MAHAVIR SINGH YADAV,GURUGRAM V. PCIT, GURUGRAM

ITA 1120/DEL/2024

AI Insights

The case involves Mahavir Singh Yadav, the appellant, who contested the order of the PCIT, Faridabad, which set aside the original assessment order that accepted his returned income. The dispute centered on whether the interest received on enhanced compensation under Section 28 of the Land Acquisition Act, 1894, should be considered as 'income from other sources' and thus taxable. The Tribunal referenced several judicial precedents, including a significant judgment by the Jurisdictional High Court, which clarified the taxability of such interest under the amended provisions of the Income Tax Act post-2009.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474899 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2018-2019
• Other Referred Cases: Inderjeet Singh Sodhi (HUF) in ITA No. 769/2023, Jagjit Singh Kataria Vs. Pr. CIT in ITA No. 1245/Del/2024, CIT Vs. Ghanshyam (HUF) (2009) 315 ITR 1 (S.C), Principal Commissioner of Income Tax-10 Vs. Inderjit Singh Sodhi (HUF) in ITA No. 769/2023, Sham Lal Narula (Dr.) v. CIT [(1964) 53 ITR 151], Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], T.N.K. Govindaraju Chetty v. CIT [(1967) 66 ITR 465], Rama Bai v. CIT [1990 Supp SCC 699 : (1990) 181 ITR 400], K.S. Krishna Rao v. CIT [(1990) 181 ITR 408], Puneet Singh (supra)
• Laws Referred To: Income Tax Act, 1961, Land Acquisition Act, 1894
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Keywords: Set aside; Question of law; Assessment record; Revision of order
• Section: 143(3); 263; 56; 27; 28; 2

Judgement Text

" 1 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘E’ NEW DELHI BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 1120/DEL/2024 (A.Y. 2018-19) Mahavir Singh Yadav Vill-Kankrola, P.O. Bhangrola, Gurugram, 122505, Haryana PAN: AAHPY7814M Vs. PCIT Faridabad, Gurugram, Gurgaon, Haryana Appellant Respondent Assessee by None Revenue by Sh. Amit Katoch, Sr. DR Date of Hearing 19/02/2025 Date of Pronouncement 27/02/2025 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of the Pr. Commissioner of Income PCIT, Faridabad, [‘Ld. PCIT ’ for short] dated 16/12/2022 for the Assessment Year 2018-19. 2. The Grounds of Appeal are as under:- “1. However, only in a case where two views are possible and the Assessing Officer has adopted one view, such a decision, which might be plausible and it has resulted in loss of Revenue, such an order is not revisable under Section 263.7.3 Applying the law laid down by this Court in the case of Malabar Industrial Co. Ltd.” 2 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT 3. Brief facts of the case are that, The Assessee filed his return of income for the year under consideration on 30.08.2018 claiming refund of Rs.5,14,020/-. The case of the Assessee was selected for the complete scrutiny on the issue of ‘Refund Claim and Winnings from Lottery/ Crossword Puzzle/Horse Races’. The assessment was completed on 12.12.2020 by the Assessing Officer u/s 143(3) r.w.s. 143(3A) & 143(3B) of the Income Tax Act, 1961 (Act for short) accepting the returned income filed by the Assessee. 3.1. Later on perusal of the assessment record by the PCIT, it is noticed that the Assessee received interest on enhanced compensation to the tune of Rs.51,18,600/- u/s 28 of the Land Acquisition Act, 1894. The assessment records revealed that the Assessing Officer did not conduct inquiry on the issues on the basis of which case was selected for scrutiny on the specific issues. The Ld. PCIT in exercise of the power conferred in the Section 263 of the Act vide order 16/12/2022, set aside the assessment order dated 12.12.2020 and directed the Assessing Officer to pass a fresh assessment order and directed to re-compute the Assessee’s income after making further enquiries. Aggrieved by the Order of the PCIT dated 16/12/2022, the Assessee preferred the present Appeal on the grounds mentioned above. 3 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT 4. None appeared for the Assessee, at the time of hearing. On verifying the order sheet, it is found that on the previous occasion, at the request of the Assessee the Appeal was adjourned and fixed for hearing today. When the Appeal called, neither the Assessee nor the Assessee's Representative were present. 5. The Ld. Departmental Representative submitted that the issue involved in the present Appeal is squarely covered by the Judgment of the Jurisdictional High Court in the case of the Inderjeet Singh Sodhi (HUF) in ITA No. 769/2023 and CM APPL No. 65057/2023 dated 08/04/2024 and further following the said Judgment of the Jurisdictional High Court, the Co-ordinate Bench of the Tribunal in the case of Jagjit Singh Kataria Vs. Pr. CIT in ITA No. 1245/Del/2024 vide order dated 10/12/2024, decided the issue in favour of the Department holding that interest on compensation and enhanced compensation shall be considered as ‘income from other sources’ and the same is taxable. The Ld. Departmental Representative thus, sought for dismissal of the Appeal of the Assessee. 6. Heard the Ld. Departmental Representative and verified the material available on record. The only issued to be considered in the present Appeal is as to whether the interest on enhanced compensation 4 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT received by the Assessee on enhanced compensation received by the Assessee partakes the character of ‘Income from Other Sources’ u/s56(2)(viii) of the Act?. And, whether the Ld. PCIT is right in exercising the power conferred u/s 263 of the Act in setting aside the Assessment Order and directing the A.O. to make fresh assessment?” 7. The very same question as to ‘whether interest on enhanced compensation partakes the character of ‘Income from Other Sources’ u/s 56(2)(viii) of the Act or not’ has been decided by the Jurisdictional High Court in the case of Principal Commissioner of Income Tax-10 Vs. Inderjit Singh Sodhi (HUF) in ITA No. 769/2023 and CM APPL 65057/2023 vide order dated 08/04/2024. The Hon’ble Jurisdictional High Court held that interest, whether on compensation or enhanced compensation shall be considered as ‘income from other sources’ and shall be taxable accordingly. The Jurisdictional High Court also held that the Tribunal has erred in relying on the decision in CIT Vs. Ghanshyam (HUF) (2009) 315 ITR 1 (S.C) by taking into consideration of Finance(No.2) Act, 2009, which came into effect in the year 2010. The relevant portion of the Judgment of the Hon'ble High Court of Delhi is reproduced as under:- 5 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT “18. The solitary question which arises for our consideration in the present appeal is whether the interest on enhanced compensation received by the respondent-assessee partakes the character of income from other sources under Section 56(2)(viii) of the Act, to be considered as separable from the enhanced compensation. 19. At the outset, it is significant to refer to Sections 28 and 34 of the Act of 1894, which deal with the payment of interest on compensation, and read as under:- “28. Collector may be directed to pay interest on excess compensation:- If the sum which, in the opinion of the court, the Collector ought to have awarded as compensation is in excess of the sum which the Collector did award as compensation, the award of the Court may direct that the Collector shall pay interest on such excess at the rate of [nine per centum] per annum from the date on which he took possession of the land to the date of payment of such excess into Court.\"− *** \"34. Payment of interest. When the amount of such compensation is not paid or deposited on or before taking possession of the land, the Collector shall pay the amount awarded with interest thereon at the rate of nine per centum per annum from the time of so taking possession until it shall have been so paid or deposited. Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per centum per annum shall be payable from the date of expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry.\" 20. A reading of Section 28 of the Act of 1894 indicates that the said provision comes into play in cases where the Court finds that some higher compensation ought to have been provided by the Collector. In such situations, the Court may direct for payment of an interest on the excess awarded amount. Whereas, Section 34 of the Act of 1894 stipulates that the Collector shall award interest on the compensation at the rate of 9% per annum from the date of taking possession. It further lays down the condition that in case of non- 6 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT payment despite expiry of a period of one year, the said interest on the amount of compensation which remains unpaid, shall be awarded at the rate of 15% per annum, calculable from the date of such expiry. 21. It is the contention of the respondent-assessee that the interest awarded under Section 28 of the Act of 1894, as discussed above, shall constitute a part of the compensation itself. The ITAT has also drawn strength from the observation of the Hon‟ble Supreme Court in the case of Ghanshyam (supra) and the relevant paragraph of the said decision reads as under:- \"35. To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under Section 34 is for the delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under Section 34.\" 22. However, vide Finance (No.2) Act, 2009 (with effect from 01.10.2010), Clause (viii) of sub-Section 2 to Section 56 of the Act was inserted and the same is extracted hereunder as:- \"56. Income from other sources.-- *** (2) In particular and without prejudice to the generality of the provisions of sub-section (1), the following incomes shall be chargeable to income tax under the head \"Income from other sources\", namely:-- *** [(viii) income by way of interest received on compensation or on enhanced compensation referred to in [sub-section (1) of Section 145- B].]\" 23. For the sake of clarity, Section 145-B of the Act is reproduced as under:- \"[145-B. Taxability of certain income.--(1) Notwithstanding anything to the contrary contained in Section 145, the interest received by an assessee on any compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the previous year in which it is received. (2) Any claim for escalation of price in a contract or 7 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT export incentives shall be deemed to be the income of the previous year in which reasonable certainty of its realisation is achieved. (3) The income referred to in sub-clause (xviii) of clause (24) of Section 2 shall be deemed to be the income of the previous year in which it is received, if not charged to income-tax in any earlier previous year.]\" 24. A conjoint reading of the aforementioned provisions i.e., Sections 56(2)(viii) and 145-B of the Act vividly stipulate that the income received by way of interest on compensation or on enhanced compensation shall be chargeable to tax under the head „income from other sources‟. Therefore, since the position with respect to the imposition of tax on interest on compensation or enhanced compensation, as it exists today, came into being only in the year 2010, the conclusions drawn from the decision in Ghanshyam (supra), which was passed in the year 2009, are unsustainable in the facts of the present case. 25. Further, much reliance has been placed by the ITAT upon the decision of the Hon‟ble Supreme Court in the case of CIT v. Govindbhai Mamaiya [(2014) 16 SCC 449], which relies upon the case of Ghanshyam (supra) to hold that the interest on enhanced compensation received under Section 28 of the Act of 1894 is exigible to tax on receipt basis. However, a deeper analysis of the decision in Govindbhai Mamaiya (supra) would show that it does not deal with any issue pertaining to the change in the taxability, put in place through the concerned amendment of 2010. Therefore, the said decision lacks any applicability in the facts and circumstances of the present case. 26. Notably, a three-Judges Bench of the Hon‟ble Supreme Court in the case of Sham Lal Narula (Dr.) v. CIT [(1964) 53 ITR 151], while considering the interest under Section 28 of the Act of 1894 to be analogous to the interest under Section 34 of the Act, took the view that the same did not form part of compensation. The relevant extract of the said decision is culled out as under:- \"9. --- As we have pointed out, earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter the owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award he gets compensation for both the rights. Therefore, the interest awarded under Section 28 of the Act, just like under Section 34 thereof, cannot be a compensation or damages for the 8 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner. ---\" [Emphasis supplied] 27. The decision in Sham Lal Narula (supra) was subsequently followed by the Hon‟ble Supreme Court in the case of Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], wherein, it was held that interest under Section 28 of the Act of 1894 was in the nature of a revenue receipt and hence, the same was considered to be taxable. The relevant paragraphs of the said decision read as under:- \"8. The controversy is no longer res integra. This question was considered elaborately by this Court in Sham Lal Narula (Dr) v. CIT [(1964) 53 ITR 151 : AIR 1964 SC 1878] . Therein, K. Subba Rao, J., as he then was, considered the earlier case-law on the concept of \"interest\" laid down by the Privy Council and all other cases and had held at p. 158 as under: \"In a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use. In no sense of the term can it be described as damages or compensation for the owner's right to retain possession, for he has no right to retain possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income Tax Act.\" 9. This position of law has been consistently reiterated by this Court in the case of T.N.K. Govindaraju Chetty v. CIT [(1967) 66 ITR 465 : AIR 1968 SC 129] , Rama Bai v. CIT [1990 Supp SCC 699 : (1990) 181 ITR 400] and K.S. Krishna Rao v. CIT [(1990) 181 ITR 408 (SC)] . Thus by a catena of judicial pronouncements, it is settled law that the interest received on delayed payment of the compensation is a revenue receipt exigible to income tax. It is true that in amending the definition of \"interest\" in Section 2(28-A), interest was defined to mean interest payable in any manner in respect of any money borrowed or debt incurred including a deposit, claim or other similar right or obligation and includes any 9 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT service, fee or other charges in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. It is seen that the word \"interest\" for the purpose of the Act was interpreted by the inclusive definition. A literal construction may lead to the conclusion that the interest received or payable in any manner in respect of any moneys borrowed or a debt incurred or enumerated analogous transaction would be deemed interest. That was explained by the Board in the circular referred to hereinbefore.\" [Emphasis supplied] 28. In the case of Puneet Singh (supra), the High Court of Punjab and Haryana, while enunciating the effect of Section 145A(b) and Section 56(2)(viii) of the Act, has held as under:- \"19. The cumulative effect of section 145A(b) and section 56(2)(viii) would be that any interest received on compensation or on enhanced compensation shall be taxable under the head \"Income from other sources\" in the year of receipt. 20. However, by section 27 of the 2009 Act, a new clause (iv) in section 57 has been inserted with effect from April 1, 2010 which lays down that in the case of income of the nature referred to in section 56(2)(viii), a deduction of a sum equal to 50 per cent. of such income would be allowable thereunder and no deduction would be allowed under any other clause of section 57. The said provision reads thus: \"57. Deductions.--The income chargeable under the head 'Income from other sources' shall be computed after making the following deductions, namely : . .. (iv) in the case of income of the nature referred to 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 allowed under any other clause of this section.\" 21. The Assessing Officer in I. T. A. No. 132 of 2018 where the assessee had received Rs. 11,30,561 as interest income, held that the interest payment received on compensation/enhanced compensation to the tune of Rs. 5,65,280 (50 per cent. of Rs. 11,30,561) is taxable as income from other sources as per provisions of sections 56(2)(viii) read with 57(iv) and section 145A(b) of the Act for the assessment year 2010-11. The 10 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT Commissioner of Income-tax (Appeals) and the Tribunal had upheld the order of the Assessing Officer in that regard. 22. No illegality or perversity could be pointed out by learned counsel for the assessee in the concurrent findings of fact recorded by the authorities below which may warrant interference by this court. No question of law, much less, substantial question of law arise in these appeals. 23. Accordingly, finding no merit in the appeals, the same are hereby dismissed.\" [Emphasis supplied] 29. Considering the foregoing discussion, we affirm the concurrent findings of the AO and CIT(A) and find that the view taken by the ITAT is unsustainable, as the same is based on an incorrect appreciation of law. The 2010 amendment was a conscious departure by the Legislature from the earlier position and the said departure holds good law, as on date. There is no question with respect to the vires of the amendment before us or regarding any ambiguity in the language of the amendment. The only concern is regarding the enunciation of the applicable law and we hold the same to unequivocally mean that interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax. 30. We, accordingly, answer the substantial question of law which has arisen in the instant appeal in affirmative and in favour of the Revenue. We, thus, hold that the ITAT has erred in relying upon the decision of Ghanshyam (supra), ignoring the changes brought about by Finance (No.2) Act, 2009, which came into effect in the year 2010. 31. In the light of the aforesaid judicial pronouncements and the concerned amendment, we set aside the order of the ITAT dated 19.06.2020. Consequently, the appeal stands allowed and the concurrent findings of the AO and CIT(A) are hereby affirmed. Pending application(s), if any, are disposed of.” 8. In the present case, the opinion of the A.O. considering the ‘interest on the enhanced compensation’ as not taxable also cannot 11 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT be called as plausible view. Once the Jurisdictional High Court reiterates the law considering the amendment to the provision and also the previous Judgments, the law laid down by the Jurisdictional High Court becomes binding precedent and the authorities or the Tribunal cannot ignore the same and take different view. The Jurisdictional High Court in the case of Inderjit Singh Sodhi (HUF) (Supra), considered the insertion of Clause (viii) to Sub Section 2 of Section 56 of the Act w.e.f 01/10/2010, wherein also considered the Judgment rendered by the Hon'ble Supreme Court in Ghanshyam (HUF) (supra) and held that the interest on compensation and enhanced compensation shall be considered as ‘income from other sources’ and taxable. Thus, in our opinion, the view taken by the A.O. that the ‘interest on enhanced compensation is part of the compensation and not the ‘interest’ per-se and allowing the same as exempt u/s 10(37) of the Income Tax Act cannot be called as ‘plausible view’. 9. By following the ratio laid down in the Judgment of the Jurisdictional High Court in the case of Inderjit Singh Sodhi (HUF) (supra), we are of the opinion that the interest on the compensation or interest on the enhanced compensation shall be considered as ‘income from other sources’ and taxable accordingly. Accordingly, we are of the 12 ITA No. 1120/Del/2024 Mahavir Singh Yadav Vs. PCIT opinion that the Ld. PCIT committed no error in setting aside the assessment order and directing the A.O. to frame fresh assessment. Thus finding no merits in the Grounds of Appeal of the Assessee, Appeal of the Assessee is dismissed. Order pronounced in the open court on 27th February, 2025 Sd/- Sd/- (PRADIP KUMAR KEDIA) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 27.02.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "