This article provides a detailed account of the proceedings and final judgment in ITA No. 1861/DEL/2020 involving Shambhu Dayal and ITO WARD – 4, Sonipat. The case pertains to the assessment year 2014-15, and the order was pronounced on June 20, 2023.
Shambhu Dayal filed an appeal with the Income Tax Appellate Tribunal (ITAT) Delhi against the order dated 09.09.2020 by the Commissioner of Income Tax (Appeals), Rohtak, which upheld the disallowance of deduction under section 10(37) of the Income Tax Act. The appeal was filed on November 17, 2020, challenging the disallowance related to the enhanced compensation received for the compulsory acquisition of agricultural land.
The case was heard by the Delhi Bench ‘SMC’ of the Income Tax Appellate Tribunal, with Dr. B. R. R. Kumar, Accountant Member, presiding. The proceedings were conducted through video conferencing.
The appeal was filed against the intimation order issued by the ITO WARD – 4, Sonipat, under section 143(1) of the Income Tax Act, 1961. The primary issues raised by the appellant, Shambhu Dayal, included:
Shri R. K. Vashisht, Advocate, representing the assessee, argued that the enhanced compensation received was for the compulsory acquisition of agricultural land, which should be treated as a capital receipt and thus not taxable. He cited various judicial pronouncements supporting this view, including decisions by the Supreme Court and other tribunals.
Shri Om Parkash, Sr. D.R., representing the Revenue, supported the order of the lower authorities, emphasizing the rationale behind treating the enhanced compensation as taxable income.
The Tribunal carefully reviewed the submissions, documents, and arguments presented by both parties. The key findings and decisions are summarized below:
This ground pertained to the disallowance of deduction under section 10(37) on the amount of Rs.31,09,300/- received as enhanced compensation. The Tribunal referred to previous decisions in similar cases, where it was held that the enhanced compensation received under section 28 of the Land Acquisition Act is to be treated as part of the compensation and hence not taxable. Consequently, this ground was decided in favor of the assessee.
This ground addressed the classification of the enhanced compensation as capital receipt rather than interest income. The Tribunal reiterated that the enhanced compensation received for the compulsory acquisition of agricultural land is a capital receipt and not taxable as interest income. Therefore, this ground was also decided in favor of the assessee.
This ground involved the consideration of a circular from the Ministry of Rural Development, which supported the assessee’s claim. The Tribunal acknowledged the relevance of the circular and found that the lower authorities had erred in not considering it appropriately. Thus, this ground was decided in favor of the assessee.
This ground challenged the inconsistency in the decisions for similar cases from the same village. The Tribunal noted that similar cases had been decided in favor of other assessees from the same village, and there was no change in facts or law to justify a different outcome. Hence, this ground was decided in favor of the assessee.
This ground related to the addition of Rs.15,54,650/- as enhanced compensation. The Tribunal, following the decisions of the Supreme Court, held that the enhanced compensation is not taxable and directed the AO to delete the addition. Therefore, this ground was decided in favor of the assessee.
This ground addressed the nature of the interest received, which the assessee claimed to be a capital receipt. The Tribunal agreed with the assessee’s view, noting that the interest received under section 28 of the Land Acquisition Act is part of the compensation and not a revenue receipt. Thus, this ground was decided in favor of the assessee.
This ground challenged the orders passed by the lower authorities as unjustified and inconsistent. The Tribunal found merit in the assessee’s claim and decided this ground in favor of the assessee.
This ground criticized the hurried nature of the orders passed by the lower authorities without proper justification. The Tribunal, considering the overall merits and judicial pronouncements, ruled in favor of the assessee.
The ITAT Delhi ruled in favor of Shambhu Dayal, allowing the appeal. The Tribunal directed the AO to delete the disallowances and treat the enhanced compensation as a capital receipt, not taxable as interest income. The final order was pronounced on June 20, 2023.
Order pronounced in the open court on June 20, 2023.
Signed by:
Dr. B. R. R. Kumar, Accountant Member
ITA No. 1861/DEL/2020 – Shambhu Dayal vs ITO WARD – 4, Sonipat: Treatment of Enhanced Compensation
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