Incriminating material found at husband’s premises justifies Section 158BD assessment against wife

ORDER

Rathod Kamlesh Jayantbhai, Accountant Member.- Feeling dissatisfied with finding so recorded in the order of the ld. CIT(A), National Faceless Appeal Centre, dated 27.08.2024 the present appeal was filed by the revenue. The dispute relates to the assessment year 2018-19. Ld. CIT(A) passed that order because the assessee challenged the order of assessment of income passed upon him u/s 143(3) read with sections 143(3A) & 143(3B) of the Income Tax Act, 1961 (for short “Act”) dated 11.03.2021 passed by National e-Assessment Centre, Delhi [for short AO] before him.

2. The grounds upon which the revenue has challenged that order of the ld. CIT(A) reads as under: –

“1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 4,43,36,980/- made by the Assessing Officer u/s 57(iv) r.w.s. 56(2)(ii) r.w.s 145B on account of interest received u/s 28 of LAC Act on enhanced compensation is taxable u/s 56(2)(viii) as income from other sources.

3. Brief facts of the case are that the assessee filed his return of income on 05.01.2019 declaring total income at Rs. 25,25,930/-. The case was selected for complete scrutiny assessment under Eassessment Scheme 201on the following issues;

S. No. Issues

Statutory notices as required from time to time were issued and served on the assessee. In response the assessee submitted the details along with requisite documents and evidences called for which are kept on record by the ld. AO. On the basis of details submitted by the assessee, the issues on which the case was selected for scrutiny was examined and verified.

Ld. AO noted that the assessee has shown the exempt income of Rs. 8,86,73,959/- as interest on compensation fully exempt. It includes interest and claims exemption u/s. 10(37) of the Act. Record reveals that the assessee has received enhanced compensation of Rs. 5,60,56,954/- and interest u/s 28 of the Land Acquisition Act of Rs. 8,86,73,959/-. On this interest amount so received the assessee tax was deducted at source. While filling the ITR the assessee claimed that interest received by him on enhanced compensation is nothing but compensation and therefore, even for the interest received was eligible for exemption u/s. 10(37) of the Act. To support this contention before the ld. AO, the assessee relied upon the decision of the Apex Court in the case of CIT v. Ghanshyam (HUF) (SC)/[2009] 315 ITR 1 (SC) and Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai v. ITO  (Gujarat). The ld. AO considered that contention but was not found acceptable because there was change in the provision of section 145B(1) r.w.s. 56(2)(viii) of the Act interest received by the assessee on Compensation or Enhanced Compensation Amount is taken as an income in which year it has been received irrespective of the method of accounting followed by the assessee subject to deduction 50 % u/s. 57(iv) of the Act of such interest income referred to in clause (viii) of sub-section (2) of section 56 of the Act. Accordingly, a sum of Rs. 4,43,36,980/- which was the net interest income, after allowing deduction of 4,43,36,980/- u/s. 57(iv) of the Act was added to the total income of the assessee.

4. Aggrieved by the above order of the Assessing Officer the assessee preferred an appeal before the ld. CIT(A). After perusing the submissions of the assessee, the ld. CIT(A) has allowed the appeal of the assessee thereby observing as under :

“5. Observation and Decision:

Ground No. 1 is general in nature.

In ground No. 2,3 and 4, the Appellant has contested the order u/s 143(3) r.w.s 143(3A) & 143(38) of the IT Act, 1961 dated 06.04.2021 for the A.Y. 2018-19 of the AO of making an addition of Rs. 4,43,36,980/-on account of interest on enhanced land compensation. All these grounds are taken up together for the sake of convenience.

I have carefully considered the submissions made by the Appellant. It is observed that the Appellant had received enhanced compensation of Rs 5,60,56,954/- and interest u/s 28 of the Land Acquisition Act of Rs 8,86,73,959/- in pursuance of enhanced compensation award by the Court. The land in question is Agricultural Land. The AO held that interest on enhanced compensation is taxable u/s 56(2)(vi) and after allowing a deduction of a sum equal to 50% of interest received as per the provisions of Section 57(iv) added an amount to Rs 4,43,36,980/- to the total income of the Appellant. The Hon’ble ITAT, Delhi Benches ‘G’, New Delhi in the case of Sunender v. ITO, Ward 4(3), Gurgaon in ITA No. 7589/Del/2018 dated 27.04.2020 has held as under:

In view of the decision of the Hon’ble Jurisdictional ITAT which is based on the decision of the Hon bile Supreme Court In. CIT v. Ghashyam (HUF) and the facts of the case being identical, the AD was not justified in disallowing the claim made by the Appellant and the addition of Rs 4,43,36,980- is hereby deleted. These grounds are allowed.

Ground No. 5 is general in nature.

In the result, the appeal is allowed.”

5. Feeling dissatisfied with the above finding so recorded in the order of the ld. CIT(A) the revenue has preferred the present appeal on the grounds as reiterated herein above in para 2. The ld. DR in support of the grounds so raised submitted that ld. CIT(A) has considered the only judgment of Ghananyam (HUF) (supra) and thereafter the law has been amended and thereafter the interest received by the assessee is purely covered by that amendment the assessee liable to pay tax in accordance with that amendment made in the Act read with the provision of section 57(2)(iv) r.w.s. 145B of the Act as in detailed discussed by the ld. AO. To support her argument she relied upon by the Bikram Singh. v. Land Acquisition Collector  (SC)/[1997] 224 ITR 551 (SC). Based on these argument she supported the order passed by the ld. AO.

6. On being asked ld. DR as to whether any corresponding amendment made in section 10(37) see accepted that being independent section dealing with the compensation issue the same was not amended.

7. Per Contra, ld. AR of the assessee supported the order passed by the ld. CIT(A). He also submitted a detailed written submission in support of the view that has been taken by the ld. CIT(A) which reads as follows;

“Brief Facts: The assessee is an individual. During the relevant year, he received certain amounts from the Land Acquisition Officer, Gurgaon, towards enhanced compensation and interest thereon u/s 28 of the Land Acquisition Act, 1894 in respect of compulsory acquisition of his agricultural land situated at Rewari, Haryana. In the return of income filed for A.Y. 2018-19, the assessee claimed exemption of the entire amount u/s 10(37) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), on the ground that the amount received u/s 28 of the Land Acquisition Act was not “interest” but an integral part of the compensation for acquisition of agricultural land.

The ld. AO, however, held that the interest component was taxable as “income from other sources” in view of the provisions of sections 56(2)(viii), 57(iv) and 145B(1) of the Act, and accordingly brought to tax 50% of the interest amounting to Rs. 4,43,36,980/-.

In first appeal, the ld. CIT(A) allowed the assessee’s claim in full and deleted the addition by holding that interest awarded u/s 28 of the Land Acquisition Act partakes the character of compensation and is eligible for exemption u/s 10(37) of the Act. Reliance was placed, inter alia, on the decision of the ITAT Delhi Bench in Surender v. ITO (ITA No. 7589/Del/2018).

The Department has now preferred the present appeal before this Hon’ble Tribunal challenging the deletion of the addition of Rs. 4,43,36,980/- made by the AO u/s 56(2)(viii) r.w.s 57(iv) r.w.s 145B(1) of the Act, contending that the ld. CIT(A) erred in treating the interest received u/s 28 of the Land Acquisition Act as part of compensation exempt u/s 10(37).

Hence, this appeal by the Department.

Submission:

1. At the outset, it is respectfully submitted that the ld. CIT(A) was fully justified in granting relief to the assessee since the amount received u/s 28 of the Land Acquisition Act, 1894 constituted part of the compensation itself and, therefore, was not taxable. The ld. CIT(A) rightly relied upon the decision of the Hon’ble ITAT Delhi Bench in Surender v. ITO (ITA No. 7589/Del/2018), wherein it was held that the interest awarded u/s 28 of the Land Acquisition Act forms an integral part of the compensation and is exempt u/s 10(37) of the Act. The said decision being rendered by a coordinate bench of the Tribunal is binding on the lower authorities, and the ld. CIT(A) has correctly applied the same while deleting the addition of Rs. 4,43,36,980/- made by the ld. AO u/s 56(2)(viii) r.w.s 57(iv) r.w.s 145B(1) of the Act.

2. Basic and Undisputed Facts:

The assessee made a detailed submission before the AO vide its letter dt (PB 2-6) hence for better position the content thereof being reproduced here as under. It was submitted before the AO that (PB-9)

The land of the assesse was acquired first time on dated 07/12/2006 by the LAC Gurgaon.

The land collector Gurgaon awarded on dated 07/12/2006 and decided amount Rs 12.50 lakh per acre. The share of the assesee in this total acquired land was 29 kanal and 4.25 marla or 3.63 acre. The total amount of award comes to Rs. 6397928/-. The copy of the LAC award is attached and annexure attached. And same was received in the year 2006.

The nature of the land was of urban agriculture land situated at Revenue Tehsil Rewari. The land was cultivated by the assesse. Copy of GIRDAWARI certified by the Halka Patwari is enclosed with this reply. The Girdawari from the year 2004-2006 is attached with this. in which it is clearly mentioned that the land was agriculture.

4. As earlier mentioned that the first award from LAC Act was made on dated 07/12/2006, thereafter the amount was enhanced by hon’ble Punjab and Haryana High Court, Chandigarh. The details are as under:-

Amount of original compensation with interest:-

Compensation Rs. 6397928/-

Interest nil

Amount of compensation by ADJ Court, Rewari in year 2013 Compensation Rs. 3,00,45,056.00

Interest u/s 28 Rs.3,46,70,182.00

Amount of compensation By High Court in year 2016 Compensation Rs. 5,60,56,954.00

Interest u/s 28 of Lac Act 1894 Rs. 8,86,73,960.00

Sir, the above said interest was received under section 28 of LAC Act 1894. Copy of certificate of interest received from LAC officer, Gurgaon is enclosed.

5. That the land was urban agriculture land in the estate Rewari. The compensation of the land is exempt u/s 10(37) of the Act 1961. The Land is fully qualify for exemption U/5 10(37

Section 145B (1) is reproduced as under:-

“145B. Taxability of certain income.

(^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.”

It is correct to say that the Interest received on enhanced compensation is taxable in the year in which it is received as amended w.e.f 01/04/2017. But it is not correct to say that all the interest is taxable under this section. It is form the spreading over the amount in periods which is taxable.

As earlier mentioned, that the interest received u/s 28 of LAC Act is not covered in this. Because the same is the part of compensation and shall be included in the exemption amount calculated u/s 10(37) of the ACT.

The section 28 of LAC Act is reproducebelow:

“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 compensationis 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] [Substituted by Act 68 of 1984, Section 18, for ” six per centum” (w.e.f. 24.9.1984).] per annum from the date on which he took possession of the land to the date of payment of such excess into Court:[Provided that the award of the Court may also direct that where such excess or any part thereof is paid into Court after the date of expiry of 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 such excess or part thereof which has not been paid into Court before the date of such expiry.]”

It is further submit that the interest received u/s 28 of LAC in part of compensation as awarded by the court on the reference of the Petitioners. It is different from the interest awarded under section 34 of the Lac Act 1894.

The views are confirmed by the The Hon’ble Supreme court in case of COMMISIONER OF INCOME TAX FARIDBAD V/S GHANSHYAM (HUF), 2009 decided on 16 July 2009 citied as

“24. To sum up, interest is different from compensation. However, interest paid on the excess amount undersection 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest undersection 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 apart of enhanced value of the land which is not the case in the matter of payment of interest under section 34.

So it is clear that the same is part of section 10(37) of the Income tax Act.

6. Sir, as your goodself mentioned that why the interest should not be taxed under section 56(Vii) and Section 57(iv):-

In this regard it is submitted that the same is not taxable under both the sections, because it is not taxable income. The sections provide taxability of the income which is not exempt. As your good self mentioned that the same come into force w.e.f 01/04/2017. It is submitted that the same is not applicable in this case.

Interest received under the section 28 of LAC act is not comes under the preview of this section because.

The Hon’ble supreme court in case of Hari Singh others also retreated that the interest under section 28 is part of compensation as has been decided on sept. 2017 relevant para reproduced below:

the hon’ble court in case of Union of India And ORS V/S Hari Singh and others, civil appeal no 15041 of 2017 decided on September 15/2017

“agricultural land, the tax deposited with the Income Tax Department shall be refunded to these respondents (2) While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in ‘Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF” [2009 (8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not. (3) The direction to refund the amount of Tax Deducted at Source (TDS) to the Land Acquisition Collector is, accordingly, set aside. However, in those cases where the amount has already been refunded, no interference is called for and it will be for the Income Tax Department to proceed in accordance with the provisions of Income Tax Act”

The decision of the Gujarat High Court in the case of MovaliyaBhikhubhaiBalabhai v. ITO (2016) 388 ITR 343

Interest awarded under section 28 of Land Acquisition Act, 1894, on enhanced compensation paid for compulsory acquisition of agricultural land, would be eligible for exemption under section 10(37)-

It is not disputed by the Assessing Officer that the land acquired was agricultural land and the conditions laid down under section 10(37)) to (iv) are applicable to the land which is in question which was compulsorily acquired. It is also not in dispute that the interest in question was interest awarded under section 28 of the Land Acquisition Act, 1894. In the given circumstances, the decision of the Gujarat High Court in the case of MovaliyaBhikhubhaiBalabhaiv. ITO (2016) 388 ITR 343  /I’ll be applicable to the facts of the present case. [Para 11]

In the light of the above judgements, it is crystal clear that the said interest u/s 28 of LAC act 1894 is integral part of compensation under section 10(37) of the Act.

Therefore, the assessee humbly pray that the same is accepted and oblige”

The above reproduction clearly demonstrates that the assessee had, at the assessment stage itself, categorically explained that the amount received u/s 28 of the Land Acquisition Act, 1894 represents interest forming part of compensation and not “interest” as defined u/s 2(28A) of the Act. The explanation was duly supported by:

It is further pertinent to note that the ld. AO did not dispute any of these factual aspects neither the nature of land nor the statutory provision under which interest was awarded.

3. Covered Issue:

3.1 Firstly, notably similar issue arose in assessee’s own case in AY 2014-15, which was decided in favour of the assessee by the CIT(A) vide its order dt 29.10.2024, by following ITAT order in case of Satbir Singh v. ITO (ITA no.1413 to 1415/CHD/2016) (Pg 3 Onwards). The said Satbir Singh relied upon the apex court decisions of CIT v. Chet Ram   (SC) followed in UOI v. Hari Singh (infra) and Ors.):

“15. The Ld. counsel for assessee has further brought our attention the latest decision of the Hon’ble Supreme Court in the case of CIT v. Chet Ram (HUF) dated 12.9.2017 in Civi l Appeal No.13053/2017 wherein also the Hon’ble Supreme Court has again reiterated the proposition laid down in the case of Ghanshyam (HUF) (supra), which we find has been further reiterated in the case of Union of India v. Hari Singh & others in Civil Appeal No. 1504 of 2017 dated 15.9.2017, as under:

“(2) While determining as to whether the compensation paid was for agricultural land or not, the Assessing Officer(s) will keep in mind the provisions of Section 28 of the Land Acquisition Act and the law laid down by this Court in ‘Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF)’ [2009(8) SCC 412] in order to ascertain whether the interest given under the said provision amounts to compensation or not.”The said decision as rightly pointed out by the Ld. counsel for assessee have been rendered by the Hon’ble Apex Court subsequent to the decision passed by the Hon’ble Jurisdictional High Court in the case of Manjeet Singh (HUF) (supra) which had dealt with the decisions of the Hon’ble Apex Court in Ghanshyam, HUF (supra). Therefore, in view of the same, the proposition laid down in Ghanshyam, HUF (supra) remains and which having been laid down by the Hon’ble Apex Court is the law of the land and has to be followed by all lower authorities. In view of the above, we hold that the interest received by the assessee during the impugned year on the compulsory acquisition of its land u/s 28 of the Land Acquisition Act, is in the nature of compensation and not interest which is taxable under the head income from other sources u/s 56 of the Act as held by the authorities below. The compensation being exempt u/s 10(37) of the Act is not disputed. In view of the same the order passed by the CIT(Appeals) upholding the addition made by the AO on account of interest on enhanced compensation is, not sustainable.”

3.2 It is further submitted that the identical issue has already been adjudicated in favour of the assessee by this Hon’ble ITAT Jaipur Bench (in the same constitution) in the cases of Krishan Pal Singh (HUF) v. ITO (ITA No. 1268/JP/2024, order dated 19.02.2025) (DPB 43-62), the Hon’ble Bench held that the interest received u/s 28 of the Land Acquisition Act, 1894 forms an integral part of compensation and is exempt u/s 10(37) of the Act. The coordinate bench, while dismissing the Department’s appeal, relied upon the decisions of the Hon’ble Supreme Court in CIT v. Ghanshyam (HUF) (2009) 315 ITR 1 (SC)and UOI v. Hari Singh & Ors. (2017) 2 SCC 695.

4. Recent judicial guideline:

4.1 Recently, the Hon’ble Kerala High Court has again taken a view in favour of the assessee in the case of Anvar Ali Poolakkodan v. ITO,  (Kerala)vide order dated 11th April 2025 (DPB 15-22), wherein it was held as under:

“Section 10(37), read with sections 2(28A), 56 and 45, of the Incometax Act, 1961 and sections 28, 34 of the Land Acquisition Act, 1894 -Capital gains – Income from transfer of agricultural land (Interest on compensation) – Assessment year 2015-16 – Assessee received compensation for his agricultural land acquired by State – Thereafter, Reference Court granted enhanced compensation and also directed interest to be paid on enhanced compensation in accordance with section 28 of LAA, 1894 – Assessee returned income received by way of enhanced compensation and interest as income under head capital gains and claimed benefit of section 10(37) – Tribunal held that while compensation and enhanced compensation amounts would merit classification as capital gains, however interest amounts paid for delayed payment of compensation or enhanced compensation would merit classification only as income from other sources and thus, would not get benefit of section 10(37) – Whether payment of interest, be it under section 28 or section 34 of LAA, 1894,would partake character of principal compensation itself since it was essentially paid to compensate assessee for loss he suffered on account of not having use of principal compensation amount at time when it fell due – Held, yes – Whether thus, interest amounts received by assessee in respect of delayed payment of compensation would be treated as accruals to principal compensation amount and be classified as ‘capital gains’ and consequently would also get benefit of section 10(37) if land compulsorily acquired was agricultural land – Held, yes – Whether further, since interest amounts so received were not in nature of interest as defined under section 2(28A), provisions of section 56 would not be attracted – Held, yes [Paras 9 and 10] [In favour of assessee]” Pertinently, the Hon’ble Kerala High Court has gone one step further and held that not only the interest received u/s 28 but even the interest received u/s 34 of the Land Acquisition Act, 1894 forms part of the compensation and is, therefore, completely exempt u/s 10(37) of the Act. The said decision of the Hon’ble High Court being the latest on the subject, and there being no contrary view of any other High Court, is binding upon all subordinate authorities throughout the country in view of the settled legal position that the decision of any High Court on interpretation of a Central enactment binds all authorities under that Act until a contrary view is taken by another High Court or by the Hon’ble Supreme Court.

This principle has been laid down by the Hon’ble Bombay High Court in CIT v. Smt. Godavaridevi Saraf (1978) 113 ITR 589 (Bom), wherein it was held that so long as there is no contrary decision of any other High Court, the law declared by one High Court is binding on all authorities functioning under that Act. Accordingly, the ratio of the Hon’ble Kerala High Court squarely applies and is binding on the Revenue authorities across India.

4.2 Recently, the Hon’ble ITAT Delhi in case of Devinder Kumar and Ors. v. PCIT in ITA No.781/Del/2024 vide order dated 28.05.2025 (DPB 33-42) has also taken a similar view by following their earlier decision in the case of Pawan Kumar v. PCIT  (Delhi-Trib) in, Punjab Haryana High Court the contrary decision has also been discussed.

5. Inconsistent and contradictory approach of the Revenue:

It is further submitted that undisputed and admitted facts are that the appellant was the co-owner of the subjected land, which was acquired by the government and therefore, the entire amount of compensation was awarded under the provisions of the LACA to all the five coowners. The subjected land was owned and possessed jointly by no. 1. Shri Ramesh Kumar for the part 8 out of 1, 2. Shri Neeraj Das for the part 8 out of 1, 3. Shri Ashok Shama for the part 4 out of 1, 4. Shri Rampal Yadav for the part 4 out of 1 and 5. Shri Mukesh for the part 4 out of 1 etc. This fact is evident from the land ownership papers.

Pertinently, this very dispute arose in the cases of other four joint owners as well, where the Revenue in all those cases have accepted the claim and the subjected amount under dispute was not taxed as interest income u/s 56 of the Act. In the case of Shri Rampal Yadav, the AO/NFAC has accepted the claim so made vide its order dated 11.03.2021 u/s 143(3). Similar is the position with regard to the other joint owners. Thus, the Revenue having taken, stand in the cases of other joint owners of the same land, how a different view could be taken in the case of the appellant. This is not only inconsistent and contradictory approach of the Revenue but also an action of discriminatory nature, violative of Article 14 and 19 of the Constitution.

6. Serious Misinterpretation of the provisions by the revenue:

6.1 It cannot be disputed that the revenue has purportedly completely misinterpreted the relevant provisions to suit its purpose. Section 56 of the Act could not have been invoked at all because it contemplated a situation where the parties i.e the recipient himself has agreed that what was received was in the nature of interest. Whereas, here the respondent assessee always contended that what was received u/s 28 of the Act was a part of the compensation but not interest. Otherwise also such interest do not fall within the ambit of section 2(28A) of the Act which defines interest under the act. In any case, the Revenue has completely failed to demonstrate how such receipt was in the nature of interest once it did not fall within the definition under section 2(28A) of the act.

6.2 All conditions of the S.10(37) complied with: It is not at all in dispute with that all the conditions enumerated u/s 10(37) of the LAC Act has been fulfilled. Section 10(37) is reproduced as under:-

“(37) in the case the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head “Capital gains” arising from the transfer of agricultural land, where-(i) such land is situate in any area refen-ed to in item (a) or item (b) of sub-clat1se (iii) of clause (14) of section 2;

(ii) such land, during the period of two years immediately preceding the date of transfer. was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;

(iii) such transfer is by way of compulsory acquisition under any law. or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;

(iv) such income has arisen from the compensation or consideration for such transfer received by such asse see on or after the 1st day o1 Apri.l, 2004.

Explanation – For the purposes of this clause, the expression “compensation or consideration” includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority;

From the above it is clear from the section that the land qualifyalI the conditions for exemption under this.”

6.3 No amendment u/s 10(37):Firstly, The amendment made in S. 56(2) is reproduced hereunder:

“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 145B].]”

It is pertinent to note that whereas amendment was made u/s 56(2)(viii), as aforesaid, at the same time, admittedly no amendment has been made till date and particularly in AY 2018-19 which is the subject matter here in the provisions of section 10(37). It has to be appreciated that S.56(2)(viii), can be invoked only and only when there is no dispute on the nature of the amount received wrt compensation/on enhanced compensation. And if so, the same is liable to be taxed in the year of receipt as per section 145B. However, once such amount is considered as a part of the enhanced compensation (but not interest) u/s 28 of the LAC Act, there is no question of invoking of the general provision of S. 56 as the special provision of claiming exemption is S.10(37) of the Act. If the legislature wanted to make the amount received of compensation/ additional compensation u/s 28 as in the nature of interest and to deny any exemption to such receipt, they could have equally amended S.10(37), denying such exemption.

7. Contrary decisions distinguishable and not applicable: It is further submitted that the decisions in the case of Inderjeet Singh Sodhi and Murari Lal by ITAT Delhi and Delhi High Court are distinguishable in as much as there is no reference made by them to the direct decision in the case of Chetram (supra) and Hari Singh (supra) which were directly on the subject. Moreover, there is no elaborate discussion made on the true and correct interpretation of S. 10(37) of the Act and the substantive fact that there was no amendment made therein. But the Honorable courts directly jumped to S.56 which was a general provision and could be invoked only and only when the receipt is admitted to be in the nature of interest, which is not the case here.

The above submissions have been made based on the instructions and the information provided of/by the client.”

8. To support the contention raised in the written submission ld. AR of the assessee filed a detailed paper book. The index of the paper book so filed reads as under:-

8.1 The ld. AR of the assessee also filed a case law compilation on 08.10.2025 where in following judicial precedent was cited:-

9. In addition to the written submission so filed the ld. AR of the assessee vehemently argued that the claim of the assessee falls under the provision of section 10(37) of the Act and thereby the arguments of ld. DR has no force as the same were not amended. He relied upon the page 20 – 21 of the paper book wherein the details of the payment and the section under which the claim given is duly recorded. This fact placed on record the same was not controverted by the revenue and the claim being under the provision of section 28 it fall for the coverage of income exempt as per provision of section 10(37) of the Act. In support of the contention, he relied upon the case law cited in his case law paper filed. In that compilation Kerala High Court Anvar Ali Pookakkodan(supra)

10. We have heard both the parties perused the materials available on record and gone through the orders of the lower authority. The only grievance of the revenue is that ld. CIT(A) has erred in deleting the addition of Rs. 4,43,36,980/- made by the Assessing Officer u/s 57(iv) r.w.s. 56(2)(ii) r.w.s 145B on account of interest received u/s 28 of LAC Act on enhanced compensation is taxable u/s 56(2)(viii) as income from other sources.

The brief facts related to the dispute are that the assessee has shown the exempt income of Rs. 8,86,73,959/- as interest on compensation fully exempt. It includes interest and claims exemption u/s. 10(37) of the Act. Record reveals that the assessee has received enhanced compensation of Rs. 5,60,56,954/- and interest u/s 28 of the Land Acquisition Act of Rs. 8,86,73,959/-. On this interest amount so received the assessee tax was deducted at source. While filling in the ITR the assessee claimed that interest received by him on enhanced compensation is nothing but compensation and therefore, even for the interest received was eligible for exemption u/s. 10(37) of the Act.

To support this contention before the ld. AO, the assessee relied upon the decision of the Apex Court in the case of Ghanshyam (HUF) (supra)and Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai (supra) The ld. AO considered that contention but was not found acceptable because there was change in the provision of section 145B(1) r.w.s. 56(2)(viii) of the Act interest received by the assessee on Compensation or Enhanced Compensation Amount is taken as an income in which year it has been received irrespective of the method of accounting followed by the assessee subject to deduction 50 % u/s. 57(iv) of the Act of such interest income referred to in clause (viii) of subsection (2) of section 56 of the Act. Accordingly, a sum of Rs. 4,43,36,980/- which was the net interest income, after allowing deduction of 4,43,36,980/- u/s. 57(iv) of the Act was added to the total income of the assessee.

The assessee challenged that finding before the ld. CIT(A) who has considered the contentions raised of the assessee and thereby the claim of that income being exempt was accepted by the ld. CIT(A) relying on the decision as cited by the assessee.

On the solitary issue as raised by the revenue the bench noted that the assessee is in receipt of Rs. 8,86,73,959/- as an interest as awarded by the Chandigarh bench of Hon’ble High Court. The said interest was paid in accordance with the provision of section 28 of the Land Acquisition Act. 1894. The provision of section 28 of the Land Acquisition Act reads as under:

28. Collector may be directed to pay interest on excess compensation. – If 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: [Provided that the award of the Court may also direct that where such excess or any part thereof is paid into Court after the date or expiry of 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 such excess or part thereof which has not been paid into Court before the date of such expiry.]

On conjoint reading of the above provision of the Act and certificate issued by the competent authority wherein it has been categorically certified that the impugned payment is made in accordance with the provision of section 28 of the Act, there cannot be any dispute about the nature of payment received by the assessee.

Thus, once it has been proved that the payment for which the present dispute is the compensation on account of provision of section 28 of the Land Acquisition Act 1894 and is merely termed as interest because the impugned land has already been transferred by way an acquisition and therefore, even if that payment is termed as interest it forms part of original consideration toward the impugned land and therefore, the same upon being termed as part of that consideration the treatment of the interest so paid u/s. 28 of the Land Acquisition Act be considered as payment towards the consideration of that land. Having noted that facts on record we note that the land in question was agricultural and therefore, the said amount though in the form of interest is to be considered as consideration on that agricultural land is exempt from tax as per provision of section 10(37) of the Act and as agreed by the ld. DR that there not change corresponding to section 145B and 56(2)(viii) of the Act. The case law cited by the ld. DR was related to application of section 194A of the Act and there is no dispute in this case the TDS was deducted. But here be that it may TDS was deducted or not the nature of payment is required to be taxed in the hands of the assessee and thus, based on the certificate of payment being placed on record stating that the payment is as per provision of section 28 of the Land Acquisition Act we are of the considered we that the same is covered by the provision of section 10(37) of the Act and the same is rightly held by so by ld. CIT(A) while dealing with appeal of the assessee. Not only that the present controversy is set right vide decision of the Kerala High Court while dealing with the case of Anvar Ali Poolakkodan v. ITO (Kerela) wherein the High Court held as under :

8. On a conjoint reading of the above statutory provisions, it is clear that amounts received by an assessee as compensation or enhanced compensation for compulsory acquisition of his landed property would be treated as income under the head of ‘Capital Gains’ for the purposes of the I.T. Act. If the said compensation amounts are received in relation to agricultural property, then by virtue of the provisions of Section 10 (37) of the I.T. Act, the amounts would stand excluded from the total income of the assessee for the purposes of the I.T. Act. As for the interest amounts received by an assessee in terms of Section 28 or Section 34 of the LAA, it is debatable as to whether the said interest would qualify as interest for the purposes of the I.T. Act as well going by the definition of the term under Section 2 (28A) of the I.T. Act. This is because there are conflicting precedents on the issue as to whether the interest paid to an assessee for delayed payment of compensation for compulsory acquisition of his land partakes the character of the compensation itself or merely that of an interest payment [Dr. Sham Lal Narula v. Commissioner of Income-Tax [1964] 53 ITR 151 (SC)]; Puneet Singh v. CIT, Karnal [2019]  (Punjab & Haryana); Mahender Pal Narang v. CBDT, New Delhi (Punjab & Haryana); Mahender Pal Narang v. CBDT, Ministry of Finance  (SC); T.N.K. Govindaraju Chetty v. Commissioner of Income-tax [1967] 66 ITR 465 (SC); Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243/[1996] (SC)]; Commissioner of Income-tax, Faridabad v. Ghanshyam (HUF) [(2009) 8 SCC 412  ITR 1(SC)]; Commissioner of Income-tax. Faridabad v. Chet Ram (HUF) [(2018) 15 SCC 270/  ITR 23(SC)]; Commissioner of Income Tax, Rajkot v. Govindbhai Mamaiya – [(2014) 16 SCC   (SC)]; Principal Commissioner of Income-tax 10 v. Inderjit Singh Sodhi (HUF) [MANU/DE/2633/2024 (Delhi)]; Manjet Singh (HUF) v. Union of India  (Punjab & Haryana) & Manjet Singh (HUF) Karta Manjeet Singh v. Union of India [MANU/SCOR/ 55128/2014].

9. Going by the nature of the payment of interest under the LAA, we are inclined to hold that the payment of interest on delayed payment of compensation to an assessee, be it under Section 28 or Section 34 of the LAA, would partake the character of the principal compensation itself since it is essentially paid to compensate the assessee for the loss he suffered on account of not having the use of the principal compensation amount at the time when it fell due. We cannot lose sight of the fact that compensation amounts paid to a person towards compulsory acquisition of his property traces its roots to the constitutional obligation to pay such compensation under Article 300A of the Constitution. Recent judicial pronouncements have also recognised the right to property as a human right. In Dharnidhar Mishra (D) v. State of Bihar [(2024) 10 SCC 605] the court pointed out that although the right to property ceased to be a fundamental right by the Constitution (44^th Amendment) Act, 1978, it continues to be a human right in a welfare state, and a constitutional right under Article 300A of the Constitution. Accordingly, the State cannot dispossess a citizen of his property except in accordance with the procedure established by law. The court went on to observe that the obligation to pay compensation, though not expressly included in Article 300A, can be inferred from that Article since the court has recognized the right to property as a basic human right. That apart, recently in Kolkata Municipal Corporation v. Bimal Kumar Shah [(2024) 10 SCC 533] the court, while rejecting the contention of the Corporation that it had effectively acquired the property of a citizen, drew a distinction between a statutory provision that confers a power of acquisition to the Corporation and other provisions that dealt with the procedure to be followed in the exercise of that power. The court found that Article 300A of the Constitution, that prohibited the deprivation of property of a citizen save as authorized by law, conferred on a citizen seven subrights viz. (i) the right to a notice of the proposed acquisition, (ii) the right to be heard on the objections if any to such proposal (iii) the right to a reasoned decision thereon (iv) the right to insist that the acquisition could only be for a public purpose (v) the right to restitution or fair compensation (vi) the right to an efficient and expeditious process and (vii) the right to a conclusion of the proceedings. In essence, the court saw the concepts of substantive and procedural due process as integral aspects of the phrase ‘authority of law’ in Article 300A of the Constitution. The developed jurisprudence on property rights therefore unambiguously points to the necessity of treating interest payments for delayed payment of principal compensation amounts for compulsory acquisition of property, as an accretion to the compensation amount itself. For a citizen whose property has been compulsorily acquired by the State, the right to receive the compensation in full accrues from the date of his dispossession and any statutory interest paid to him for delayed payment of the principal compensation amounts partakes the character of the compensation itself. This is irrespective of whether the interest that is paid is under Section 28 or Section 34 of the LAA because the interest payments under both of the said provisions are premised on the same rationale [See: The constitution bench decision in Sundar v. Union of India (2001) 7 SCC 211].

10. In the light of the discussion above, we hold that interest amounts received by an assessee in respect of delayed payment of compensation under the LAA will be treated as accruals to the principal compensation amount and be classified as “Capital Gains’ for the purposes of the I.T. Act. Consequently, the interest amounts will also get the benefit of Section 10 (37) of the I.T. Act if the land compulsorily acquired is agricultural land. Further, since the interest amounts so received are not in the nature of interest as defined under Section 2 (28A), the provisions of Section 56 of the I.T. Act will not be attracted in such cases. While the provisions of Section 56 (2)(viii) deal with interest on compensation or enhanced compensation, the said reference to compensation or enhanced compensation need not be seen as made in connection with compulsory acquisition of property. The applicability of Section 56 (2)(viii) will depend upon whether or not, in the particular factual situation, the interest amount can be treated as different in nature from the principal compensation amount.

The upshot of the above discussions is that these appeals are allowed by answering the questions of law raised therein in favour of the assessee and against the revenue.”

Based on the discussion on facts of the case and considering the judicial precedent as discussed, we see no infirmity in the finding of the ld. CIT(A) and thereby dismissed the solitary ground raised by the revenue.

In the result, the appeal of the revenue stand dismissed.