Facts
Assessee has raised the following grounds of appeal:-
1. The CIT(A), NFAC, has committed gross injustice to the appellant by and passed the order u/s 250 of the Income Tax Act, 1961 upholding the order of Ld. Assessing Officer which is illegal and bad in law and contrary to the facts and circumstances of the case, material/ evidence on the records as well as passed without application of mind and is liable to be set aside.
2. That the impugned order of the CIT (A), NFAC, in mechanically upholding/ endorsing the order of Assessment dated 18-03-209 is bad in law and is liable to be set aside.
3. The CIT (A), NFAC, has erred in facts and law in upholding the action of the A.O, not deleting the addition made for interest received on enhanced compensation on account of compulsorily acquisition of Agriculture land even without Considering our detailed reply with so many ruling announced by the Honorable Apex Court and High court, Tribunal in this regard which clearly said that the Interest awarded to the Land owner on enhanced compensation by Apex court on compulsorily acquisition of his Agriculture Land as per section 28 of the Land acquisition act, 1894 is only an accretion to the value of land and not in the nature of interest and the same is liable to be treated as per the provision of section 45(5) read with section 10(37) of the I.T Act, 1961 and if the Original compensation is Taxable then the same will also be taxable and if original compensation is exempt u/s 10(37) on account of compulsorily acquisition of agriculture Land then the same will also be exempt because this interest has been awarded by the Apex court under the provision of section 28 of the Compulsorily Land acquisition act, 1894, a certificate issued by the Land Acquisition Officer about the nature of this interest has also submitted before the CIT(A), NFAC. Hence, this order of assessment passed by the CIT(A), NFAC, u/s 250 of the Income Tax Act, 1961 against the assessee should be null and void as per the law.
4) That the CIT(A), NFAC, has erred in facts and law in upholding the order of assessment without appreciating the various contentions/ submissions/ evidences, case law and replies filed during the proceedings before NFAC.
5) That the CIT(A), NFAC, has erred in facts and law in passing their order on surmises and conjectures, on mere pretense and apprehension without any support from the material on records.
6) The CIT(A) has erred in fact and law in upholding the order passed by Ld. A.O who has made an addition on account of Interest on enhanced compensation which was otherwise an exempt income.
Submissions
Counsel of the assessee submitted that the Ld. CIT (A), NFAC, has erred in facts and law in upholding the action of the A.O, not deleting the addition made for interest received on enhanced compensation on account of compulsorily acquisition of Agriculture land even without Considering our detailed reply with so many ruling announced by the Honorable Apex Court and High court, Tribunal in this regard which clearly said that the Interest awarded to the Land owner on enhanced compensation by Apex court on compulsorily acquisition of his Agriculture Land as per section 28 of the Land acquisition Act, 1894 is only an accretion to the value of land and not in the nature of interest and the same is liable to be treated as per the provision of section 45(5) read with section 10(37) of the I.T Act, 1961 and if the Original compensation is Taxable then the same will also be taxable and if original compensation is exempt u/s 10(37) on account of compulsorily acquisition of agriculture Land then the same will also be exempt because this interest has been awarded by the Apex court under the provision of section 28 of the Compulsorily Land acquisition act, 1894, a certificate issued by the Land Acquisition Officer about the nature of this interest has also submitted before the Ld. CIT(A), NFAC.
Senior DR, contended that the interest received on compensation or enhanced compensation is to be treated as ‘Income from other sources’ and not under the head ‘Capital gains.’
Decision
The single bench of C.M. Garg, Judicial Member noted that the coordinate Bench of the Tribunal categorically held that after judgment of the Supreme Court in the case of Ram Bai, the undue hardship to the taxpayer was mitigated and the provisions of section 145A of the Act was amended to provide that the interest received by an assessee on compensation or enhanced compensation shall be deemed to be income for the year in which it was received, irrespective of the method of accounting followed by the assessee.
It further noted that the AO did not allow benefit of the section 10(37) of the Act to the assessee, however, he allowed 50% of deduction on total interest received, u/s 28 of enhanced compensation by following the provisions of section 57(iv) of the Act and treated the remaining 50% as ‘Income from other sources.’
The Tribunal viewed that the Board Circular is not directly applicable to the case of the assessee as, in the present case, the land was acquired under the old Land Acquisition Act, 1896, but, the intention of the legislature can be gathered therefrom that the Revenue does not want to tax the amount of enhanced compensation or interest thereon.
The Tribunal held that the CIT(A) was not correct in upholding the assessment order wherein the AO has granted part relief to the assessee u/s 57(iv) of the Act and not applying the provisions of section 10(37) of the Act on the interest received by the assessee on enhanced compensation.
The bench directed the AO to allow deduction u/s 10(37) of the Act to the assessee on the entire amount of interest received on enhanced compensation u/s 28 of the Act.
Case title: Virender Rathee v/s ITO
Citation: ITA No. 693/Del/2023
