| Question And Answer | |
|---|---|
| Subject: | Whether interest on compensation received under land acquisition Act is taxable ? |
| Category: | Income-Tax |
| Querist: | ca vinay v kawdia |
| Answered by: | Research Team |
| Tags: | taxability of interest on compensation |
| Date: | May 19, 2021 |
AfterGhanshyam (HUF>[2009] 315 ITR 1 (SC), it was settled thatinterest received on compensation or enhanced compensation under section 28 of Land Acquisition Act, 1894 is not taxable being part of enhanced compensation itself Courts /tribunals have decided in favour of assessee on the basis Ghanshyam(HUF) consistently. However, P & H High Court in Mahender Pal Narang v. CBDT [2020] 120 taxmann.com 400 (Punjab & Haryana) decided against the assessee by relying on sections 56(2) and 57 of the 1961 Act.
P & H High court while deciding against the assessee, dissented with Gujarat High Court Movaliya Bhikhubhai Balabhai v. ITO(TDS) [2016] 70 taxmann.com 45/388 ITR 343 (Guj.)
Further, Hon’ble Supreme Court in Mahender Pal Narang v. CBDT [2021] 126 taxmann.com 105 (SC) dismissed the SLP by way of non speaking order against the above P & H High Court ruling. What is the correct legal position in this regard?
The judgment has to be read in the contest in which it was rendered. When the Supreme Court rendered the judgment in Ghanshyam (HUF) [2009] 315 ITR 1 (SC), there was no provison for taxing the interest on enhanced compensation . The Punjab and Haryana High Court in Mahender Pal Narang v. CBDT [2020] 120 taxmann.com 400 (P & H) (HC) after considering the amendment has held that how the ratio of Supreme Court supra is not applicable . Even Gujarat High Court in Movaliya Bhikhubhai Balabhai v. ITO(TDS) [2016] 70 taxmann.com 45/388 ITR 343 (Guj.) (HC) had not discussed the provision of section 56 of the income tax Act , righty so the issue before them was to consider deduction of tax at source . Punjab and Hrayana High Court has also applied the ratio in I.T.C. Ltd. v. CCE [2004] 7 SCC 591.
Accordingly the ratio of Punjab and High Court seems to be correct . In CIT v. Sun Engineering Works P. Ltd. (1992) 198 ITR 297 (SC) (320)
“It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court, divorced from the context of the question under consideration and treat it to be the complete ” law ” declared by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court.
Issue being debatable there is no Judgement of Supreme Court directly on the issue , mere dismissal of SLP without discussion it cannot be assumed that the Supreme court has settled the issue . In an appropriate case the matter can be taken to supreme Court .
Research Team .