his parents as an agricultural property. Such land was acquired by the
Government and the assessee had received enhanced compensation of
Rs.6,19,31,108/- including interest thereon and claimed exemption u/s 10(37) of
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the Income-tax Act, 1961 ("the Act") and claimed refund of Rs.32,75,862/- in the
return of income. Learned AO found that as per Form D issued by the Land
Acquisition Officer, Panchkula, the assessee had received enhanced
compensation of Rs.7,74,13,335/- which includes principal amount of
Rs.4,46,02,790/- and interest amount of Rs.3,28,10,545/- from the LAO,
Panchkula, during the year and on the enhanced compensation received, TDS
amounting to Rs.1,54,82,777/- was deducted out of which amount of
Rs.1,22,01,723/- was refunded to the assessee and credited in his account.
3. Learned AO passed order u/s 143(3) of the Act, basing on the amendment
of sub section (2) of Section 56 and consequent amendment under clause (b) of
Section 145A and simultaneous amendment u/s 57(iv) of the Act by the Finance
(No.2) Act, 2009 w.e.f. 1.4.2010 applicable relevant to the AY 2010-11,
according to which the interest received by the assessee on compensation or
enhanced compensation amount is taken to be an income in which year it has
been received, irrespective of the method of accounting followed by the assessee
subject to deduction 50% u/s 57(iv) of the Act of such interest income referred to
in clause (viii) of sub section (2) of Section 56 of the Act. He accordingly taxed
50% of interest received, which worked out at Rs.1,64,05,272/- Headded such
amount back to the income of the assessee.
4. Assessee challenged the said addition before the learned CIT(A) stating
that the interest received by the assessee u/s 28 of the Land Acquisition Act is
part of compensation and is exempt u/s 10(37) of the Act in view of the judgment
of the Hon'ble Apex Court in the case of CIT vs Ghanshyam Dass & Ors, 315
ITR 1(SC) followed by the Hon'ble Apex Court in the case of CIT vs Gobind
Bhai Mamaiya, 367 ITR 498 (SC). The assessee, therefore, contended that the
ld. AO treated the interest on enhanced compensation as interest income and has
taxed it as interest income received u/s 57(iv) of the Act read with Section 145A
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of the Act whereas the interest on enhanced compensation has been held by the
Hon'ble Apex court as part of the compensation and is not interest income as has
been treated by the AO. Assessee, therefore, prayed before the learned CIT(A)
that the levy of tax on the interest received u/s 28 of the Land Acquisition Act is
illegal and has to be deleted.
5. Learned CIT(A) clearly found that this is a case of receipt of interest on
enhanced compensation u/s 28 of the Land Acquisition Act. However, learned
CIT(A) held that the decision of the Hon'ble Supreme Court in the case of
Gobind Bhai Mamaiya (supra) vide para 8 holds that the interest earned u/s 28 of
the Land Acquisition Act is on enhanced compensation and be treated as an
accretion to the value and part of the compensation making it eligible to tax. On
this premise, learned CIT(A) held that inasmuch as the said judgment did not
deal with the exemption u/s 10(37) of the Act, and, therefore, is not applicable to
the facts of the case. He accordingly dismissed the appeal and confirmed the
addition.
6. Assessee is, therefore, before us stating that the judgment of the Hon'ble
Apex Court in the case of Ghanshyam Dass (supra) and Gobind Bhai Mamaiya
(Supra) and also in the case of Union of India vs Hari Singh and Ors., 302 CTR
458 (SC) classify the receipt of interest u/s 28 of the Act as capital receipt to be
dealt with under the provisions of Section 45(5) of the Act and the consequences
under the Act shall follow thereafter; that merely because the Hon'ble Apex
Court had stated that the compensation and the enhancement of the compensation
has to be dealt with u/s 45(5) of the Act, does not take away the effect of
provisions of Section 10(37) of the Act; and that, therefore, it is just and proper to
look into the provisions involved in this matter in a holistic way but the decision
of the Hon'ble Apex court shall not be read to have denied the assessee the
benefit u/s 10(37) of the Act.
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7. Per contra, it is the submission of the learned DR that in CIT vs Chet Ram
(HUF), (2018) 400 ITR 23 (SC), CIT vs GovindbhaiMamaiya (2014) 367 ITR
498 (SC) and Smt. PremlataPurshottamPaldiwal vs CIT (2017) 84 taxmann.com
317 (Bom), the it was held that interest has to be taxed in the year of receipt and
not to be spread over the years on actual basis and the enhanced compensation
with interest thereon received under the interim order passed by the High Court
in pending appeals relating to the land acquisition has to be assessed for tax not
in the year in which the said amount had been received. Learned DR further
submitted in the case of Ghanshyam (supra) the Hon'ble Apex Court held that
even in cases where appeal is pending, the forum permits claimant to withdraw
against security or otherwise, enhanced compensation, which is in dispute, the
same is liable to be taxed u/s 45(5) in the year of receipt. Basing on this, he
argued that the matter is squarely covered by the above decision in favour of the
revenue and in all the matters, the Hon'ble Supreme Court stated that the interest
on the enhanced compensation is also liable to be taxed u/s 45(5) of the Act in
the year of receipt and nowhere the Hon'ble Supreme Court had dealt with the
exemption u/s 10 (37) of the Act and, therefore, there is no strength in the
contention put forth by the assessee and the appeal is liable to be dismissed.
8. We have gone through the orders of the authorities below in the light of the
arguments on either side and the decisions of the Hon'ble Apex Court cited
above. In the case of Ghanshyam (supra), the Hon'ble Supreme Court held in
unequivocal terms that the additional amount u/s 23(1A), solatium under section
23(2) and interest on excess compensation u/s 28 of the Land Acquisition Act
form part of enhanced compensation u/s 45(5)(b) and, therefore, is subject to tax
u/s 45(5) in the year of receipt. No contrary view is taken by the Supreme Court
in the subsequent judgments and as on the date, law is fairly settled that the
amount of interest received u/s 28 of the land Acquisition Act is in the nature of
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capital gain. In the case of Hari Singh (supra) while dealing with the similar
question under identical set of facts while setting aside the matter to the file of
the AO to examine the facts of the case and to apply the law as contained in the
Income-tax Act, Hon'ble Supreme Court specifically directs that in case the
learned AO finds that the compensation was received in respect of the
agricultural land, the tax deposited with the Income-tax Department shall be
refunded to the assessee. Hon'bleSupreme Court gave the above direction after
noticing the decision in the case of Ghanshyam (supra).
9. In this set of circumstances, it does not admit of any doubt as to the nature
of receipt by way of interest u/s 28 of the Land Acquisition Act in the hands of
the assessee or the applicability of the Income-tax Act to sch amount. When the
Hon'ble Supreme Court specifically directs in the case of Hari Singh (supra), the
learned AO shall examine the facts of the case and then apply the law as
contained, CIT(A) has not stated that such an amount shall be brought to tax u/s
45(5) without applying the provisions under 10(37) of the Act, which exempts
such receipts from being taxed. It could be noted that Section 45(5) makes no
reference to the nature of property that is acquired but it deals with the category
of cases which falls in the description of "capital assets". However, Section
10(37) exempts specifically an income chargeable under the head "capital gains"
arising from the transfer of agricultural land. It is, therefore, clear that once the
Hon'ble Supreme court directed the AO in the case of Hari Singh (supra) that
after examining the facts to apply the provisions contained in the Income-tax Act
with a specific reference to the agricultural land stating that in case if it is found
that the compensation was received in respect of the agricultural land, the tax
deposited with the Income-tax Department shall be refunded to these depositors.
10. In this matter, what was acquired by the Government was an agricultural
land and such a fact is well evident from the assessment order itself . As a matter
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of fact, learned AO, by granting exemption under section 10(37) of the Act,
refunded a sum of Rs. 1,22,01,723/-. Only question is whether the interest
received under section 28 of the Act assumes the character of enhanced
compensation and consequently it is exempt under section 19(37) of the Act. In
view of the decisions of the Hon'ble Supreme Court referred to above, we do not
have any doubt in our mind as to the law in this aspect and while respectfully
following the ratio laid down by the Hon'ble Supreme Court in the case of
Ghanshyam (supra) and Hari Singh (supra) above, direct the ld. AO to refund the
TDS amount that was deducted on account of the interest received under section
28 of the Land Acquisition Act Also. With these directions, we allow the appeal
of the assessee.
11. In the result, the appeal of the assessee is allowed.
Order pronounced in the Open Court on 14 th March, 2019.
Sd/- sd/-
(G.D. AGARWAL) (K. NARASIMHA CHARY)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 14th March, 2019.
VJ
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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Draft dictated on
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Approved Draft comes to the Sr.PS/PS
Kept for pronouncement on
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Date on which file goes to the AR
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