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The Tax Publishers Interest on enhanced compensation under Land Acquisition Act 1894 whether partakes texture of compensation and is outside scope of Section 145A read with Section 56(2)(viii) and 57(iv) *Facts:* Assessee was in receipt of interest on enhanced compensation arising out of acquisition under Land acquisition Act, 1894. The stand of the assessee was the interest was exempt as it took the tinge of the compensation. Revenue's plea was that the interest on enhanced compensation would be taxable @ 50% in the year on receipt based on Ghanshyam HUF 2009 (9) SCC 412. On appeal CIT(A) allowed the stand of the assessee. Aggrieved revenue went in higher appeal to ITAT - Held in favour of the Assessee that the interest also partook the character of original compensation and thus was exempt under the act. *Applied:* Manjit Singh HUF, Karta Manjit Singh v. Union of India and others in civil appeal no. 15506 of 2013,dated 14-1-2014, Jagmal and another v. State of Haryana and another, Sunder Lal and another v. Union of India, civil appeal no. 20014 of 2015 Order, dated 21-9-2015 and CIT v. Bir Singh HUF in ITA No. 209 of 2004 were discussed and it was held that they are covered by the decisions of Hon'ble Supreme Court in the cases of Ghanshyam HUF, CIT v. Chet Ram HUF (Civil Appeal No. 1353/2017), Union of India v. Hari Singhand others (Civil Appeal No. 1504 of 2017). The decisions of Hon'ble Supreme Court in the cases of Chet Ram HUF and Hari Singh and others are dated 12-9-2017 and 15-9-2017 respectively and have been passed after the decision of jurisdictional court of Manjit Singh HUF. Hon'ble Supreme Court has held that interest received by the assessee on compulsory acquisition of land under Section 28 of the LA Act is in the nature of compensation and not interest which is taxable under the head 'income from other sources' under Section 56 of the Act. Hon'ble GujArat High Court had followed the decision of Hon'ble Supreme Court in the case of CIT v. Ghanshyam HUF, (2009) 182 Taxman 368 (SC) : 2009 TaxPub(DT) 1897 (SC), wherein it was held that interest under Section 28 of LAC Act, 1894 is part of compensation amount whereas interest under Section 34 is only for delay in making payment after the compensation is determined. Interest under Section 28 is the part of enhanced value of land which is not the case in the matter of interest under Section 34. Thus it was held by Hon'ble Gujrat High Court that in the light of the law laid down by the Supreme court in case of Ghanshyam HUF the interest received under Section 28 of the LAC Act would not fall within the ambit of expression 'interest' as envisaged under Section 145A (B) of the Act as the Supreme Court has held that interest received under Section 28 of the LAC Act is not in the nature of interest but an accretion to the compensation and forms part of compensation. Hon'ble Gujrat High Court has repelled the argument that the decision of Ghanshyam HUF was rendered in 2009 and there was an amendment in Finance Act w.e.f. 1st April 2010 in Section 145A. It is discussed in this order that the CBDT Circular No.. 5/2010 dated 3-6-2010, in para 46.1 has clarify the purpose of this amendment and that it was in the context of the decision of Hon'ble Supreme court in case of Smt. Rama Bai vs CIT, (1990) 84 CTR 164 (SC) : 1990 TaxPub(DT) 0685 (SC) where it was held that arrears of interest computed on delay or enhanced compensation shall be taxable on accrual basis. Further in para 46.3 it is mentioned 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. Thus the substitution of Section 145A by Finance Act, 2009 was not in connection with the decision of Supreme Court in Ghanshyam HUF case. Therefore when one reads the words 'interest received on compensation or enhanced compensation in Section 145A, the same have to be constitute in the manner interpreted by Supreme Court in Ghanshyam HUF case. Thus the Hon'ble Delhi Tribunal following the ratio laid down by the Apex Court and Bangalore Tribunal has given relief to the assessee. *Dissented :*Ghanshyam HUF [2009 (9) SCC 412] *Ed. Note:* The number of citations in this decision make it a noteworthy decision. *Case:* ITO v. Hari Singh Saini 2023 TaxPub(DT) 1783 (Del-Trib)

The Tax Publishers

Interest on enhanced compensation under Land Acquisition Act 1894 whether partakes texture of compensation and is outside scope of Section 145A read with Section 56(2)(viii) and 57(iv)

Facts:

Assessee was in receipt of interest on enhanced compensation arising out of acquisition under Land acquisition Act, 1894. The stand of the assessee was the interest was exempt as it took the tinge of the compensation. Revenue's plea was that the interest on enhanced compensation would be taxable @ 50% in the year on receipt based on Ghanshyam HUF 2009 (9) SCC 412. On appeal CIT(A) allowed the stand of the assessee. Aggrieved revenue went in higher appeal to ITAT -

Held in favour of the Assessee that the interest also partook the character of original compensation and thus was exempt under the act.

Applied:

Manjit Singh HUF, Karta Manjit Singh v. Union of India and others in civil appeal no. 15506 of 2013,dated 14-1-2014, Jagmal and another v. State of Haryana and another, Sunder Lal and another v. Union of India, civil appeal no. 20014 of 2015 Order, dated 21-9-2015 and CIT v. Bir Singh HUF in ITA No. 209 of 2004 were discussed and it was held that they are covered by the decisions of Hon'ble Supreme Court in the cases of Ghanshyam HUF, CIT v. Chet Ram HUF (Civil Appeal No. 1353/2017), Union of India v. Hari Singhand others (Civil Appeal No. 1504 of 2017). The decisions of Hon'ble Supreme Court in the cases of Chet Ram HUF and Hari Singh and others are dated 12-9-2017 and 15-9-2017 respectively and have been passed after the decision of jurisdictional court of Manjit Singh HUF. Hon'ble Supreme Court has held that interest received by the assessee on compulsory acquisition of land under Section 28 of the LA Act is in the nature of compensation and not interest which is taxable under the head 'income from other sources' under Section 56 of the Act.

Hon'ble GujArat High Court had followed the decision of Hon'ble Supreme Court in the case of CIT v. Ghanshyam HUF, (2009) 182 Taxman 368 (SC) : 2009 TaxPub(DT) 1897 (SC), wherein it was held that interest under Section 28 of LAC Act, 1894 is part of compensation amount whereas interest under Section 34 is only for delay in making payment after the compensation is determined. Interest under Section 28 is the part of enhanced value of land which is not the case in the matter of interest under Section 34. Thus it was held by Hon'ble Gujrat High Court that in the light of the law laid down by the Supreme court in case of Ghanshyam HUF the interest received under Section 28 of the LAC Act would not fall within the ambit of expression 'interest' as envisaged under Section 145A (B) of the Act as the Supreme Court has held that interest received under Section 28 of the LAC Act is not in the nature of interest but an accretion to the compensation and forms part of compensation. Hon'ble Gujrat High Court has repelled the argument that the decision of Ghanshyam HUF was rendered in 2009 and there was an amendment in Finance Act w.e.f. 1st April 2010 in Section 145A. It is discussed in this order that the CBDT Circular No.. 5/2010 dated 3-6-2010, in para 46.1 has clarify the purpose of this amendment and that it was in the context of the decision of Hon'ble Supreme court in case of Smt. Rama Bai vs CIT, (1990) 84 CTR 164 (SC) : 1990 TaxPub(DT) 0685 (SC) where it was held that arrears of interest computed on delay or enhanced compensation shall be taxable on accrual basis. Further in para 46.3 it is mentioned 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. Thus the substitution of Section 145A by Finance Act, 2009 was not in connection with the decision of Supreme Court in Ghanshyam HUF case. Therefore when one reads the words 'interest received on compensation or enhanced compensation in Section 145A, the same have to be constitute in the manner interpreted by Supreme Court in Ghanshyam HUF case. Thus the Hon'ble Delhi Tribunal following the ratio laid down by the Apex Court and Bangalore Tribunal has given relief to the assessee.

Dissented :Ghanshyam HUF [2009 (9) SCC 412]

Ed. Note: The number of citations in this decision make it a noteworthy decision.

Case: ITO v. Hari Singh Saini 2023 TaxPub(DT) 1783 (Del-Trib)