1. This appeal of the assessee arises from the order of the CIT(A), Amritsar, dated 03.12.2013 for the assessment year 2010-2011. The assessee has raised following grounds of appeal:

1. That the ld. CIT(A), showing scant respect to the order of Highest Court of land, in the case of Ghanshyam (HUF), (2009) 315 ITR 1 (SC), has committed a grave legal error to hold that interest of Rs. 17,78,877/- received u/s. 28 of the Land Acquisition Act, 1894, on enhanced compensation, was not part of compensation but liable to tax under the head ‘Income from other sources’.

2. That the ld. CIT(A), went all the way wrong to hold that interest u/s. 28 of I.A Act, 1894 was for delay in granting the compensation/addl. compensation, a view apparently opposed to the clear mandate of Hon'ble Apex Court in the case of Ghanshyan (supra), holding that the said interest, unlike interest u/s. 34 of the I.A Act, 1894, was an accretion to the value and hence part of enhanced compensation.

3. That the ld. CIT(A), also fell into grave error in endorsing the ITO's view and to hold that Hon'ble Apex Court decision supra, was not applicable in view of the provisions of section 145A(b) read with section 56(2)(viii) introduced by Finance (No. 2) Act, 2009, w.e.f 01.04.2010

4. That having wrongfully held that the impugned interest u/s. 28 of I.A Act, 1894 was not part of additional compensation, consequential denial of its exemption u/s. 10(37) of the I.T Act, 1961, is another act of ld. CIT(A), which is opposed to the near facts and the settled legal position.

5. That the ld. CIT(A)'s stand is contemptuous not only for defying the decision of Hon'ble Apex Court supra, but also in ignoring the subsequent decisions of Hon'ble P & H High Court and various other High Court's cited before the ld. CIT(A), fully accepting and following the mandate of Hon'ble Supreme Court, supra, on identical issue.

6. That by any reckoning, the impugned order of ld. CIT(A) being contrary to law and the facts of the case, deserves not to be sustained.

7. That having been put to undue litigation, the assessee prays to be granted appropriate cost in the matter.

2. The brief facts of the case as per AO's order are reproduced for the sake of convenience as under:

“2. The assessee is working a Junior Asstt. in the office of the Civil Surgeon, Gurdaspur and declared gross salary of Rs. 2,71,289/- in his original return. However, the assessee in his revised return filed on 16.11.2010 has declared Rs. 1,741/- on account of “Income from other sources”, Agricultural Income of Rs. 1,58,455/- for rebate purposes in addition to income declared in his original return. The assessee has also shown total receipts of Rs. 28,90,019/- as an exempt income u/s. 10(37) of the Income Tax Act, 1961 on account of “Agricultural Land Compulsory acquired”. The assessee has also filed a copy of Form No. 16 dated 16.02.2010 issued by the Collector Land Acquisition, Colonization Department, Chandigarh, a perusal of which indicates that the assessee has been awarded enhanced compensation amounting to Rs. 11,11,253/- and interest on enhanced compensation amounting to Rs. 17,78,766/- on account of agricultural land measuring 36 Kanals 10 Marlas, situated at Vill. Awankha, Dinanagar, Distt. Gurdaspur acquired by the aforesaid department and tax of Rs. 1,77,877/- has accordingly bee deducted at source on the aforesaid interest. The assessee has deposited the said proceeds of Rs. 27,12,147/- i.e total payment of enhanced compensation of Rs. 11,11,253/- and interest thereon at Rs. 28,90,019/- less TDS of Rs. 1,77,877/- in his saving bank a/c. No. 94640100469178 dated 19.03.2010, maintained with P.N.B G.T Road, Kanwan, P. Parmanand. Since the assessee has filed a certificate dated 23.08.2012 from the Sub Divisional Magistrate, Gurdaspur, certifying therein that land acquired by the aforesaid authorities was situated beyond the two kilometers from the local limit of Municipal Committee, Dinanagar and was being used as an Agricultural land, capital gains on the said is exempt u/s. 10(37) of the Act, being compulsory acquisition of agriculture land.

It is worth while to mention here that by virtue of amendment in section 145A(b) of the Act vide Finance (No. 2) Act of 2009, it has been provided that interest received by the 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 under the head Income from other sources” under clause (viii) of sub-section 2 of section 56 of the I.T Act, 1961. As the assessee's counsel in his reply dated 3.10.2012 has wrongly interpreted the judgment of the Hon'ble Supreme Court of India in the case of Commissioner Of Income Tax, Faridabad v. Ghanshyam (Huf) .) (2009) 182 Taxman 368 (SC), in which it has been stated that interest on enhanced compensation awarded u/s. 28 of the Land Acquisition Act, 1894, received by the assessee forms part of compensation u/s. 45(5) of the Act and also claimed to be exempt under sub-section 37 of section 10 of the Act. Since the interest awarded by the acquisition authorities to the assessee on account of compulsory acquisition of agricultural land at Rs. 17,78,766/- is chargeable to tax by the amendment section 145A(b) of the Act under the head ‘Income from other sources’ w.e.f 01.04.2010 (A.Y 2010-2011), the assessee has categorically been asked to explain vide this office show cause notice dated 16.10.2012 as to why an addition of Rs. 8,89,383/- i.e total interest awarded at Rs. 17,78,766/- less deduction of Rs. 8,89,383/- allowable under clause (iv) of section 57 of the Act should not be made.”

3. The assessee submitted the reply to the show cause notice and ultimately, the AO made an addition of Rs. 8,89,383/- and the relevant findings are reproduced for the sake of convenience, as under:

“I have gone through the assessment records as well as contention of the assessee's counsel putforth by him in his reply dated 02.11.2012 and found that interest of Rs. 17,78,766/- was awarded to the assessee on the enhanced compensation by the Addl. Distt. Judge vide his order dated 14.03.2008 u/s. 28 of the Land Acquisition Act. By virtue of amendment in section 145A(b) of the Act vide Finance (No. 2) of 2009 which is effective from 01.04.2009 (A.Y 2010-2011), interest received by an assessee on compensation or on enhanced compensation as the case may be, forms part of the assessee's income of the year in which same is received under the head “Income from other sources” under clause (viii) of sub-section (2) of section 56 of the Act. The contention taken by the assessee's counsel that amendment made by the Finance (No. 2) Act, 2009 is not clear with regard to chargeability of interest awarded u/s. 28 of the Land Acquisition Act does not carry any weight as the said amendment has clearly provided for taxability of interest awarded either u/s. 34 of the Land Acquisition Act, 1894 on account of interest on delayed payment or under section 28 of the said act on account of interest on enhanced compensation. After taking into consideration the facts of the case referred supra, interest awarded to the assessee amounting to Rs. 17,78,766/- by the Collector Land Acquisition Colonization Department, Chandigarh is chargeable to tax by virtue of amendment made by the Finance (No. 2) Act, 2009 which is applicable w.e.f from 01.04.2010 (A.T 2010-2011) and as discussed above, the ratio of decision of the Apex Court in the case titled as CIT, Faridabad v. Ghanshyam (HUF) (2009) 182 Taxman 368 (SC) does not apply in the assessee's case as the assessment year involved in the said case was 1999-2000 i.e prior to the amendment of provision of section 145(b) as well as amendment of clause (viii) of sub-section (2) of section 56 of the Act by the Finance (No. 2) Act, 2009. Having regard to the above referred facts, an addition of Rs. 8,89,383/- is hereby made under the head “Income from the other sources” in the assessee's total income on account of your interest received by him on the enhanced compensation on the acquisition of your land situated at vill. Awankha during the previous year relevant to A.Y under consideration after allowing deduction there from @ 50% as provided in clause iv of section 57 of the Act.”

4. The Ld. CIT(A) confirmed the action of the Assessing Officer.

5. The Ld. counsel for the assessee read the decision of the Hon'ble Supreme Court in the case of Commissioner Of Income Tax, Faridabad v. Ghanshyam (Huf) .), (2009) 182 Taxman 368 (SC) and argued that the amount received by the assessee is under section 28 of the Land Acquisition Act, 1894 and not u/s. 34 of the said Act. The relevant para of the decision of Hon'ble Supreme Court in the case of Commissioner Of Income Tax, Faridabad v. Ghanshyam (Huf) .), (2009) 315 ITR 1 is reproduced as under:

“24. To sum up, interest is different from compensation. However, interest paid on the excess amount u/s. 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest u/s. 34 is for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest u/s. 28 is part of the amount of compensation whereas interest u/s. 34 is only for delay in making payment after compensation amount is determined. Interest u/s. 28 is part of enhanced valued of the land which is not the case in the matter of payment of interest u/s. 34.”

It is to answer the above questions that we have analysed the provisions of section 23, 23(IA), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, section 23(IA) provides for additional amount. It takes care of increase in the value @ 12% per annum. Similarly, u/s. 23(2) of the 1894 Act, there is a provision for solatium which also represents part of enhanced compensation. Similarly, section 28 empowers the Court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount u/s. 23(IA) and solatium u/s. 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the Court after reference u/s. 18 of the 1894 Act. It depends upon the claim, unlike interest u/s. 34 which depends upon undue delay in making the award. It is true that “interest” is not compensation. It is equally true that sec. 45(5) of the Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of 1894 Act which awards “interest” both as an accretion in the value of the lands acquired and interest for undue delay. Interest u/s. 28 unlike interest u/s. 34 is an accretion to the value, hence, it is a part of enhanced compensation or consideration which is not the case with the interest u/s. 34 of the 1894 Act. So also additional amount u/s. 23(IA) and solatium u/s. 23(2) of the 1961 (sic-1894) Act forms part of enhanced compensation u/s. 45(5)(b) of the 1961 Act. In fact, what we have stated hereinabove is reinforced by the newly inserted clause (c) of section 45(5) by the Finance Act, 2003 w.e.f 1.4.2004 The newly inserted clause envisages a situation wherein the assessment for any year:—

- the capital gain arising from the transfer of a capital asset is computed by taking the

- compensation or consideration referred to in clause (a) of section 45(5) or as the case may be

- enhanced compensation or compensation referred to in clause (b) of Sec. 45(5).

And subsequently such compensation or consideration is reduced by any court, Tribunal or other authority.”

6. The Ld. counsel for the assessee relied upon the issue on the decisions of various courts of law:

i) CIT v. Smt. Parkash Kaur, (2011) 330 ITR 332 (P&H).

ii) Jagmal Singh v. State of Haryana Civil Revision No. 7740 of 2012 date of decision - 18 July, 2013

iii) CIT v. Keshwa Devi, (2012) 19 Taxman 220 - HP

iv) CIT v. Joginder Singh appeal No.-120-2008 order dated 30 Oct. 2012 - HP.

7. The Ld. DR, on the other hand, relied upon the orders of both the authorities below.

8. We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact that the enhanced compensation is awarded by the Additional District Judged vide his order dated 14.03.2008 under section 28 of the Land Acquisition Act, as has been affirmed by the AO in his order reproduced hereinabove. It is also not under dispute that the Hon'ble Supreme Court, in the case of Commissioner Of Income Tax, Faridabad v. Ghanshyam (Huf) .), (2009) 315 ITR 1 has laid down that the amount received under section 28 is part of the amount of compensation whereas interest u/s. 34 is only for delay in making payment after compensation. In the present case, the amount is received u/s. 28 of the Land Acquisition Act, 1894 and therefore, according to us this is a compensation and cannot take part of the compensation u/s. 45(5) and is exempt u/s. 10(37) of the Income Tax Act, 1961. Accordingly, the Ld. CIT(A) is not justified in confirming the action of the A.O and in view of the decision of Hon'ble Supreme Court in the case of Commissioner Of Income Tax, Faridabad v. Ghanshyam (Huf) .), (2009) 315 ITR 1 and other decisions relied upon by the ld. counsel for the assessee, we direct the A.O to delete the addition made. Thus, all the grounds of the assessee are allowed.

9. In the result, the appeal filed by the assessee in ITA No. 755(Asr)/2013 is allowed.