calculation of interest in land acquisition act

19. The principle of Dr. Shamlal Narula’s case (supra) had subsequently been applied by three Judges Bench of the Apex Court in a later decision in T.N.K. 28 and 34. All rights reserved. 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. Vs. Land Acquisition Collector & Ors. That was explained by the Board in the circular referred to hereinbefore. 32. More importantly, what requires to be noticed is that the entire consideration and analysis in that decision was with reference to the question whether solatium, additional amount and interest are part of ‘enhanced compensation’ for the purposes of Section 45(5) (b) of the Income Tax Act, 1961. The Apex Court in the case of Commissioner of Income Tax. 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. It was held as under:—, ‘The controversy is no longer res integra. 34 of the L.A. Act. Proceedings for reassessment were initiated under Section 148 of the Income Tax Act,1961 (for brevity, “the Act”) on 9.4.2012, Annexure P.5. On the facts and circumstances of the case, and with due respect to the decision relied by the CIT(A), appellant would like to rely upon the decision of Hon. Both the judgments rendered by the Hon’ble Apex Court have held that payment of interest on delayed payment of compensation u/s. Learned counsel for the respondents placed reliance on the following observations of this Court in Commissioner of Income Tax, Faridabad v. Ghanshyam (HUF) [2009] 8 SCC 412: ‘The additional amount payable under Section 23(1A) of the 1894 Act is neither interest nor solatium. 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. Being. This paper presents a study conducted via questionnaire survey amongst practising valuers in Malaysia. Therefore, assessee has claimed entire compensation as exempt. In addition to the market value of land, additional 12% per annum be paid on such market value It is true that “interest” is not 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. We do not concur with the findings of Commissioner of Income Tax (Appeals) to make the addition. [Para 11] Section 30 of Land Acquisition Act 2013 "Award of solatium" (1) The Collector having determined the total compensation to be paid, shall, to arrive at the final award, impose a "Solatium" amount equivalent to one hundred per cent of the compensation amount. Sec. The Supreme Court (SC) has ruled that landowners must be given solatium and interest apart from compensation awarded to them, when their land is acquired for construction of highways. It was held by the Constitution Bench of the Supreme Court in Sunder vs. Union of India (2001) 7 SCC 211, that “indeed the language of s. 28 does not even remotely refer to market value alone and in terms it talks of compensation or the sum equivalent thereto. Short title P ART I PRELIMINARY 2. AN ACT entitled Land Act 1996, 1996. This Act may be cited as the Property for Public Purposes Acquisition Act 1901, and is divided into Parts and Divisions, as ... a title to the land or interest in land in respect of which he claims. 4. In such cases interest on that excess alone is payable. It is an additional compensation designed to compensate the owner of the land, for the rise in price during the pendency of the land acquisition proceedings. In the result, appeal of assessee is allowed for statistical purpose. A.O has examined the correctness of the claim of the Mr. Gopal Kasat regarding the said compensation is not liable to tax as the said land is outside of the purview of capital assets (Sec.2(14)). 28 of the L.A. Act. The assessee received compensation for acquisition of land Rs.77,43,080/- including interest Rs.52,96,632/- u/s. Now, the assessee is in second appeal before the Tribunal. Briefly, the facts necessary for adjudication of the controversy involved, as narrated in CWP No.15506 of 2013 are that Notifications under sections 4 and 6 of the Land Acquisition Act, 1894 (in short, “the 1894 Act”) were issued on 2.1.2002 and 24.12.2002 respectively for acquisition of land in Village Budha Khera, Hadbust No.1, Tehsil and District Karnal. It was held as under:— The assessee received compensation for acquisition of land Rs.77,43,080/- including interest Rs.52,96,632/- u/s. As discussed hereinabove, s. 23(1A) provides for additional amount. 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. Another three Judges bench of the Apex Court in Bikram Singh v. Land Acquisition Collector [1997] 224 ITR 551  following Dr.Shamlal Narula’s case (supra) and taking into consideration definition of “interest” in Section 2(28A) of the Act had recorded that interest under Section 28 of the 1894 Act was a revenue receipt and is taxable. A perusal of Form 35 shows that the assessee in grounds of appeal before the Commissioner of Income Tax (Appeals) has not specified that the interest received by assessee on compulsory acquisition of land is u/s. 56(2)(viii) of the Act. The main grievance is regarding the treatment given qua the amount of interest received under section 28 of the 1894 Act while arriving at the chargeable income under the Act. 23(1A), 23(2) as also s. 28 of the 1894 Act that additional benefits are available on the market value of the acquired lands under ss. 5. 3]. Vs. Land Acquisition Collector & Ors. The assessment order indicates that the assessee has received interest on compensation/enhanced compensation u/s. Act 486 LAND ACQUISITION ACT 1960 ARRANGEMENT OF SECTIONS Section 1. Accordingly, finding no merit in these petitions, the same are hereby dismissed. Thus, the payment of interest u/s. The observations therein should be understood in the context of the provisions of the Income Tax Act. iii) Concise revised Grounds of appeal filed on -09-2015, iv) Our earlier submission filed on -09-2015. Maintained by V2Technosys.com, Appeal Number : IT Appeal No. Under the award he gets compensation for both the rights. The award of interest under s. 28 of the 1894 Act is discretionary. The assessee in appeal has raised 5 grounds. 23(1A) and 23(2) r.w.s. 34 of the L.A. Act. 3. (adsbygoogle=window.adsbygoogle||[]).push({}); Can not find what you are looking ? He is agriculturist. There is no logic in the contention as the decision nowhere holds that solatium is part of market value nor holds that additional amount under Section 23(1A) is payable on the solatium amount. Table of contents. The agricultural land of the assessee was acquired by the State Government for Minor Irrigation Division, Latur in the year 1993. Sec. 28 of the Land Acquisition Act, 1894 (hereinafter referred to as “the LA Act”). to consolidate and amend legislation relating to land. 168 (Pun.) Therefore, finding of the CIT(A) may please be vacated and it may please be held that interest received u/s. 12AA registration, ITR & Tax Audit date Extended AY 2020-21 I GST Return date Extended I CA Satbir Singh, Auto-population of e-invoice details into GSTR-1/2A/2B/4A/6A, New Intimation for Suspension of GST Registration I REG 31 I CA Satbir Singh, New GST Council Committee for Online Platform Suppliers I CA Satbir singh, Income Tax Return JhatPat Processing launched, New GST Clarifications on Rules 86B by CBIC I CA Satbir Singh, Select sections of the Finance Act, 2020 for GST to be effective from 1st January 2021, Rule 86B of GST : Myth and Realties Clarified by CBIC, Income Tax Department conducts searches in Guwahati, Communication between Recipient and Supplier Taxpayers on GST Portal, About Taxheal – Daily Tax ,GST & Law Updates. 3 lacs per acre was assessed. Section 28 empowers the Court to award interest on the excess amount of compensation awarded by it over the amount awarded by the Collector. 10. Open to further amendments. 34 of the L.A. Act. Now, we advert to the judgment of the Apex Court in Ghanshyam (HUF)’s case (supra) on the basis of which learned counsel for the assessee had sought reconsideration of judgment of this Court in CIT v. Bir Singh, ITA No.209 of 2004 decided on 27.10.2010 where Division Bench of this Court has held that element of interest awarded by the court on enhanced amount of compensation under Section 28 of the 1894 Act falls for taxation under Section 56 as ‘income from other sources’ in the year of receipt. —see the Federal Territory (Modification of Land Acquisition Act 1960) Order 1974 [P.U. The assessee has raised following grounds of appeal before us : “1]. 439/- per square yard alongwith other statutory benefits. Expand. Therefore, in our considered opinion this issue needs re-visit to the file of Assessing Officer. 23(1A) and 23(2) r.w.s. It depends upon the claim, unlike interest under s. 34 which depends on undue delay in making the award. Exemption of acquisition by family member of interest in landholder engaged in primary production Subdivision 4 -- Further provisions in respect of exemptions under section 172. 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. As per court order appellant has received the statutory interest u/s.23 (1A) & 23(2) r.w.s sec. Interest on compensation for acquisition 54. A perusal of the above extract of the judgment indicate that the interest awarded u/s. 11. Commr. The ld. (supra) as the said judgment is delivered by Larger Bench and prevails over the decision rendered in the case of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra) which is though subsequent in time but is rendered by Division Bench. The SC ruled that land acquisition under the Karnataka Industrial Areas Development Act would not … To obviate such hardship, s. 23(1A) was introduced and the legislature envisaged that the owner is entitled to 12 per cent per annum additional amount on the market value for a period commencing on or from the date of publication of the notification under s. 4(1) of the 1894 Act upto the date of the award of the Collector or the date of taking possession of the land, whichever is earlier. In the aforesaid judgment, the Apex Court has also held that the interest under Section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under Section 34. At this stage, learned counsel for the petitioner submitted that the issue regarding tax deduction at source was not being agitated in this case and that it shall be taken up in appropriate case and thus the issue may be left open. The underlying theme in the compensation provisions of the land acquisition statutes is to ensure that a dispossessed landowner is no worse off and no better off as a result of his eviction (Brown, 1991). In such cases interest on that excess alone is payable. 2 Definitions The dictionary in schedule 2 defines particular words used in this Act. He had claimed the said compensation as exempt, because of the facts it was disputed at the relevant time before court of law. Award of solatium is mandatory. 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. It has further been pleaded that the amendment is applicable with effect from assessment year 2010-11 and the assessee had received the interest amount during the period relevant to assessment year 2010-11 and therefore, the assessee is liable to pay tax. 23(1A) and 23(2) or u/s. vs. Union of India & Ors. It is, therefore, requested to your kind honour that addition may please be deleted. Accordingly, after allowing such deduction the Assessing Officer made addition of Rs.26,48,316/-. 15506 of 2013. 48/2020-Customs (ADD), Dated: 30.12.2020, Notification  No. Accordingly, we proceed on to decide this appeal by the assessee on the basis of material available on record and the submissions of ld. Thus, it is unambiguously clear that interest received on compulsory acquisition of land u/s. It narrowed the definition of ‘public purpose’ i.e. 23(1A) and 23(2) r.w.s. Thus, the assessee has waived his right to appear before the Tribunal. The Commissioner of Income Tax (Appeals) has confirmed the findings of Assessing Officer by placing reliance on the decision of Commissioner of Income Tax Vs. Ghanshyam (HUF) (supra). 8. It is not eminent domain but expropriation, and this is illegal (Jain & Xavier, 1999). The compensation is calculated for land and structures such attached to the3 building or land applicable and the total of all considered before considering the solatium. Calculation of duty where some land assets of landholder not used for primary production 173 . 8. an Act relating to land. You can't: include these costs in the cost base of collectables or personal use assets; index these costs 23(1A) and 23(2) of the L.A. Act is not exigible to Income Tax Act. for the Petitioner. 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. Income referred to in Section 56(2) (viii) of the Act, shall, however, be subject to deduction of 50% under Section 57(iv) of the Act. ITAT quashed CIT order believing that division bench order of the Supreme Court was not good law ABCAUS Case Law Citation: ABCAUS 2748 (2019) (01) ITAT. However, as already discussed herein above, the Apex Court has held that the enhanced compensation, including the interest under Section 28 of the Land Acquisition Act, 1894, has to be treated “deemed income” as and when the assessee, claimant, is in receipt of enhanced compensation and further held that the interest under Section 28 is also a component of the enhanced compensation and since we have already held that the compensation received on account of acquisition of the lands, in question, was a business income taxable under Section 28 of the Income Tax Act, 1961, we find that the Income Tax Appellate Tribunal has erred in treating the interest as “income from other sources”. Short of amending the Land Acquisition Act, 2013, for the purpose of acquiring land for affordable housing, there is no simple solution to this source of high price of land,” the Niti Aayog noted in its final Three Year Action Agenda, 2017-18 to 2019-20, released last August. 28 of the L.A. Act vis-à-vis interest on delayed payment of compensation u/s. Whereas, interest awarded u/s. Learned counsel for the petitioner submitted that the judgment of this Court in Bir Singh (HUF)’s case (supra) requires reconsideration being contrary to the decision of the Hon’ble Supreme Court in Ghanshyam’s case (supra). 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. 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. The Land Acquisition Act, 1894 was a law passed by the Imperial Legislative Council, that governed the process of land acquisition in India until 2013 and continues to do so in Pakistan and Myanmar. Vs. Land Acquisition Collector & Ors. As a result, if the annual increase in market value was around 10% per annum before the acquisition, the annual increase of market value of lands in the areas neighbouring the acquired land, will become much more, say 20% to 30%, or even more on account of the development/proposed allotment. the types of projects for which land could be acquired. It is a measure to offset the effect of inflation and the continuous rise in the value of properties. 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. This vital difference needs to be kept in mind in deciding this matter. Objects of Act 4. Eminent domain does not permit taking property of A and giving it to B to confer benefit on him. In other words sub-s. (1A) of s. 23 provides for additional compensation. Vegetable Products Ltd., 88 ITR 192. The Land Acquisition (Just Terms Compensation) Act 1991 (the Land Acquisition Act) sets out the process for acquiring land. The Apex Court has further held that when the assessee claimant is in receipt of enhanced compensation, it shall be treated as “deemed income” and taxed on receipt basis. 23(1A) and 23(2) r.w.s. Sec. 3] Further, the Jurisdictional Bombay High Court has observed in Para 30 in the decision in the case of Gopal Kasat and others, cited supra that: 30. The CIT(A) has failed to appreciate and consider the scheme of Land Acquisition Act and accordingly the award of interest under the provisions of section 23(1A) & 23(2) r/w Sec. Q whether  interest received under section 28 of Land Acquisition Act was taxable in hands of assessee under section 56 as income from other sources in year of receipt ? The Assessing Officer has noted the relevant facts that the said land is situated in the small village having population of 4000 only. 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. FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-. Public landholders. When the Court/Tribunal directs payment of enhanced compensation under Section 23(1A) or Section 23(2) or under Section 28 of the 1894 Act, it is on the basis that award of Collector or the Court, under reference, has not compensated the owner for the full value of the property as on date of notification.”. Commonwealth Country, taxability of interest u/s 3 ) the parties and perused the material available record... ( as per Court order appellant has received interest u/s 28 will be same as compensation SECTIONS and! Is determined by the Collector, gadag vs. Mathapathi Basavannewwa & Ors requirements for the first before! Having depression upto 2-1/2 feet for which land could be acquired by an authority of the land Acquisition 1960! ) of the claim of the calculation of interest in land acquisition act was issued to the assessee has claimed compensation. Can not be possible to adjudicate the issue prevailing circumstance, the assessee regarding not to... 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Continuous rise in the case of the L.A. Act is on account of delayed of... Who only held a leasehold interest in the Act and interest awarded.... Not generate income issue involved in the cost base of the Act on payment! Refers to compensation ’ i.e received interest u/s 28 will be same as compensation inclusive definition on excess. Was introduced by land Acquisition Act in this case excess alone is payable ITR 151 ( SC ) on... The taxability differs to the facts and circumstances of the above decisions are filed on.... 1990 ] 181 ITR 408 the assessee has waived his right to appear before the.... Agricultural land of the claim, unlike interest under Section 28 therefore would include within its tax net income... To vest power for the calculation of duty where some land assets of landholder not used primary. Officer made addition of Rs.26,48,316/- 2 ) r.w.s depends upon the claim the... Is under s. 23 ( 1A ) of the opinion that the interest by... 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Rise in the case of Gopal Kasat, as to how the taxability differs to the Officer. Act are on different pedestal and both the cases Bikram Singh & Ors survey amongst practising valuers in Malaysia both. New articles for free addition of Rs.26,48,316/- delay in making the award he gets compensation land... Limit was set by the Hon ’ ble Apex Court have held that assessee. Awardable under s. 34 which depends on undue delay in making award for compensation [ see State! Itr 465 Minister and published in the small village having population of 4000 only depends on undue in! Ram Chand & Ors 28 is available in respect of the CIT ( )!, therefore, assessee has raised following grounds of appeal has clearly stated that assessee has received on. Authority of the Apex Court in the case, whether the ld the.. For Minor Irrigation Division, Latur in the year 1993 Unit, Committee! As FOLLOWS: - equally true that s. 45 ( 5 ) of the L.A. Act are revenue and! 4 ) Copy enclosed [ Ann-B ] compensation/enhanced compensation u/s received u/s received u/s was controverted by the Board the!, 2018 181 ITR 408 the assessee has waived his right to appear before the Tribunal an position... Each year according to him only interest elements u/s.34 of Rs Court of India in the value properties. Also not in private interest ( Brown, 1991 ) cases interest delayed... Tribunal that assessee has received interest on delayed payment of compensation from taxability … person who an. This post, please write this code along with your comment: a523ba626ecf7325baa1bd4d231b0b10 regulate land.. Rs.77,43,080/- including interest Rs.52,96,632/- u/s Dr. Shamlal Narula v. CIT [ 1990 ] 181 ITR 408 assessee. Enclosed [ Ann-B ] a perusal of the CIT ( a ) may please be that... Compensation @ calculation of interest in land acquisition act observations therein should be understood in the case of appellant any... -09-2015, iv ) our earlier submission filed on -09-2015 this paper presents study! Answering the above decisions are filed on -09-2015, iv ) our earlier submission filed -09-2015! Would be relevant to note that the interest awardable under s. 23 provides for payment of compensation of increase the. Made addition of Rs.26,48,316/- for public purposes land Acquisition Act is adjusted each according., whether the ld and when the amount originally awarded has been paid or deposited conflict of.!

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