BHAG SINGH, PANCHKULA,PANCHKULA V. INCOME TAX OFFICE, WARD NO 3, PANCHKULA, PANCHKULA

ITA 907/CHANDI/2025

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The case involves Bhag Singh, the appellant, who received interest on enhanced compensation due to the compulsory acquisition of agricultural land, which he argued should be exempt as it is part of the compensation under section 28 of the Land Acquisition Act, 1894. The Assessing Officer taxed this interest as income from other sources, which was upheld by the CIT(A). The appellant contended that this interest should be viewed as part of the capital gains and not taxable under the head 'Income from Other Sources'. The Tribunal, referencing a similar case (Ajay Kumar vs ITO), upheld the lower authorities' decisions, emphasizing that the interest received is taxable in the year of receipt and does not qualify for exemption under section 10(37).

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792033 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 11-07-2025
• Other Referred Cases: Ajay Kumar vs ITO (ITA No. 463/Chd/2023)
• Laws Referred To: Land Acquisition Act 1894, Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: RISHAB GUPTA; C.A
• Keywords: Capital Gains; TDS
• Section: 28

Judgement Text

"आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: VIRTUAL MODE/HYBRID MODE/PHYSICAL MODE ŵी लिलत क ुमार, Ɋाियक सद˟ एवं ŵी मनोज क ुमार अŤवाल, लेखा सद˟ BEFORE: SHRI. LALIET KUMAR, JM & SHRI. MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ ITA No. 907/Chd/ 2025 िनधाŊरण वषŊ / Assessment Year : 2015-16 Bhag Singh C/o M K Aggarwal & Associates SCO 1, First Floor, Sector 11, Panchkula-134109 Haryana बनाम The ITO Ward No. 3, Panchkula ˕ायी लेखा सं./PAN NO: AKCPS1405M अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Shri Rishab Gupta, C.A राजˢ की ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 20/11/2025 उदघोषणा की तारीख/Date of Pronouncement : 09/12/2025 आदेश/Order PER LALIET KUMAR, J.M: This is an appeal filed by the Assessee against the order of the Ld. CIT, Appeal Addl / JCIT (A)-2, Mumbai dt. 13/11/2024 for the A.Y. 2015-16. 2. In the present appeal, Assessee has raised the following grounds: 1. The Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre had made a grave legal error in upholding the addition made by Ld. AO of Rs. 22,57,525/- with respect to Interest received on enhanced compensation(construed as Compensation) u/s 28 of Land Acquisition Act 1894 amounting Rs. 45,15,051/- without considering the decision of Hon’ble Apex Court. 2. The Ld. Assessing Officer had made grave legal error in making addition to the total income of the assessee on account of Interest on enhanced compensation (construed as Compensation) u/s 28 of Land Acquisition Act, 1894 as Income from Other Sources instead of “Capital Gains”. 3. That the appellant graves leave to add, delete or amend the grounds of appeal till the disposal of the same. 3. Briefly stated, the assessee received interest on enhanced compensation granted under section 28 of the Land Acquisition Act, 1894 in Printed from counselvise.com 2 respect of compulsory acquisition of agricultural land. The Assessing Officer taxed 50% of the said receipt u/s 56(2)(viii) r.w.s. 145B(1). The Ld. CIT(A) upheld the action of the Assessing Officer after noting that the assessee had not produced any material to show that the amount represented part of compensation rather than interest. 4. The Ld. AR submitted that the interest granted u/s 28 is in the nature of enhanced compensation and is therefore exempt u/s 10(37). Reliance was placed upon Ghanshyam (HUF) and Hari Singh, as well as certain coordinate Bench decisions, contending that interest awarded under section 28 partakes the character of compensation. It was emphasised that the assessee is an agriculturist and the receipt should be viewed as part of the compensation for accretion in value of land. 5. Per contra, the Ld. Departmental Representative supported the orders of the authorities below and submitted that the issue is squarely covered against the assessee by the decision of the Chandigarh Bench in Ajay Kumar vs ITO (ITA No. 463/Chd/2023), forming part of the consolidated order in land- acquisition matters. 5.1 It was argued that after insertion of sections 56(2)(viii) and 145B(1), all interest received on compensation or enhanced compensation—whether under section 28 or 34—is taxable in the year of receipt, and the earlier judgments relied upon by the assessee relate to the pre-amendment position. It was further submitted that the assessee cannot claim TDS credit without offering the corresponding income to tax. 6. We have carefully considered the rival submissions and examined the record. We observe that the Coordinate Chandigarh Bench, in the case of Ajay Kumar (supra), has already adjudicated identical arguments. The Bench ruled that interest on compensation falls within the ambit of Section 56(2)(viii) and is taxable in the year of receipt pursuant to Section 145B(1). The Bench explicitly rejected the applicability of Section 10(37) to the interest Printed from counselvise.com 3 component and clarified that claiming TDS credit is contingent upon the income being offered to tax. The facts in the instant case are materially identical. 6.1 In respectful adherence to the binding precedent of the Coordinate Bench in Ajay Kumar, we affirm the Ld. CIT(A)'s decision to sustain the addition. The assessee has failed to adduce any distinguishing features or contrary legal propositions that would justify a departure from the settled view of this Bench. 7. In the result, the appeal of the assessee is dismissed. Order pronounced in the open Court on 09/12/2025. Sd/- Sd/- मनोज क ुमार अŤवाल लिलत क ुमार (MANOJ KUMAR AGGARWAL) (LALIET KUMAR) लेखा सद˟/ ACCOUNTANT MEMBER Ɋाियक सद˟ /JUDICIAL MEMBER AG आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकर आयुƅ/ CIT 4. आयकर आयुƅ (अपील)/ The CIT(A) 5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar Printed from counselvise.com "