VIJAY SINGH CHAUHAN,NOIDA V. ITO,WARD-2(5), NOIDA

ITA 2561/DEL/2023

AI Insights

The case involves Vijay Singh Chauhan, who appealed against the order of the National Faceless Appeal Centre, which upheld the addition of Rs. 6,71,51,098 to his income under the head 'Income from Other Sources'. This amount represented the interest received on enhanced compensation from the New Okhla Industrial Development Authority, which was not declared in his return for the Assessment Year 2015-16. The primary legal contention was whether this interest should be considered as part of the compensation and thus exempt under Section 10(37) of the Income Tax Act, or taxable as income. The Tribunal examined various precedents and statutory provisions, ultimately deciding in favor of the Revenue.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793611 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2015-2016
• Appeal Filed On: 12-09-2023
• Other Referred Cases: CIT vs. Ghanshyam Das (HUF), Mahendra Pal Narang vs. CBDT, Movaliya Bhikhubhai Balabhi vs. ITO-TDS-1, Surat, Pawan Kumar vs. Pr. CIT, Virendr Rathee vs ITO, Ward 5, Nitin Kumar vs. ITO, Shri Tara Chand vs ITO, Shri Pawan Giri HUF vs Department of Income Tax, Haryana Urban development Authority vs Mandir Nar Singh Puri and Others, Ganeshi Singh vs NOIDA, Bikram Singh vs Land Acquisition Collector, Sham Lal Narula vs CIT, Inderjit Singh Sodhi (HUF) vs PCIT-10
• Laws Referred To: Income Tax Act, 1961, Land Acquisition Act, 1894
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: NAVEEN KUMAR
• Keywords: Set aside; Question of law; Capital receipt; Capital Gains; TDS
• Section: 142(1); 263; 271(1)(c); 56; 56(2); 27; 28; 2(14); 45(5)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘F’: NEW DELHI BEFORE SHRI SUDHIR PAREEK, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 2561/Del/2023 (Assessment Year: 2015-16) Vijay Singh Chauhan, House No.-193, Gali No.-3, Village Chhalera, Sector-44, Noida, Uttar Pradesh India. Vs. Income Tax Officer, Ward- 2(5), Noida, Uttar Pradesh, India. PAN No: AEIPC4637E APPELLANT RESPONDENT Assessee by : Sh. Naveen Kumar, Adv. Revenue by : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing: 01.07.2025 Date of Pronouncement: 26.09.2025 ORDER PER SUDHIR PAREEK, JM: The aforetitled appeal has been preferred against the order of National Faceless Appeal Centre, Delhi [hereinafter, in short, ‘CIT(A)’] dated 17.07.2023 for AY 2015-16, by which appeal of the assessee was dismissed. 2. Brief facts of the case may be narrated as that the appellant filed return of income declaring total income of Rs. 3,74,740/- for the Assessment Year 2015-16 on 04.08.2016, claiming refund of Rs.1,33,93,740/-. Thereafter, case was selected through CASS for limited scrutiny, on the reasons as mentioned below. Printed from counselvise.com 2 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO (i)Whether interest income has been correctly shown in the Return of Income. (ii) Whether refund claim is justified. (iii) Whether sales turnover/receipts has been correctly offered for tax. (iv) Whether the claim of agricultural income is correct. 2.1. In the abovesaid proceeding notices u/s 143(2) and 142(1) of the Act, was issued and duly served upon the appellant on different dates, and it was noticed that the appellant had received a sum of Rs. 13,43,02,195/- as interest on enhanced compensation from New Okhla Industrial Development Authority. The interest income which was received by the appellant, has not been declared in his return of income for the AY 2015-16. The Learned AO, made addition of Rs 6,71,51,098/- in the income of the appellant as in the head ‘income from other sources”. 3. In appeal, the Learned CIT(A) upheld the impugned addition and on being aggrieved with the same, the assessee before us by way of present appeal. 4. The appellant has raised the following grounds of appeal: “GROUND OF APPEAL - 1: The Ld. CIT(A) erred in upholding the decision of the Ld. AO to include an additional amount of Rs.6,71,51,098/- in the appellant's taxable income under the head \"Income from Other Sources.\" GROUND OF APPEAL - II: The Ld. CIT(A) failed to appreciate the factual and legal contentions raised by the appellant with respect to the taxation of interest received as compensation/enhanced compensation under Section 28 of the Land Acquisition Act 1894. In addition as per the legal precedent of CIT vs. Ghanshyam Das (HUF) to support the contention that interest paid under Section 28 should not be taxable. GROUND OF APPEAL-III: The Ld. CIT(A) failed to understand that interest components under Section 28 and Section 34 of the Land Acquisition Act 1894 are different. Interest under Section 28 is rightfully viewed as an integral part of the compensation amount and should not be subjected to regular income tax treatment. GROUND OF APPEAL-IV: Printed from counselvise.com 3 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO The CIT(A), failed to consider the decisions of various courts, including the Supreme Court and this Hon'ble ITAT wherein under similar circumstances the Interest received u/s 28 was treated as an integral part of section 28. Since, it was an agricultural land on which the compensation has been awarded by the court; and secondly, the interest received on enhanced compensation u/s 28 of the Land Acquisition Act is part of compensation and hence is not taxable, and the assessee is entitled for exemption u/s 10(37) of the Act. The appellant prays for a fair consideration of his contentions and a just decision in line with the principles of law and equity. In support of the contention of the assessee reliance is placed on the following judgments passed by the Hon'ble Delhi ITAT, wherein the facts in question were similar and the Hon'ble ITAT Delhi passed the judgment in favour of the Assessee.  ITO, Ward 2. vs. Hari Singh Saini ITA No.1539/Del/2020 & CO No.164/Del/2022  ITO vs Girish Kumar - I.Τ.Α. No. 5084/DEL/2019  Pranav Saran vs ACIT, Circle 32 - ITA No.499/Del./2021  Ram Kishan vs ITO, Ward 60-ITA No. 5391/Del/2017  Virendr Rathee vs ITO, Ward 5 - ITA No. 693/Del/2023  Nitin Kumar vs. ITO - ITA No. 56/DEL/2023 We hold that firstly, GROUND OF APPEAL - V: The appellant craves leave to add, amend, alter, or withdraw any of the above-mentioned grounds of appeal during the course of the appellate proceedings.” 5. Heard rival submissions and carefully scanned the materials available on record. 6. Reiterating the grounds of appeal, The Learned AR submitted that taxation of interest received as compensation / enhanced compensation under section 28 of the Land Acquisition Act, 1894, the interest components under section 28 and section 34 of the Land Acquisition Act, 1894 are different. Interest under section 28 is rightfully viewed as an integral part of the compensation amount and should not be subjected to regular income tax treatment. Also submitted that it was an agricultural land on which the compensation has been awarded by the court, and secondly, the interest received on enhanced compensation u/s 28 of the Land Acquisition Act is Printed from counselvise.com 4 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO the part of compensation and hence is not taxable, and the appellant is entitled for exemption u/s 10(37) of the Act. 7. The Ld. AR, placed reliance on the case of CIT v. Ghanshyam (HUF) (2009) 315 ITR 1(SC)., and also, placed the reliance on the various decisions of Co-ordinate Bench of ITAT Delhi, which are reproduced as under:  ITO, Ward 2. vs. Hari Singh Saini ITA No.1539/Del/2020 & CO No.164/Del/2022  ITO vs Girish Kumar - I.Τ.Α. No. 5084/DEL/2019  Pranav Saran vs ACIT, Circle 32 - ITA No.499/Del./2021  Ram Kishan vs ITO, Ward 60-ITA No. 5391/Del/2017  Virendr Rathee vs ITO, Ward 5 - ITA No. 693/Del/2023  Nitin Kumar vs. ITO - ITA No. 56/DEL/2023  Pawan Kumar vs. Pr. CIT [2024] 159 taxmann.com 61 (Delhi-Trib.)  Movaliya Bhikhubhai Balabhi vs. ITO-TDS-1, Surat [2016] 70 taxmann.com 45 (Gujrat). 8. Per Contra, the Learned DR relying upon the orders passed by the both authorities below, submitted that the Legislature introduced the provisions of section 56(2)(viii) vide an amendment, by the Finance Act, 2009, w.e.f. 01/04/2010, and inserted “income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A’ and correspondingly by the said Act, also introduced the provisions of section 57(iv) providing for a deduction of a sum equal to the fifty percent of the income referred to in section 56(2)(viii). Further submitted that section 145A of the Act provides for the method of accounting in certain cases and section 145A(b) inter-alia, provides that notwithstanding anything contrary contained in section 145, interest received on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received and subsequently, the provisions of section 145A was replaced by the provisions of section 145B, by the Finance Act, 2018 , w.e.f.01/04/2017, with the result that income by way of interest received on Printed from counselvise.com 5 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO compensation or on enhanced compensation referred to in section 145B was made chargeable to tax as income from other sources u/s 56(2)(viii) of the Act. 9. It is also submitted on behalf of the Revenue, that in the case of Mahendra Pal Narang versus CBDT, the Hon’ble Punjab & Haryana High Court, took dissent view, from the view taken by the Hon’ble High Court of Gujrat in the case of Movaliya Bhikhubhai Balabhai (supra) and held that the words “interest received on compensation or enhanced compensation” in sections 56(2)(viii) and 57(iv) was plain, simple and unambiguous and therefore, any interest received on compensation or enhanced compensation shall be assessable as income from other sources and not under the head capital gains. 10. The Ld. AR has further submitted that the Ld. AO and Ld. CIT(A) wrongly applied, Section 45 of the Act concerning the facts of the present case as Section 45 deals with \"Capital Gains.\" However, Section 10(37) overrides Section 45 of the Act in cases where agricultural land is compulsorily acquired, and the compensation qualifies for exemption. Since the Appellant's land was agricultural in nature and compulsorily acquired, no capital gains arise U/s 45 of the Act, rendering it inapplicable to the present case. Also submitted that the Section 56(2)(viii) of the Act relates to income chargeable under the head \"Income from Other Sources.\" However, this provision does not apply to compensation or consideration for the compulsory acquisition of agricultural land that qualifies for exemption U/s 10(37) of the Act. The order of the Ld. AO to tax the compensation U/s 56(2)(viii) of the Act is, therefore, misplaced and contrary to law. As in the present case, the Compensation amount was finally determined in February 2014 by the Judgment of the Hon'ble Supreme Court, though the acquisition was made in 1990 and it was paid to the assessee in June 2014, all the more it was the interest on the amount of the Printed from counselvise.com 6 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO compensation which was determined at the later stage, not at the time of the acquisition which was awarded by the Court order or otherwise at a later stage. 10. 1. The Learned AR also contended that despite the explicit exemption U/s 10(37) of the Act, the Ld. AO erroneously taxed the compensation U/s 56(2)(viii) of the Act, disregarding the specific provisions of the Act that grant an exemption to such income and accordingly the Learned AO failed to acknowledge that Section 10(37) of the Act operates as a special provision, excluding the application of both Section 45 of the Act and Section 56(2)(viii) of the Act in cases involving agricultural land compensation. 10.2 The Ld. AR, further argued, that the interest received U/s 28 compensates the landowner for the delay in receiving proper compensation for the compulsory acquisition of land, thereby forming part of the compensation and not being treated as taxable income and accordingly, the interest received U/s 28 of the Land Acquisition Act must be excluded from the taxable income, as it does not constitute a capital receipt forming part of the enhanced compensation. The addition made by the Learned AO and sustained by the Learned CIT(A) is contrary to law and facts and deserves to be set aside. 10.3 Also submits that Section 34 applied to cases where landowners do not oppose the amount of compensation initially awarded by the Collector, but the Collector fails to pay or deposit the awarded amount on time after taking possession of the land. The interest U/s 34 of the LA Act is meant to compensate the landowners for this delay in payment. Which is not the case herein. The provisions of U/s 28,28A, and 34 of LA Act deal with interest on compensation and re-determination of compensation for land acquired under the Land Acquisition Act. While all three Printed from counselvise.com 7 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO provisions address issues related to compensation, they save different purposes and apply in distinct circumstances. 10.4. Further submitted that, as also held in the landmark case of CIT vs. Ghanshyam Das (HUF) [315 ITR 1 (SC)], the Hon'ble Supreme Court categorically observed that interest received U/s 28 of the LA Act is not in the nature of interest U/s 56(2)(viii) of the Income Tax Act, 1961, but rather a part of the enhanced compensation itself. Para 24 of the Judgment is re-produced hereinafter for clarification: “24. 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 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. 10.5. The Learned AR submits that delays in the determination of compensation at various stages coupled with delayed actual payment to the landowners are common phenomena and, therefore, payment of interest gives a healing touch, which partially recompenses the decline of the intrinsic worth of money and for such reasons, the interest received U/s 28 of the LA Act must be excluded from the taxable income, as it doesn't constitutes a capital receipt forming part of the enhanced compensation and the appellant is entitled to exemption/s 10(37) of the Act. 10.6 The Learned AR also submitted that Para 5.7 of the impugned order, erroneously relied on the decision of the Hon’ble Punjab & Haryana High Court in Mahender Pal Narang v. CBDT [2020] 423 ITR 13, as this decision failed to fully consider the binding principles laid down by the Hon’ble Supreme Court in Ghanshyam (HUF) and Hari Singh. Moreover, while interpreting the interest Printed from counselvise.com 8 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO received by the assessee, the AO and the CIT(A) should have also considered the placement of Sections 28 and 34 within the framework of the LA Act. Section 28 is placed in Part III of the Act, which is titled \"Reference to Court and Procedure Thereon,\" while Section 34 is placed in Chapter V, titled \"Payment.\" The placement and the headings of these chapters reflect the legislative intent. Section 28 deals with the interest awarded by the court on enhanced compensation, which is inherently linked to the process of adjudicating and determining fair compensation. Conversely, Section 34 pertains to interest awarded purely for delay in payment, a separate context entirely. The placement of Section 28 in the procedural part of the Act indicates the legislature's intent to treat interest under this section as part of the original compensation, whereas interest under Section 34 is treated as independent income. Had the legislature intended to treat interest under Section 28 as taxable income distinct from compensation, it would have placed it elsewhere in the statute. 10.7. The Learned AR vehemently submitted that the compensation received for the compulsory acquisition of agricultural land is exempt under Section 10(37) of the Act. The land in question satisfies all the necessary conditions for exemption, including its use for agricultural purposes, its location within a specified area, and the receipt of compensation post-April 1, 2004. The interest received under Section 28 of the Land Acquisition Act is an integral part of the enhanced compensation, compensating for the delayed payment. It is distinct from interest under Section 34, which is taxable as \"Income from Other Sources.\" Judicial precedents, including the Hon'ble Supreme Court's decisions in Ghanshyam (HUF) and Hari Singh, and decisions of the Hon'ble ITAT Delhi, unequivocally support the Appellant's position. 11. On the other hand, the Ld. Sr. DR submits that the distinction brought about in Ghanshyam's case (supra) that interest under section 28 of the Predecessor Act is Printed from counselvise.com 9 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO part of the amount of compensation and therefore, exigible to tax under 45(5) of the Act stands obliterated by the amendment with the introduction of the in the provisions of Sections 145B, 56(2)(viii) and 57(iv) Act vide which interest received on compensation and enhanced compensation has been made taxable as 'income from other sources', and if that be so then the question of the provisions of Section 10(37) of the Act for exemption of interest awarded under section 28 of the Land Acquisition Act from taxability would not come into play inasmuch as such interest is taxable as per the judgment of the Larger Benches of the Hon’ble Supreme Court in Dr. Shamlal Narula case etc., being not a part of compensation and even otherwise interest component of compensation received under section 28 being not expressly exempted there under. Had the intention of the Legislature been to exempt the interest on compensation or enhanced compensation under section 10(37) of the Act, then a provision would have been engrafted there under in view of the pronouncement earlier thereto rendered by the Hon'ble Supreme Court in Ghanshyam's case(supra), more so when the provisions of Section 56(2) (viii) were introduced in the Act providing there under that interest of compensation or enhanced compensation would be taxable as income from other sources. 11.1 The Learned DR submitted that the issue in question now stands settled with judgement of the Hon’ble Supreme Court of India in Mahender Pal Narang vs. CBDT, Ministry of Finance [2021] in [2021] 126 taxmann.com 105 (SC). And as per judgement of the Hon’ble High Court of Delhi in the case of PCIT-10 vs. Inderjit Singh Sodhi (HUF) [2024] 161 taxmann.com 301 (Delhi), such receipts are taxable. 12. The Learned AR vehemently argued that the Hon’ble Supreme Court in the case of Ghanshyam (HUF) (supra) has held that interest awarded U/s 28 of the LA Act is not \"interest\" in the conventional sense but an accretion to the compensation amount. The Court clarified that this interest is compensatory in nature, Printed from counselvise.com 10 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO compensating the landowner for the enhanced value of the land due to compulsory acquisition, and forms part of the compensation, subject to the same tax treatment as the principal compensation. This position was reaffirmed in Union of India v. Hari Singh (2017), where the Court held that interest under Section 28 is distinct from interest under Section 34, the latter being payable for delayed payment and taxable as \"Income from Other Sources.\" These decisions, being binding precedents, categorically establish that interest under Section 28 should not be taxed under Section 56(2)(viii) but treated as part of the compensation, particularly where it relates to the compulsory acquisition of agricultural land exempt under Section 10(37). It is also submitted that the Co-ordinate Bench of ITAT Delhi, consistently held that interest under Section 28 is part of the enhanced compensation and, therefore, not taxable under Section 56(2)(viii). The Ld. CIT(A), however, in para 5.7 of the impugned order, erroneously relied on the decision of the Hon'ble Punjab & Haryana High Court in Mahender Pal Narang v. CBDT (2020) 423 ITR 13, which was against the assessee. This decision failed to fully consider the binding principles laid down by the Hon'ble Supreme Court in Ghanshyam (HUF) and Hari Singh. The CIT(A) also overlooked the contrary judgment of the Hon'ble Gujarat High Court in Movaliya Bhikhubhai Balabhai v. ITO (2016) 70 Taxmann.com 45, where it was categorically held that interest under Section 28 forms part of the enhanced compensation and is not taxable as \"Income from Other Sources\" under Section 56(2)(viii). The Hon'ble Gujarat High Court correctly observed that the Finance Act, 2009 amendments could not override the nature of Section 28 interest as compensatory. Moreover, while interpreting the interest received by the assessee, the AO and the CIT(A) should have also considered the placement of Sections 28 and 34 within the framework of the LA Act. Section 28 is placed in Part III of the Act, which is titled \"Reference to Court and Procedure Thereon,\" while Section 34 is placed in Chapter V, titled \"Payment.\" The placement and the headings of these Printed from counselvise.com 11 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO chapters reflect the legislative intent. Section 28 deals with the interest awarded by the court on enhanced compensation, which is inherently linked to the process of adjudicating and determining fair compensation. Conversely, Section 34 pertains to interest awarded purely for delay in payment, a separate context entirely. The placement of Section 28 in the procedural part of the Act indicates the legislature's intent to treat interest under this section as part of the original compensation, whereas interest under Section 34 is treated as independent income. Had the legislature intended to treat interest under section 28 as taxable income distinct from compensation, it would have placed it elsewhere in the statute. 13. The Learned AO, concluded in assessment order, that out of the total interest income of Rs 13,43,02,195/-, 50% which is computed as Rs 6,71,51,098/- is taxable as per the provision of the Act and as such, the appellant has not shown the above income in his return of income and claimed refund of Rs 1,34,19,430/- so addition of Rs 6,71,51,098/- made in the income of the appellant in the head of Income from other sources, the relevant extract thereof as under: 5. (i) The reply of the assessee is not convincing at all. As per the section 56(2)(Viii) of the Income Tax Act, 1961 Income by way of interest received on compensation or on enhanced compensation, shall be assessed under the head \"Income from other sources\" in the year in which it is received. Further, as per section 57(iv), 50 per cent of such interest is deductible. However no deduction is permitted. Furthermore, as per section 145A(b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received. (ii) Further, as per the decision of the Hon'ble Supreme Court in the case of CIT, Faridabad Vs Ghanshyam [HUF], settled controversy with regard to the year of taxability of the receipt of Disputed Enhanced Compensation which was resolved and the same is taxable in the year of receipt. The judgments of the Apex Court in the above case also make it clear that the above position with regard to the taxability of receipt of such compensation will apply under the Post-1988 Law. In the context of the year of taxability of interest on compensation or on enhanced compensation, later, the Income Tax Act specifically Printed from counselvise.com 12 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO amended by the Finance Act, 2009 w.e.f. the A.Y. 2010-11 [Ref. sections 145A(b), 56(2)(viii) and 57(iv)]. Under the amended provisions, effectively, 50% of the interest received by the assessee on compensation or on Enhanced Compensation is taxable in the year of receipt. 6. After considering the replies and documents submitted by the assessee and information available in records, it is established that the assessee during the year under consideration received interest of Rs. 13,43,02,195/-compensation/enhanced compensation on his land acquisition from New Okhla Industrial Development Authority. As per 26AS details, TDS of Rs. 1,34,30,221/-was deducted by the NOIDA Authority on the aforesaid interest. Out of the total interest income of Rs. 13,43,02,195/-, 50% which is computed as Rs. 6,71,51,098/- is taxable as per the provision of the Income Tax Act, 1961 (as discussed in para 5(i) & (ii) above). The assessee has not shown the above income in his ITR and claimed refund of Rs.1,34,19,430/-. Hence, an addition of Rs. 6,71,51,098/- is made in the income of the assessee in the head Income from Other Sources. Since, the assessee has furnished inaccurate particulars of his income and the assessee has concealed the above income, penalty proceedings u/s 271(1)(c) is being initiated separately. 14. While deciding the appeal, the Learned CIT(A) observed that the action of the Learned AO in treating the interest income of Rs 13,43,02,195/- as assessed u/s 56(2)(viii) of the Act deserves to be upheld, relevant extract thereof as under: “5.1 During the course of assessment proceedings, it was found that the appellant received an amount of Rs. 13,43,02,195/- as interest on enhanced compensation from New Okhla Industrial Development Authority (NOIDA). As the same was not declared in the return of income for A.Y. 2015-16, the AO issued a show-cause notice as to why the said amount should not be taxed u/s 56(2)(viii) of the Act. He also relied on the provisions of section 145A of the Act. The appellant replied that the compensation received was on account of acquisition of land by NOIDA in accordance with section 28 and 28A of the Land Compensation Act and hence. interest thereon was to be treated as attributance to the value of compensation and the land being agricultural in nature, income from capital gains is exempt u/s 10(37) of the Act. In support of the claim, the appellant relied on the decision of CIT, Faridabad vs Ghanshyam (HUF) 315 ITR(1). The AO did not accept the objections of the appellant as he said that section 56(2)(viii) of the Act read with section 145A(b) is very clear that interest received as compensation/enhanced compensation shall be assessed under the head \"Income from other sources\" and further as per section 57(iv), 50% of deduction is also available on the interest income received. 5.2 With regard to the Hon'ble Apex Court judgment in the case of CIT vs. Ghanshyam (HUF) 315 ITR(1), the AO clarified that it was with regard to the year of taxability of receipt of such compensation. He also mentioned that the Income Tax Act specifically amended by the Finance Act 2009 w.e.f. A.Y. 2010-11 [refer section 145A(b), 56(2) (viii) and 57(iv)]50% of the interest received by the appellant as compensation/enhanced compensation is taxable in the year of receipt. After considering the details and reply filed by the appellant, the AO made an addition of Rs. 6,71,51,098 being 50% of Rs. 13,43,02, 195 u/s 56(2)(viii) of the Act. Printed from counselvise.com 13 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO 5.3 The appellant submitted various case-laws apart from the Hon'ble Supreme Court's judgment in the case of CIT, Faridabad vs. Ghanshyam (HUF) which are reproduced in para 4 above. 5.4 I have considered the facts of the case and the submissions made by the appellant. The undisputed fact in this case is that the appellant received an amount of Rs. 13,43,02,195/- being interest on compensation/enhanced compensation from New Okhla Industrial Development Authority which acquired this land in the early 1980. The appellant did not Include it in the return of income on the pretext that the said land was an agricultural land within the meaning of Section 2(14) of the Income Tax Act, 1961 and any amount received as compensation/enhanced compensation u/s 28 or Sec. 28A of the Land Compensation Act was attributable to the land sale. value and hence exempt u/s 10(37) of the Income Tax Act 1961. The appellant maintained that even though it was named as interest, actually it was in the nature of compensation/enhanced compensation to be treated as principle amount in line with Section 28 of the Land Compensation Act and not as interest on delayed payment u/s 34 of the said Act. In reliance of its claim that this income is to be treated as exempt being in the nature of principle amount, the appellant relied mainly on the Hon'ble Supreme Court's decision in the case of CIT vs. Ghanshyam (HUF). The appellant also relied on various other case laws detailed in para 4 above. 5.5 Section 56(2) (viii) of the I.T. Act was introduced w.e.f. A.Y. 2010-11. The wordings of the section are clear and it is reproduced as below: \"Income by way of interest received on compensation or enhanced compensation referred to in Clause(b) of Section 145A\" Clause (b) of Section 145A is reproduced below: \"Interest received by appellant as compensation/enhanced compensation as the case may be shall be deemed to be the income of the year in which it is received.\" Section 57(iv) allows deduction of 50% of the income referred to in section 56(2)(viii). Hence, there is no distinction mentioned in the Act with respect to interest received on compensation as is brought out by the appellant. The language of the above section is plain, simple and unambiguous. There is no scope of taking outside aide for giving interpretation to the newly inserted sub-sections and clauses. The Hon'ble Supreme Court in ITC Ltd. vs CCE(2004) 7 SCC 591 held as under: \"These decisions exemplify the general rule of statutory construction that words have to be construed strictly according to their ordinary and natural meaning, particularly when the statute is a fiscal one irrespective of the object with which the provision was introduced. Of course if there is ambiguity in the statutory language, reference may be made to the legislative intent to resolve the ambiguity. But if the statutory language is unambiguous then that must be given effect to. The legislature is deemed to intend and mean what it says. The need for interpretation arises only when the words used in the statute are, on their own terms ambivalent and do not manifest the intention of the legislature 5.6 Now coming to the Hon'ble Supreme Court decision relied upon by the appellant, the issue to be decided in the cited judgment was whether compensation/enhanced Printed from counselvise.com 14 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO compensation or interest on is liable to be taxed u/s 45(v) in the year of receipt. WENT compensation is liable to be taxed u/s 45(v) in the year of receipt. 5.7 The Hon'ble Supreme Court held that interest u/s 28 unlike interest u/s 34 has an accretion to the value, hence it is part of compensation/enhanced compensation or consideration which is not the case with interest u/s 34 of the Land Compensation Act 1894 and hence it was held that interest u/s 28 is to be treated as part of compensation/enhanced compensation and assessed to tax as per section 45(v) of the I. T Act. This judgment was prior to the insertion of Section 56(2) (viii) of the Act and the A.Y. pertained to 1999-2000. Section 56(2)(viii) of the Act was inserted w.e.f. A.Y. 2010-11. The case of the appellant pertains to A.Y. 2015-16 which is very well after introduction of Section 56(2) (viii). The Hon'ble High Court of Punjab & Haryana in the case of Mahendar pal Narang vs CBDT, New Delhi has distinguished the decision of Hon'ble Supreme Court in the case of CIT vs Ghanshyam (HUF) and held that the said decision does not come to the rescue of the petitioner as amendments have taken place in various sections of the Act after the said decision. The facts are identical to the facts of the appellant's case, hence the Supreme Court decision is no longer applicable in view of the amendments in the Act. It is worthwhile to mention that the SLP filed by the appellant in the case of Mahendar pal Narang has been dismissed by the Hon'ble Supreme Court. (126 taxmann.com 105 (SC)/2021) 5.8 With regard to reliance by the appellant on other case laws, the discussion is as follows: 1. Shri Pawan Giri HUF Vs Department of Income Tax ITA No. 405/Chd/2013 (Hon'ble ITAT, Chandigarh): The Assessment Year concerned is AY 2008-09 when section 56(2)(vii) was not in statute. It followed the Hon'ble Supreme Court decision in the case of CIT, Faridabad vs. Ghanshyam (HUF). The more relevant case law will be Hon'ble High Court of Punjab & Haryana in the case of Mahendar pal Narang vs CBDT, New Delhi which has distinguished the above judgment. 1. 1. Haryana Urban development Authority Vs Mandir Nar Singh Puri and Others (Hon'ble Punjab and Haryana High Court-(CR No 7953 of 2013) -It followed the Hon'ble Supreme Court decision in the case of CIT, Faridabad vs. Ghanshyam (HUF). The more relevant case law will be Hon'ble High Court of Punjab & Haryana in the case of Mahendra Pal Narang vs CBDT, New Delhi which has distinguished the above judgment. 2. Movaliya Bhikubhai Balabhai Vs ITO (Hon'ble Gujarat HC-C A no 50 of 2017) The Hon'ble High Court of Punjab & Haryana in the case of Mahendar pal Narang vs CBDT, New Delhi has dissented from this judgment and as SLP filed by the appellant against the latter judgment has been dismissed by the Hon'ble Supreme Court and is in favour of revenue, the latter decision will apply to the appellant's case. 3. Hon'ble Supreme Court decision in the case of Ganeshi Singh Vs NOIDA - С А по 18331 of 2008) - Does not pertain to Income tax matter and deals with amount of compensation. 4. Shri Tara Chand Vs ITO (ITA No. 386/Chd/ 2016 (Hon'ble ITAT, Chandigarh) It followed the Hon'ble Supreme Court decision in the case of CIT, Faridabad vs. Ghanshyam (HUF). The more relevant case law will be Hon'ble High Court of Punjab & Haryana in the case Printed from counselvise.com 15 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO of Mahendar Pal Narang vs CBDT, New Delhi which has distinguished the above judgment. 5.9 Moreover, its seen from the order of compensation under Section 28A of the Land Acquisition Act in the case of the appellant that out of total amount of Rs.17,28,12,920/- paid by NOIDA authority, tax has been deducted (TDS) @ 10 per cent only on amount of Rs.13,43,02,195/- which is the interest portion and the remaining amount of Rs.3,85,10,725 being enhanced value and solatium not been considered for deduction of tax at source. Hence it is clear that the authority has not considered the entire amount as enhanced value of compensation attributable to the land. Hence, the action of the Assessing Officer in treating the interest income of Rs. 13,43,02,195/- as assessed under section 56(2) (viii) of the Act (before deduction u/s.57(iv) of the Act] is upheld.” 15. The Co-ordinate Bench of ITAT Delhi in the case of Veena Shah vs. Pr. CIT, in ITA No.1222/Del/2023 for Assessment Year 2018-19 decided the identical issue (in which author is one of us), of which relevant extract, are reproduced as under: “24 The decisions of the coordinate benches of the ITAT relied upon by the Ld. Ld. Counsel are based upon the reasoning propounded in the case of Ghanshyam HUF (supra). The Co-ordinate benches of the ITAT had not been made aware of an earlier judgment in the case of Sham Lal Narula (supra). Hence, the decisions were in favour of the assessee and not a good law. Therefore, in view of the decision in the case of Sham Lal Narula (supra), we are of the considered opinion that the decision in the case of Ghanshyam HUF (supra) is not applicable after the substitution of Sections 145A, 145B, 56(2)(Viii) and 57(iv) by Finance (No.2) Act, 2009. In view of the above, it is evident that the interest on compensation or interest on enhanced compensation is chargeable to tax under the head \"income from other sources\" from 01.10.2010 onwards. Therefore, the decision of the Hon'ble Supreme Court in the case of Ghanshyam HUF (supra), which was passed in the year 2009, in our considered opinion, is not applicable in the facts of the present case. The case laws relied upon by the Ld. Counsel were held distinguishable on facts and thus these were of no help to the appellant/assessee. 25. We find merit in the argument of the Ld. DR that the assessment order dated 11.02.2021, wherein the decisions of the Hon'ble Jurisdictional High Coat/Punjab & Haryana High Court in the cases of Mahender Pal Narang (Supra) and Puneet Singh (Supra) not followed was erroneous and prejudicial to the revenue as per the clause (d) of Explanation 2 to section 263 of the Act. 26. In view of the foregoing discussions, we are of the considered opinion that the order of Ld. PCIT is in accordance with the ratio laid down by Hon'ble Supreme Court in the cases of Sham Lal Narula (supra) and Malabar Industrial Co. Ltd, 243 ITR83 and the Hon'ble High Courts in the cases of Mahender Pal Narang (Supra), Puneet Singh (Supra) and Inderjit Singh Sodhi (HUF) [2024] 161 taxmann.com 301 as the AO's order is not only legally permissible under the provisions of the Act but also against the binding decisions of Hon'ble Punjab and Haryana High Court in the cases of Mahender Pal Narang (Supra) and Puneet Singh (Supra). Thus, we are of the considered view that the PCIT is fully Printed from counselvise.com 16 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO justified in holding that the order passed by the AO is erroneous and prejudicial to the interest of the Revenue as the assessment order is based on an incorrect appreciation of law. 27. In the light of the aforesaid judicial pronouncements and the concerned amendment, we decline to interfere with the impugned order dated 27.03.2023, passed under section 263 of the Act by the PCIT. 28. Consequently, the appeal stands dismissed.” 16. The Hon’ble Jurisdictional Delhi High Court in the case of PCIT vs. Inderjit Singh Sodhi (HUF) ITA No.769/2023 & CM Appeal 65057/2023 , in which solitary question for consideration was before the Hon’ble Court that whether the interest on enhanced compensation received by the assessee partakes the character of income from other sources u/s 56(2)(viii) of the Act, to be considered as separable from the enhanced compensation and substantial question of law arosen before Hon’ble Court that whether interest received by the assessee u/s 28 and 34 of the Land Acquisition Act, 1894 would fall under the provisions of section 10(37) and 56(2)(viii) of the Act and has held that the interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax, relevant paras of which as under: “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. Printed from counselvise.com 17 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO 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- 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 l'inance (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 Printed from counselvise.com 18 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO 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 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 CTT 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 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. Printed from counselvise.com 19 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO 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 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 Printed from counselvise.com 20 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO 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 1. 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 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 co findings of fact recorded by the authorities below which may warrant interference by this court No question of law, much less, substantial question of lave 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.” 17. On the basis of foregoing discussions, there is material substance in submissions advanced on behalf of the Revenue that the issue settled by the Hon’ble Jurisdictional High Court in the case of Inderjit Singh Sodhi (supra), that interest on enhanced compensation shall be considered as income from other sources and be taxable. In conclusion, on the basis of above ratio laid down and by following the order of Co-ordinate Bench of Tribunal in the case of Veena Shah (supra), considering existing legislature intent and entire legal and factual backdrop of the Printed from counselvise.com 21 ITA No.2561/Del/2023 Vijay Singh Chauhan vs. ITO case, we are not inclined to interfere with the impugned order as there is no any legal infirmity exhibits therein by holding that the interest received on enhanced compensation comes under income from other sources u/s 56(2)(viii) of the Act and accordingly, the appeal of the assessee is liable to be dismissed. 18. Consequently, the appeal of the assessee is hereby dismissed. Order pronounced in open Court on 26th September, 2025. Sd/- Sd/- (AVDHESH KUMAR MISHRA) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 26/09/2025. PK/Sr. PS Copy forwarded to: 1. Appellant 1. Respondent 2. CIT 3. CIT(Appeals) 4. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Printed from counselvise.com "