Ghanshyamdas (HUF) and by the Honourable Himachal Pradesh High Court in the case of CIT Vs. Keshawadevi. It was stated that the decision of the Honourable Supreme Court in the case of CIT Vs. Ghanshyamdas (HUF) was decided on 16/07/2009 which is after the Finance Act 2009. The main issue decided by this judgement is whether the additional amount u/s.23(1A), solatium u/s.23(2), interest paid u/s.28 of the Land Acquisition Act is a part of compensation and only interest given u/s.34 is revenue receipt which is liable for taxation. It was stated that in view of the aforesaid decision, the assessee had claimed the entire interest amount u/s. 28 as part of compensation and the same is being exempt from tax. The assessee further stated that the decision given by the Constitution Bench of the Honourable Supreme Court in Sunder V.s Union of India (2001) 7 SSC 211 also says that interest received u/s 28 is a part of compensation. The assessee also relied on the decision given in the case of CIT Vs. Govindbhai Mamaiya. It was further stated by the assessee that since he had received only 50% of the amount of compensation and the balance 50% is pending before the Hon'ble Court, the matter has not reached the final stage and therefore no amount of interest can be brought to tax. The assessee has also relied upon the proviso which is inserted after clause (b) of sub-section (5) of section 45 by the Finance (No.2) Act, 2014, w.e.f. 01/04/2015 :

Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority shall be deemed to be income chargeable under the head "Capital gains" of the previous year in which the final order of such court, Tribunal or other authority is made;

to state that since the interest which was received by the assessee was in pursuance of an interim order of the Honourable High Court, the said interest amount cannot be taxable till the Honourable High Court delivers its final judgement.

6. I have given a careful consideration to the submissions made by the assessee and I find that this case is squarely covered by the decision in the case of Bikram Singh Vs. Land Acquisition Collector [1997] 224 ITR 551 (SC). The Hon'ble Supreme Court held:

"7. Relying upon these three provisions, it is contended that the definition of 'interest' is confined only to money-lending business between debtor and the creditor and if the creditor receives any amount by way of interest from the debtor, it is in the nature of a receipt of income on a charge paid in respect of money borrowed or in respect of the credit facility given which have been utilised and, therefore, the definition would be applicable only when the money is lent by a creditor and received by the debtor. Then only interest is chargeable to income-tax. When interest is paid either under section 34 or section 28 of the Land Acquisition Act, it is only a payment in consideration of loss of enjoyment of the possession by the owner. It is not by way of any charge on compensation determined under section 23(1). Therefore, it is not exigible to income-tax. We find no force in the contention.

8. The controversy is no longer res integra. This question was considered elaborately by this Court in Dr.ShamlaINarulav. CIT [1964]

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53 ITR 151. 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 page 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 .... " (p. 158)

9. This position of law has been consistently reiterated by this Court in the case of T.N.K. GovindarajuChettyv. CIT [1967] 66 ITR 465, Rama Rai v. CIT [1990] 181 ITR 400 and K.S. Krishna Rao v. CIT [1990] 181 ITR 408. 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(28A), 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.

10. But the question is: whether the interest on delayed payment on the acquisition of the immovable property under the Acquisition Act would not be exigible to income-tax? It is seen that this Court has consistently taken the view that it is a revenue receipt. The amended definition of 'interest' was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under section 28 or 31 of the Land Acquisition Act is a taxable event. Therefore, we hold that it is a revenue receipt exigible to tax under section 4 of the Act. Section 194A has no application for the purpose of this case as it encompasses deduction of the income at the source. However, the appellants are entitled to spread over the income for the period for which payment came to be made so as to compute the income for assessing tax for the relevant accounting year." (Emphasis Mine)

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7. The contention of the assessee that the decision in Ghanshyam (HUF) case (supra) being of a later date and favourable to the assessee, should be considered for the purpose of decision this appeal against the decision of the Apex Court in the case of Bikram Singh (supra), cannot be acceded to. First and foremost, the decision in Bikrarn Singh case was given by a Three Member Bench of the Hon'ble Apex Court whereas the decision in Ghamshyam (HUF) case was given by a Two Judge Bench of the Hon'ble Supreme Court. Hence, the decision given by the Larger Bench shall prevail over the decision given by the Smaller Bench, even though the same may be of a later date. The Hon'ble Aurangabad Bench of the Bombay High Court has considered this issue in Writ Petition NO.5402 of 2013, in the case of Shivajirao Dnyanoba Ghanwat Vs. State of Maharashtra and others and in Writ Petition NO.5401 of 2013 in the case of Balasaheb Raosaheb Bidwe and Others Vs. State of Maharashtra. Apart from the above two, 11 other cases on similar ground was disposed by the Hon'ble Bombay High Court, Aurangabad Bench. The Income Tax Department was a party in all the 13 Writ Petitions. The issue before the Hon'ble High Court was that interest in land acquisition proceedings means interest awarded only u/s.34 of the L.A. Act, 1894 and that interest awarded u/s.28 of the L.A. Act, 18'94 cannot be looked into. The Hon'ble Court also looked into the decision given in the case of Ghanshyam (HUF) (supra) & Bikram Singh (supra) and decided the issue in the following words:

"9. We have perused para-24 & 25 of the judgement of the Apex Court in "Commissioner of Income Tax Vs. Ghanshyam" supra, We find that the Honourable Apex Court there was not called upon to look into the larger bench judgement delivered earlier in the case of Bikram Singh (supra). In para-7 the Honourable larger bench has found that the interest paid u/s.28 is not by way of any charge on compensation determined u/s. 23(l). We, therefore, with respect, follow the larger Bench judgement of the Honourable Apex Court."

8. In a recent decision in the case of Manjeet Singh (HUF) Karta Manjeet Singh Vs. Union of India [2016] 65 taxmann.com 160 (Punjab & Haryana), similar decision has been taken. The decision is as under:

"7. The primary question for consideration that arises in these petitions relates to the nature of interest received by the landowner-assessee under Section 28 of the 1894 Act. In other words, whether the interest which is received by the assessee-landowner partakes the character of income or not and, in such a situation is it taxable under the provisions of the Act.

8. It would be apposite to quote herein below Sections 28 and 34 of 1894 Act which read thus:-

"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."

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"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,

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."

9.The award of interest under Section 28 of the 1894 Act applies when the amount originally awarded has been paid or deposited and when the Court awards excess amount. In such cases interest on that excess alone is payable. Section 28 empowers the Court to award interest on the excess amount of compensation awarded by it over the amount awarded by the Collector. The compensation awarded by the Court includes the additional compensation awarded under Section 23(1A) and the solatium under Section 23(2) of the said Act. Section 28 is applicable only in respect of the excess amount, which is determined by the Court after a reference under Section 18 of the 1894 Act:

10. Under Section 34 of the 1894 Act, the Collector awards interest on the compensation offered at the rate of 9% per annum for a period of one year from the date of taking possession and thereafter at the rate of 15% per annum from the date of expiry of one year on the amount of compensation or part thereof which remains unpaid or deposited before the date of such expiry.

11. A plain reading of Sections 23(1A), 23(2) as also Section 28 of the 1894 Act clearly spells out that additional benefits are available on the market value of the acquired lands under Section 23(1A) and 23(2) whereas Section 28 is available in respect of the entire compensation. The Constitution Bench of the Supreme Court in Sunder's case (supra) had approved the following observations of the Division Bench of this Court in State of Haryana v. Smt Kailashwati, AIR 1980 Punj. &Har. 117:-

"10. Once it is held as it inevitably must be that the solatium provided for under Section 23(2) of the Act forms an integral and statutory part of the compensation awarded to a landowner, then from the plain terms of Section 28 of the Act, it would be evident that the interest is payable on the compensation awarded and not merely on the market value of the land. Indeed the language of Section 28 does not even remotely refer to market value alone and in terms talks of compensation or the sum equivalent thereto. The interest awardable under Section 28 therefore would include within its ambit both the market value and the statutory solatium. It would be thus evident that the provisions of Section 28 in terms warrant and authorize the grant of interest on solatium as well."

12. Adverting to the case law on the subject, inevitably, reference is made to the judgment by the three Judges bench of the Supreme Court

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in the case of Dr.ShamlalNarula v. CIT [1964] 53 ITR 151, which had considered the issue regarding award of interest under the 1894 Act. Interest under Section 28 of the 1894 Act was considered akin to interest under Section 34 thereof as both were held to be on account of keeping back the amount payable to the owner and did not form part of compensation or damages for the loss of the right to retain possession. It was noticed as under:-

"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 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 s. 28 of the Act, just like under s. 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."

The principle of Dr.ShamlalNarula'scase (supra) had subsequently been applied by three Judges Bench of the Apex Court in a later decision in T.N.K. GovindarajuChettyv. CIT[1967] 66 ITR 465."

3. The learned counsel first of all invited out attention to the tribunal's order dated 01.07.2019 allowing the instant appeal followed by the Revenue's miscellaneous application MA No. 42/Pun/2020 which has accepted on 20.08.2021 in the latter's favour. Mr. Shah thereafter submitted that the interest income in issue is not taxable going by the hon'ble apex court decision in CIT vs. Ghanshyamdas (HUF) 315 ITR 1 (SC) r.w.s. 10(37) of the Act. We find no merit inn assessee's instant argument once the legislature has inserted Section 56(2)(viii) vide Finance Act 2009 w.e.f. 01.04.2010 holding interest received on compensation or on enhanced compensation referred to in "clause (b) of Section 145A" as treating the corresponding income as income from "other" sources. The assessee could hardly rebut the fact that the foregoing statutory provision in fact makes both interest on compensation as well as on enhanced compensation deemed as income of the year in which it is received whereas the assessment year before their lordships was 1999-2000 only. We thus hold that the CIT(A) has rightly affirmed the assessment findings assessing the impugned interest income in assessee's hands.

4. Mr. Shah at this stage invited our attention to the Revenue's averments in the foregoing miscellaneous application (supra) that its Tax Appeal in a connected case is pending in hon'ble jurisdictional high court raising the very issue. We find no substance in assessee's instant latter

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request as well once it is clear that the impugned interest income is very much taxable as per the amended provision i.e. Section 56(2)(viii) r.w.s. 57(iv) r.w.s. 145A(b) applicable w.e.f. 01.04.2010. The assessee fails in its sole substantive ground as well as in the main appeal therefore.

5. This assessee's appeal is dismissed. Order pronounced in the open court on 28^thApril, 2022. Sd/- Sd/-

(Dipak P. Ripote) (S.S. Godara)

Accountant Member Judicial Member

Pune, Dated: 28^thApril, 2022

Copy to:

1. The Appellant

2. The Respondent

3. The CIT(A) -2, Aurangabad

4. The Pr.CIT - 2, Aurangabad

5. The DR, "A" Bench, ITAT, Pune By Order

//True Copy//

Assistant Registrar

ITAT, Pune Benches, Pune n.p.

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