Assistant Commissioner of INcome TAx Circle-1 , Vijayapur V. Shri Mallappa Basappa Halakati (HUF) , Bagalkot

ITA 2053/BANG/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4685 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 23-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SREE NANDINI DAS BENGALUR U
• Assessee Lawyers: ASHOK G MUNNUR
• Keywords: Non-deduction of tax
• Section: 45(5); 6; 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO. 2053/BANG/2017 ASSESSMENT YEAR : 2014-15 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, VIJAYAPUR VS. SHRI MALLAPPA BASAPPA HALAKATTI (HUF), DR.M.B.HALAKATTI EXTENSION, NEAR GDA FURNITURE, BAGALKOT 587 101. PAN: AAKHM 3885R APPELLANT RESPONDENT APPELLANT BY : SMT. SREE NANDINI DAS, ADDL.CIT(DR)(ITAT), BENGALUR U. RESPONDENT BY : SHRI. ASHOK G.MUNNUR, CA DATE OF HEARING : 10.10.2018 DATE OF PRONOUNCEMENT : .10.2018 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS IS AN APPEAL FILED BY THE REVENUE AGAINST T HE ORDER DATED 27.7.2017 OF THE CIT(APPEALS), BELAGAVI RELATING TO ASSESSMENT YEAR 2014- 15. 2. THE FACTS AND CIRCUMSTANCES UNDER WHICH THIS A PPEAL ARISE FOR CONSIDERATION ARE THAT THE ASSESSEE OWNED AGRICULTU RAL LANDS ALONGWITH ONE SHRI.SIDDAPPA B.HALAKATTIIN, IN HAVELI VILLAGE OF BAGALKOT TALUKA WHICH WAS COMPULSORILY ACQUIRED BY THE SPECIAL LAND ACQUI SITION OFFICER [HEREINAFTER REFERRED TO AS THE SLAO], BAGALKOT U NDER THE PROVISIONS OF THE LAND ACQUISITION ACT, 1894 VIDE NOTIFICATION DATED 28.10.1998. AGGRIEVED ITA NO. 2053/BANG/2017 PAGE 2 OF 12 BY THE AWARD AS ORIGINALLY PASSED AWARDING COMPENSA TION FOR THE LAND ACQUIRED BY THE GOVT., THE ASSESSEE HAD FILED A REF ERENCE FOR ENHANCED COMPENSATION BEFORE THE II ADDL. CIVIL JUDGE (SENIO R DIVISION), BAGALKOT AND FURTHER FILED A WRIT PETITION BEFORE THE HONBL E KARNATAKA HIGH COURT. THE HONBLE KARNATAKA HIGH COURT IN ITS ORDER DATED 17.1.2013 DIRECTED THE SPECIAL LAND ACQUISITION OFFICER UKP., BAGALKOT TO CONSIDER THE PLEA OF THE ASSESSEE FOR ENHANCED COMPENSATION. THE SLAO, BAGA LKOT VIDE ORDER DATED 28.5.2013 AWARDED ENHANCED COMPENSATION. THE ASSESSEE RECEIVED HIS SHARE OF ENHANCED COMPENSATION OF RS .2,66,81,241 AND RS.4,19,51,682 AS INTEREST ON ENHANCED COMPENSATION U/S.28 OF THE LAND ACQUISITION ACT, 1894. 3. THE QUESTION BEFORE THE AO WAS WITH REGARD TO TA XABILITY OF A SUM OF RS.4,19,51,682 RECEIVED AS INTEREST ON ENHANCED COM PENSATION. UNDER THE PROVISIONS OF SECTION 10(37) OF THE INCOME-TAX ACT, 1961 [THE ACT] ENHANCED COMPENSATION RECEIVED ON ACQUISITION OF AG RICULTURAL LANDS IS EXEMPT. THE PROVISIONS OF SECTION 10(37) OF THE ACT READS AS FOLLOWS:- SECTION 10(37) : CAPITAL GAIN ON COMPULSORY ACQUISITION OF URBAN AGRICULTURAL LAND: IN THE CASE OF AN ASSESSEE, BEING AN INDIVIDUAL OR A HINDU INDI VIDUAL FAMILY, ANY INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAIN ARISING FROM THE TRANSFER OF AGRICULTURAL LAND, SHALL BE EX EMPTED, WHERE : 1. SUCH LAND IS SITUATE IN ANY AREA REFERRED TO IN, IT EM (A) OR ITEM (B) OF SUB-CLAUSE (III) OF CLAUSE (14) OF SECTION 2 2. SUCH LAND, DURING THE PERIOD OF TWO YEARS IMMEDIATE LY PRECEDING THE DATE OF TRANSFER, WAS BEING USED FOR AGRICULTURAL PURPOSES BY SUCH HINDU UNDIVIDED FAMIL Y OR INDIVIDUAL, OR A PARENT OF HIS 3. SUCH TRANSFER IS BY WAY OF COMPULSORY ACQUISITION U NDER ANY LAW, OR A TRANSFER THE CONSIDERATION FOR WHICH IS DETERMINED OR APPROVED BY THE CENTRAL GOVERNMENT OR THE RESERVE BANK OF INDIA ITA NO. 2053/BANG/2017 PAGE 3 OF 12 4. SUCH INCOME HAS ARISEN FROM THE COMPENSATION OR CONSIDERATION FOR SUCH TRANSFER RECEIVED BY SUCH AS SESSES ON OR AFTER THE 1ST DAY OF APRIL, 2004. IT MAY BE NOTED IN THIS CONNECTION THAT EXEMPTION I S AVAILABLE ONLY IF COMPULSORY ACQUISITION HAS TAKEN PLACE ON OR AFTER 1-4-2004. EXEMPTION IS ALSO AVAILABLE IF ACQUISITION HAS TAKEN PLACE BE FORE 1-4-2004 BUT COMPENSATION HAS BEEN RECEIVED ON OR AFTER 1-4-2004 . FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSION, COMPENSATION OR CON SIDERATION INCLUDES THE COMPENSATION OR CONSIDERATION ENHANCED OR FURTH ER ENHANCED BY ANY COURT, TRIBUNAL OR OTHER AUTHORITY. 4. THE ASSESSEES CLAIMED THAT INTEREST RECEIVED BY HIM ON ENHANCED COMPENSATION IS NOTHING BUT COMPENSATION AND THEREF ORE EVEN FOR THE INTEREST PORTION RECEIVED, WAS ELIGIBLE FOR EXEMPTI ON U/S. 10(37) OF THE ACT. THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GHANSHYAM (HUF) (2009) 8 SCC 912 IN SUPPORT OF HIS CLAIM THAT INTEREST PAID ON ENHANCED COMPENSATION I S AKIN TO ENHANCED COMPENSATION. THE AO, HOWEVER, WAS OF THE VIEW THA T INTEREST ON ENHANCED COMPENSATION WAS CHARGEABLE TO TAX UNDER T HE PROVISIONS OF SECTION 57(IV) R.W.S. 56(2)(VIII) R.W.S. 145A(B) OF THE ACT. THESE PROVISIONS READ AS FOLLOWS:- DEDUCTIONS. 57. THE INCOME CHARGEABLE UNDER THE HEAD 'INCOME F ROM OTHER SOURCES' SHALL BE COMPUTED AFTER MAKING THE FOLLOWI NG DEDUCTIONS, NAMELY : (I) .. (II) (III) . (IV) IN THE CASE OF INCOME OF THE NATURE REFERRED T O 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 A LLOWED UNDER ANY OTHER CLAUSE OF THIS SECTION. ITA NO. 2053/BANG/2017 PAGE 4 OF 12 INCOME FROM OTHER SOURCES. 56. (1) INCOME OF EVERY KIND WHICH IS NOT TO BE EXC LUDED FROM THE TOTAL INCOME UNDER THIS ACT SHALL BE CHARGEABLE TO INCOME -TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', IF IT IS NOT CHARGEABL E TO INCOME-TAX UNDER ANY OF THE HEADS SPECIFIED IN SECTION 14, ITEMS A TO E. (2) IN PARTICULAR, AND WITHOUT PREJUDICE TO THE GEN ERALITY OF THE PROVISIONS OF SUB-SECTION (1), THE FOLLOWING INCOMES, SHALL BE CH ARGEABLE TO INCOME-TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES', NAMELY : (I) .. TO (VII) .. (VIII) INCOME BY WAY OF INTEREST RECEIVED ON COMPEN SATION OR ON ENHANCED COMPENSATION REFERRED TO IN CLAUSE (B) OF SECTION 1 45A; METHOD OF ACCOUNTING IN CERTAIN CASES. 145A. NOTWITHSTANDING ANYTHING TO THE CONTRARY CON TAINED IN SECTION 145, (A) (B) INTEREST RECEIVED BY AN ASSESSEE ON COMPENSATI ON OR ON ENHANCED COMPENSATION, AS THE CASE MAY BE, SHALL BE DEEMED T O BE THE INCOME OF THE YEAR IN WHICH IT IS RECEIVED. 5. THE AO REJECTED THE CLAIM OF EXEMPTION U/S. 10(3 7) OF THE ACT AND HELD THAT INTEREST IS CHARGEABLE TO TAX IN THE YEAR OF RECEIPT, IRRESPECTIVE OF THE PERIOD FOR WHICH THE INTEREST IS CALCULATED. T HE AO HELD THAT AS PER THE PROVISIONS OF SECTION 56(2)(VIII) OF THE I.T.ACT, 1 961 INSERTED W.E.F. 01-04- 2010, INCOME BY WAY OF INTEREST RECEIVED ON COMPENS ATION OR ON ENHANCED COMPENSATION SHALL BE CHARGEABLE TO TAX UNDER THE H EAD ' INCOME FROM OTHER SOURCES' AND CLAUSE (B) OF SECTION 145A SPECI FIES THE YEAR OF ACCOUNTING OF THIS INCOME AS THE YEAR IN WHICH IT I S RECEIVED. SECTION 56(2)(VIII) IS UNAMBIGUOUS ON THIS ISSUE AND INCLUD ES INTEREST OF ANY NATURE AND KIND WITHOUT MAKING ANY DISTINCTION OF INTEREST RECEIVED UNDER DIFFERENT PROVISIONS OF THE LAND ACQUISITION ACT, 1894. HENCE , THE INTEREST INCOME IN QUESTION CANNOT BE CONSIDERED AS COMPENSATION OR E NHANCED COMPENSATION AND NOT ELIGIBLE FOR EXEMPTION U/S.10( 37) OF THE ACT. ITA NO. 2053/BANG/2017 PAGE 5 OF 12 6. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED APPEAL BEFORE THE CIT(APPEALS). THE CONTENTION OF THE ASS ESSEE BEFORE THE CIT(APPEALS) WAS THAT INTEREST ON ENHANCED COMPENSA TION AWARDED TO THE ASSESSEE WAS IN TERMS OF SECTION 28 OF THE LAND ACQ UISITION ACT, 1894 AND SUCH INTEREST WAS IN THE NATURE OF COMPENSATION FAL LING WITHIN THE AMBIT OF SECTION 10(37) OF THE ACT. 7. THE CIT(APPEALS) ACCEPTED THE PLEA OF THE ASSESS EE AND HELD THAT INTEREST TO THE EXTENT OF RS.4,19,51,682 WHICH WAS INTEREST AWARDED U/S. 28 OF THE LAND ACQUISITION ACT, 1894 PARTOOK THE CHARA CTER OF COMPENSATION FOR LAND ACQUIRED AND FELL WITHIN THE AMBIT OF SECTION 10(37) OF THE ACT AND TO THAT EXEMPT WAS EXEMPT. THE CIT(A) FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GHANSHYAM (HUF) (SUPRA ) IN COMING TO THE ABOVE CONCLUSION AND FURTHER HELD THAT THE PROVISIO NS OF SECTION 57(IV) R.W.S. 56(2)(VIII) R.W.S. 145A(B) OF THE ACT WERE NOT APPL ICABLE FOR INTEREST ON ENHANCED COMPENSATION AS SUCH INTEREST WAS IN THE N ATURE OF ENHANCED COMPENSATION AND NOT INTEREST. 8. AGGRIEVED BY THE AFORESAID ORDERS OF THE CIT(APP EALS), THE REVENUE HAS PREFERRED THE PRESENT APPEALS BEFORE THE TRIBUN AL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE LD. D R, WHO RELIED UPON THE ORDER OF THE AO AND REITERATED THE STAND OF THE REVENUE AS CONTAINED IN THE GROUNDS OF APPEAL FILED BEFORE THE TRIBUNAL WHI CH IS A REITERATION OF THE STAND TAKEN BY THE AO IN THE ORDER OF ASSESSMENT. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A) ON T HE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF I N MOVALIYA BHIKHUBHAI BALABHAI V. INCOME-TAX OFFICER-TDS-1-SURAT [2016] 70 TAXMANN .COM 45 (GUJ) . 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. IT I S NOT DISPUTED BY THE AO THAT THE LAND ACQUIRED WAS AGRICULTURAL LAND AND THE CONDITIONS LAID ITA NO. 2053/BANG/2017 PAGE 6 OF 12 DOWN U/S. 10(37)(I) TO (IV) ARE APPLICABLE TO THE L AND WHICH IS IN QUESTION WHICH WAS COMPULSORILY ACQUIRED. IT IS ALSO NOT IN DISPUTE THAT THE INTEREST IN QUESTION WAS INTEREST AWARDED U/S. 28 OF THE LAN D ACQUISITION ACT, 1894. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MOVALIYA BHIKHUBHAI BALABHAI (SUPRA) WILL BE APPLICABLE TO THE FACTS OF THE PRESENT CASE . 11. IN MOVALIYA BHIKHUBHAI BALABHAI V. INCOME-TAX OFFICER- TDS-1-SURAT [2016] 70 TAXMANN.COM 45 (GUJARAT) , THE HONBLE GUJARAT HIGH COURT HAD TO DEAL WITH THE NATURE OF THE INTEREST AWARDED U/S.28 OF THE LAND ACQUISITION ACT, 1894. THE FACTS OF THE CASE BEFORE THE HONBL E GUJARAT HIGH COURT WAS THAT THE PETITIONER'S AGRICULTURAL LANDS CAME T O BE ACQUIRED UNDER THE PROVISIONS OF THE ACT OF 1894 FOR THE PUBLIC PURPOS E OF THE OZAT-2 IRRIGATION SCHEME. THE AWARD PASSED BY THE COLLECTOR CAME TO B E CHALLENGED BY THE PETITIONER BEFORE THE LEARNED PRINCIPAL SENIOR CIVI L JUDGE, JUNAGADH (HEREINAFTER REFERRED TO AS THE 'REFERENCE COURT'), WHO BY AN ORDER DATED 20TH MARCH, 2011 AWARDED ADDITIONAL COMPENSATION OF RS. 5,01,846/- IN FAVOUR OF THE PETITIONER TOGETHER WITH OTHER STATUT ORY BENEFITS. PURSUANT TO SUCH AWARD, THE SECOND RESPONDENT CALCULATED THE AM OUNT PAYABLE TO THE PETITIONER AND IN TERMS OF THE STATEMENT SHOWING TH E AMOUNT OF COMPENSATION TO BE DEPOSITED IN THE COURT, COMPUTED AN AMOUNT OF RS. 20,74,157/- AS PAYABLE TO THE PETITIONER BY WAY OF INTEREST UNDER SECTION 28 OF THE ACT OF 1894. THE PETITIONER MADE AN APPLICA TION UNDER SECTION 197(1) OF THE INCOME TAX ACT, 1961 (ACT) FOR DECIDI NG THE TAX LIABILITY OF INTEREST AND TO ISSUE A CERTIFICATE AS TO NIL TAX L IABILITY. THE APPLICATION WAS REJECTED ON THE GROUND THAT THE INTEREST AMOUNT ON THE DELAYED PAYMENT OF COMPENSATION AND ENHANCED VALUE OF COMPENSATION IS TAXABLE AS PER THE PROVISIONS OF SECTION 57(IV) READ WITH SECTIONS 56( 2)(VIII) AND 145A(B) OF THE ACT UNDER THE HEAD INCOME FROM OTHER SOURCES. BEING AGGRIEVED BY SUCH ORDER, THE ASSESSEE FILED WRIT PETITION BEFORE HON BLE GUJARAT HIGH COURT. ITA NO. 2053/BANG/2017 PAGE 7 OF 12 THE QUESTION BEFORE THE COURT WAS WHETHER INTEREST AWARDED U/S.28 OF THE ACT OF 1894 IS AKIN TO COMPENSATION AND CHARGEABLE TO TAX U/S.45(5) OF THE ACT OR UNDER THE HEAD INCOME FROM OTHER SOURCES U /S.57(IV) READ WITH SEC.56(2)(VIII) AND 145A(B) OF THE ACT. THE HONBLE GUJARAT HIGH COURT HELD THAT INTEREST UNDER SECTION 28 OF THE ACT OF 1894 I S AN ACCRETION TO COMPENSATION AND FORMS PART OF THE COMPENSATION AND , THEREFORE, EXIGIBLE TO TAX UNDER SECTION 45(5) OF THE ACT. IN COMING T O THE AFORESAID CONCLUSION, THE HONBLE GUJARAT HIGH COURT FOLLOWED THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT V. GHANSHYAM (HUF) [2009] 182 TAXMAN 368 , WHEREIN IT WAS HELD THAT INTEREST UNDER SECTION 2 8 OF THE ACT OF 1894 IS PART OF THE AMOUNT OF COMPENSATION WHEREAS INTEREST UNDER SECTION 34 THEREOF IS ONLY FOR DELAY IN MAKING PAYMENT AFTE R THE COMPENSATION AMOUNT IS DETERMINED. INTEREST UNDER SECTION 28 IS A PART OF THE ENHANCED VALUE OF THE LAND WHICH IS NOT THE CASE IN THE MATT ER OF PAYMENT OF INTEREST UNDER SECTION 34. ON THE APPLICABILITY OF THE PROVI SIONS OF SEC.57(IV) READ WITH 56(2)(VIII) AND SEC.145A(B) OF THE ACT, THE HO NBLE GUJARAT HIGH COURT HELD, :- SECTION 145A OF THE I.T. BEARS THE HEADING 'METHOD OF ACCOUNTING IN CERTAIN CASES'. SECTION 145A(B) PROVI DES THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145, INTEREST RECEIVED BY AN ASSESSEE ON COMPENSATI ON OR ON ENHANCED COMPENSATION, AS THE CASE MAY BE, SHALL BE DEEMED TO BE THE INCOME OF THE YEAR IN WHICH IT IS RECEIVED. CLAUSE (VIII) OF SUB-SECTION (2) OF SECTION 56 OF THE I.T. ACT PROVI DES FOR INCOME BY WAY OF INTEREST RECEIVED ON COMPENSATION OR ON E NHANCED COMPENSATION REFERRED TO IN CLAUSE (B) OF SECTION 1 45A WHICH IS CHARGEABLE AS INCOME FROM OTHER SOURCES. THE FIRST RESPONDENT INCOME TAX OFFICER SEEKS TO TAX THE INTEREST RECEIV ED BY THE PETITIONER UNDER SECTION 28 OF THE ACT OF 1894 AS I NCOME FROM OTHER SOURCES UNDER SECTION 56(2)(VIII) READ WITH S ECTION 145A(B) OF THE I.T. ACT. IN THE OPINION OF THIS COURT, IN T HE LIGHT OF THE LAW LAID DOWN BY THE SUPREME COURT IN THE CASE OF GHANSHYAM (HUF) ( SUPRA ), THE INTEREST RECEIVED UNDER SECTION 28 OF THE AC T OF 1894 WOULD NOT FALL WITHIN THE AMBIT OF THE EXPR ESSION ITA NO. 2053/BANG/2017 PAGE 8 OF 12 'INTEREST' AS ENVISAGED UNDER SECTION 145A(B) OF TH E I.T. ACT, INASMUCH AS, THE SUPREME COURT IN THE ABOVE DECISIO N HAS HELD THAT INTEREST UNDER SECTION 28 OF THE ACT OF 1894 I S NOT IN THE NATURE OF INTEREST BUT IS AN ACCRETION TO THE COMPE NSATION AND, THEREFORE, FORMS PART OF THE COMPENSATION. IT WAS ARGUED ON BEHALF OF THE REVENUE BEFORE THE H ONBLE GUJARAT HIGH COURT THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GHANSHYAM (HUF) WAS RENDERED PRIOR TO THE SUBSTITUT ION OF SECTION 145A OF THE I.T. ACT BY FINANCE (NO. 2) ACT, 2009 WITH EFFE CT FROM 1ST APRIL, 2010, AND HENCE, WOULD HAVE NO APPLICABILITY CASES PERTAI NING TO AY 2010-11 AND AFTERWARDS. SUCH AN ARGUMENT WAS REPELLED BY THE HO NBLE GUJARAT HIGH COURT AS FOLLOWS: 11. IT HAS BEEN VEHEMENTLY CONTENDED ON BEHALF OF THE FIRST RESPONDENT THAT THE ABOVE DECISION HAS BEEN RENDERE D PRIOR TO THE SUBSTITUTION OF SECTION 145A OF THE I.T. ACT BY FIN ANCE (NO. 2) ACT, 2009 WITH EFFECT FROM 1ST APRIL, 2010, AND HEN CE, WOULD HAVE NO APPLICABILITY TO THE FACTS OF THE PRESENT C ASE. THE SCOPE AND EFFECT OF THE SUBSTITUTION (WITH EFFECT FROM 1S T APRIL, 2010) OF SECTION 145A, AS ALSO AMENDMENT MADE IN SECTION 56( 2) BY ACT 33 OF 2009 HAVE BEEN ELABORATED IN THE FOLLOWING PO RTION OF THE DEPARTMENTAL CIRCULAR NO. 5/2010, DATED 3.6.2010, A S FOLLOWS: 'RATIONALIZING THE PROVISIONS FOR TAXATION OF INTER EST 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', SHAL L 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 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. ITA NO. 2053/BANG/2017 PAGE 9 OF 12 THIS HAS CAUSED UNDUE HARDSHIP TO THE TAXPAYERS. 46.2 WITH A VIEW TO MITIG ATE 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 O F THE SUPREME COURT IN GHANSHYAM (HUF)'S CASE (SUPRA) BUT WAS BROUGHT IN TO MITIGATE THE HARDSHIP CAUSED TO T HE ASSESSEE ON ACCOUNT OF THE DECISION OF THE SUPREME COURT IN RAMA BAI V. CIT [1990] 181 ITR 400/[1991] 54 TAXMAN 496 WHEREBY IT WAS HELD THAT ARREARS OF INTE REST COMPUTED ON DELAYED OR ENHANCED COMPENSATION SHALL BE TAXABLE ON ACCRUAL BASIS. THEREFORE, WHEN ONE READS THE WORDS 'INTEREST RECEIVED ON COMPENSATION OR ENHANCE D COMPENSATION' IN SECTION 145A OF THE I.T. ACT, THE SAME HAVE TO BE CONSTRUED IN THE MANNER INTERPRETED BY T HE SUPREME COURT IN GHANSHYAM (HUF)'S CASE (SUPRA). 12. THE HONBLE GUJARAT HIGH COURT FINALLY CONCLUDE D, AS FOLLOWS: 13. THE UPSHOT OF THE ABOVE DISCUSSION IS THAT SINCE INTEREST UNDER SECTION 28 OF THE ACT OF 1894, PARTAKES THE C HARACTER OF COMPENSATION, IT DOES NOT FALL WITHIN THE AMBIT OF THE EXPRESSION ITA NO. 2053/BANG/2017 PAGE 10 OF 12 'INTEREST' AS CONTEMPLATED IN SECTION 145A OF THE I .T. ACT. THE FIRST RESPONDENT - INCOME TAX OFFICER WAS, THEREFOR E, NOT JUSTIFIED IN REFUSING TO GRANT A CERTIFICATE UNDER SECTION 19 7 OF THE I.T. ACT TO THE PETITIONER FOR NON-DEDUCTION OF TAX AT SOURC E, INASMUCH AS, THE PETITIONER IS NOT LIABLE TO PAY ANY TAX UNDER T HE HEAD 'INCOME FROM OTHER SOURCES' ON THE INTEREST PAID TO IT UNDE R SECTION 28 OF THE ACT OF 1894. 14. THE PETITIONER HAD EARLIER CHALLENGED THE COMMUNI CATION DATED 9TH FEBRUARY, 2015 WHEREBY ITS APPLICATION FO R A CERTIFICATE UNDER SECTION 197 OF THE I.T. ACT HAD BEEN REJECTED , AND SUBSEQUENTLY, TAX ON THE INTEREST PAYABLE UNDER SEC TION 28 OF THE ACT OF 1894 HAS ALREADY BEEN DEDUCTED AT SOURCE. CO NSEQUENTLY, 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 INTERES T, THE SECOND RESPONDENT WAS NOT JUSTIFIED IN DEDUCTING TAX AT SO URCE UNDER SECTION 194A OF THE I.T. ACT IN RESPECT OF SUCH AMO UNT. THE PETITIONER IS, THEREFORE, ENTITLED TO REFUND OF THE AMOUNT WRONGLY DEDUCTED UNDER SECTION 194A OF THE I.T. ACT. 13. IN THE LIGHT OF THE AFORESAID DECISION OF THE H ONBLE GUJARAT HIGH COURT AND IN THE LIGHT OF THE ADMITTED FACTUAL POSI TION IN THE PRESENT CASE, WE ARE OF THE VIEW THAT THE CIT(APPEALS) IS FULLY J USTIFIED IN ALLOWING EXEMPTION U/S. 10(37) OF THE ACT ON THE INTEREST RE CEIVED BY THE ASSESSEE U/S. 28 OF THE LAND ACQUISITION ACT, 1894. WE FIND NO GROUNDS TO INTERFERE WITH THE IMPUGNED ORDERS OF THE CIT(APPEALS). ITA NO. 2053/BANG/2017 PAGE 11 OF 12 14. CONSEQUENTLY, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF OCTOBER, 2018. SD/- SD/- ( A.K.GARODIA ) ( N.V. VASUDEVAN) ACCOUNTANT MEMBER VIC E PRESIDENT BANGALORE, DATED, THE 26 TH OCTOBER, 2018. / VMS / COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NO. 2053/BANG/2017 PAGE 12 OF 12 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S . . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. ..