May 2019

Sections 10(37), 45 Interest on enhanced compensation received from government on compulsory acquisition of agricultural land is exempt u/s. 10(37) of the Income-tax Act, 1961 and consequently TDS deducted on account of enhanced compensation was liable to be refunded

Jagdish T. Punjabi | Devendra Jain | Tejaswini Ghag
Chartered Accountants

8. [2019] 104 taxmann.com 99 (Del) Baldev Singh vs. ITO ITA No.: 2970/Del./2015 A.Y.: 2011-12 Dated: 8th March, 2019

 

Sections 10(37), 45 Interest on enhanced compensation received from government on compulsory acquisition of agricultural land is exempt u/s. 10(37) of the Income-tax Act, 1961 and consequently TDS deducted on account of enhanced compensation was liable to be refunded

 

FACTS

The assessee, in the return of income filed by him, claimed exemption u/s. 10(37) of the Act in respect of enhanced compensation of Rs. 4,69,20,146, received by him during the previous year in respect of agricultural land inherited by him from his parents.

 

During the course of assessment proceedings, the Assessing Officer (AO) observed that the said compensation of Rs. 4,69,20,146 comprised of Rs. 2,70,33,074 as principal and balance Rs. 1,98,85,972 as interest and TDS amounting to Rs. 93,84,030 was deducted, out of which Rs. 74,45,433 was refunded to the assessee and credited to his account.

 

The AO, based on the amendments made in sections 56(2), 145A(b) and 57(iv) of the Act which were applicable with effect from 1.04.2010 held that interest on enhanced compensation was liable to be taxed as income in the year in which it was received, irrespective of the method of accounting followed and accordingly taxed Rs. 99,42,986 being the interest received after allowing 50% deduction.

 

Aggrieved, the assessee preferred an appeal to the CIT(A). In the appellate proceedings before CIT(A) it was contended that the Supreme Court has in CIT vs. Ghanshyam Dass (HUF) [2009] 315 ITR 1 held interest on enhanced compensation to be a part of compensation and therefore the same is exempt u/s. 10(37) of the Act. This decision of the Supreme Court in CIT vs. Ghanshyam Dass (HUF) (supra) has been followed in the case of CIT vs. Gobind Bhai Mamaiya [2014] 367 ITR 498 (SC)]. The CIT(A) upheld the action of the AO and observed that the decision of the Supreme Court in the case of Gobind Bhai Mamaiya (supra) did not de

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