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2017 DIGILAW 237 (MAD)

R. Manoharan v. Income Tax Officer

2017-01-24

R.SURESH KUMAR

body2017
ORDER : R. Suresh Kumar, J. 1. The prayer in the writ petition is for a writ of certiorari to call for the records of the respondent in PAN.No. AVBPM 1727E dated 24.03.2010 for the assessment year 2007-2008 and quash the same. 2. The petitioner had filed Income Tax return for the assessment year 2007-08 on 30.03.2009. In fact, the petitioner had filed a Nil Return from the point of view of Income Tax assessment for the said financial year, ie the year ended on 31.03.2007. Thereafter, the petitioner realised that even though he had filed a Nil return, since he had omitted to say under which head or under which provision, he claimed exemption for paying income tax for the amount received from Land Acquisition Authorities for the acquisition of his land as additional compensation amount under Section 24 of the Land Acquisition Act. 3. According to the petitioner, since the interest is received under Section 28 of the Land Acquisition Act for the additional compensation, the same is also part of the additional compensation like solatium, etc., and such interest for additional compensation since become part of the compensation is exempted from income tax assessment, in view of the law declared by the Honourable Apex Court in the judgment made in (2009) 315 ITR 1 (SC) in the matter of Commissioner of Income Tax v. Ghanshyam (HUF). This omission on the part of the petitioner to make a mention at the return itself for making a claim for exemption for the said amount for the interest received by the petitioner for the enhanced compensation was subsequently noticed and therefore, the petitioner had given a detailed representation on 15.03.2010 to the respondent, wherein, he had stated that his income received from Land Acquisition Authorities is interest for the additional compensation, since has to be exempted, in view of the law declared by the Honourable Apex Court in the judgment referred above, since such a claim was not expressly requested for by the assessee in the return itself. 4. 4. The further case of the petitioner is that in spite of the above stated facts and despite the said representation dated 15.03.2010 having been given by the petitioner, the respondent has passed the impugned order dated 24.03.2010, where, he fixed the liability of tax to the extent of Rs.3,01,860/- as tax for the income received by the petitioner, I.e the income came to the petitioner by way of interest for the enhanced compensation of his agricultural lands acquired by the Government. Therefore, aggrieved by the said impugned order, the petitioner has come before this Court by filing the present writ petition with the aforesaid prayer. 5. Heard both sides. 6. Mr. K. Soundarrajan, the learned counsel appearing for the petitioner would rely upon heavily the judgment of the Honourable Apex Court cited supra, wherein, the learned counsel relied paragraph No. 24 as well as the end paragraph of the judgment, which reads thus: "24. To sum up, interest is different from compensation. However, interest paid on the excess amount under section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under section 34 is for delay in making payment. This vital differences needs to be kept in mind in deciding this matter. Interest under section 28 is part of the amount of compensation whereas interest under section 34 is only for delay in making payment after the compensation amount is determined Interest under section 28 is a part of the enhanced value of the land which is not the case in the matter of payment of interest under section 34. It is clear from a reading of sections 23( 1 A) and 23(2) as also Section 28 of the 1894 Act that additional benefits are available on the market value of the acquired lands under Section 23(1-A) and 23(2) whereas section 28 is available in respect of the entire compensation. It was held by the Constitution Bench of the Supreme Court in Sunder v. Union of India [2001] 7 SCC 211, that 'indeed the language of section 28 does not even remotely refer to market value alone and in terms it talks of compensation or the sum equivalent thereto. Thus, interest awardable under section 28, would include within its ambit both the market value and the statutory solatium. Thus, interest awardable under section 28, would include within its ambit both the market value and the statutory solatium. It would be thus evident that even the provisions of section 28 authorise the grant of interest on solatium as well.' Thus, 'solatium' means an integral part of compensation, interest would be payable on it. Section 34 postulates award of interest at 9 per cent, per annum from the date of taking possession only until it is paid or deposited. It is a mandatory provision. Basically section 34 provides for payment of interest for delayed payment.' "Last paragraph : Having settled the controversy going on for last two decades, we are of the view that in this batch of cases which relate back to the assessment years 1991-1992 and 1992-1993, possibly the proceedings under the Land Acquisition Act, 1894, would have ended. In a number of cases we find that proceedings under the 1894 Act have been concluded and taxes have been paid. Therefore, by this judgment we have settled the law but we direct that since matters are decade old and since we are not aware of what has happened in the Land Acquisition Act proceedings in pending appeals, the recomputation on the basis of our judgment herein, particularly in the context of type of interest under section 28 vis-a-vis interest under section 34, additional compensation under section 23(1 A) and solatium under section 23(2) of the 1894 Act, would be extremely difficult after all these years, will not be done." 7. The learned counsel for the petitioner would also submit that there is no dispute that the land which was acquired from the petitioner was an agricultural land and in view of the exemption given under Section 2(14)(iii) of the Income Tax Act, 1961, the income derived from the agricultural land, even by way of compensation is exempted from the purview of income tax. Therefore, what is the additional compensation received by the petitioner from the Land Acquisition Authorities for his land being acquired also shall be exempted from the income tax assessment. Therefore, what is the additional compensation received by the petitioner from the Land Acquisition Authorities for his land being acquired also shall be exempted from the income tax assessment. This position since has been reiterated and the law having been declared by the Honourable Apex Court in the judgment cited supra, merely because the petitioner omitted to make a claim specifically by way of attaching a explanatory note along with the original return submitted to the respondent specifically claiming that the said income shown in the Nil return submitted by the petitioner is interest received from the Land Acquisition Authorities as additional compensation paid under Section 28 of the Land Acquisition Act, the respondent should not have passed the impugned order in spite of the subsequent representation made by the petitioner on 15.03.2010. Therefore, the learned counsel for the petitioner would contend that the impugned order is liable to be interfered with, as the petitioner is no way liable to be taxed for the said income received by way of additional compensation for his agricultural land acquired by the respondent. 8. The learned counsel for the petitioner would also submit that before passing the impugned order under Section 143(1) of the Income Tax Act, 1961, if a notice under Section 143(2)(i) had been issued to the petitioner, expressing the view of the respondent that he has reason to believe that the claim made by the petitioner is inadmissible, then, certainly, the petitioner would have been in a position to explain the said factual matrix that he is exempted from paying the tax, in view of the categorical pronouncement of the Honourable Apex Court in the judgment cited supra. Because of the non-issuance of the notice as contemplated under Section 143(2)(i) of the Income Tax Act, even the said chance of explaining the said position to the respondent also has been denied to the petitioner and therefore on that ground also, the learned counsel for the petitioner submits, that the impugned order is liable to be interfered with. 9. Because of the non-issuance of the notice as contemplated under Section 143(2)(i) of the Income Tax Act, even the said chance of explaining the said position to the respondent also has been denied to the petitioner and therefore on that ground also, the learned counsel for the petitioner submits, that the impugned order is liable to be interfered with. 9. Per contra, the learned Standing Counsel appearing for the respondent would submit that though there is no direct provision in the Income Tax Act to give exemption for income received by an assessee by way of interest for additional compensation paid to him under Section 28 of the Land Acquisition Act, in view of the said judgment of the Honourable Apex Court cited supra, the department would have considered the claim of the petitioner, if really any such exemption is claimed by him, while filing the return. The petitioner merely filed a Nil return, wherein, he has not stated under what provision of law or otherwise he filed this Nil Return for the income shown by way of income received from the land acquisition authorities by way of interest paid for the additional compensation. If such a specific exemption is claimed, then, the respondent would have been in a position to either accept the said claim or if he has reason to disagree such claim, certainly, he would have issued a notice under Section 143(2) (i) of the Income Tax Act. Here, no such claim was specifically made by the petitioner seeking exemption. Therefore, the questing of giving any notice under Section 143(2)(i) of the Income Tax Act does not arise in this case. 10. The Learned Standing Counsel appearing for the respondent would also submit that it is the admitted case of the petitioner that he has not made any specific claim in the return for exemption and his further representation was dated only on 15.03.2010 and before the same reached the office of the respondent, the assessment process of the return submitted by the petitioner on 30.03.2009 was taken up for process under Section 143 of the Income Tax Act and after completing the process, the impugned order was passed under Section 143(l)(a) (ii) of the Income Tax Act. Therefore, there is no legal infirmity attached with the impugned order. 11. This Court has considered the rival submissions made by both sides. 12. Therefore, there is no legal infirmity attached with the impugned order. 11. This Court has considered the rival submissions made by both sides. 12. The facts narrated above art not in controversy. However, as has been pointed out by the learned counsel for the petitioner that the land of the petitioner, which was acquired is an agricultural land and the same is exempted from income tax assessment. It is also a fact that he had received the income by way of interest for the enhanced compensation paid under Section 28 of the Land Acquisition Act, which reads 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." 13. If any interest is received by the petitioner for the belated payment of the compensation, the said interest would have been paid under Section 34 of the Land Acquisition Act, which reads thus: "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." 14. Comparing these two provisions by putting them in juxtaposition, the Honourable Apex Court has given the said verdict cited supra, wherein, the Honourable Apex Court has held that whatever the amount is received by way of interest for the additional compensation, solatium, the same shall form part of the actual compensation to be paid for the land acquired as the said payments are made only after adjudication by Section 18 reference of the Land Acquisition Act. Therefore, what has been received by way of income by the petitioner in the present case from the land acquisition authority is no doubt only an interest for the enhanced compensation within the meaning of Section 28 of the Land Acquisition Act and when that being the position, the law declared by the Honourable Apex Court in the judgment cited supra would squarely apply to the present facts of this case. 15. Had this position been explained to the respondent by way of an explanatory note attached with the return originally submitted by the petitioner, as has been rightly pointed out by the learned Standing Counsel for the respondent, they would have been in a position to re-assess the issue by giving notice under Section 143(2)(i) of the Income Tax Act, 1961, provided if the respondent did not agree with the claim made by the petitioner. Such a situation did not arise before the respondent, as the petitioner, admittedly, did not make a claim, due to inadvertence. Such inadvertence on the part of the petitioner at the same time cannot make the petitioner ineligible to claim such exemption, which according to the law declared by the Honourable Apex Court, is always available before the petitioner, in view of the facts of the case, where admittedly, the land is an agricultural land and the income shown in the return, which is in question, is the income by way of interest for the enhanced compensation under Section 28 of the Land Acquisition Act. Therefore, this court, in view of the aforesaid facts and circumstances of the case and in view of the judgment of the Honourable Apex Court in (2009) 315 ITR 1 (SC) in the matter of Commissioner of Income Tax v. Ghanshyam (HUF), is of the view that the impugned order is liable to be interfered with and the matter can very well be remanded for reconsideration to the respondent. 16. Resultantly, the impugned order is quashed. 16. Resultantly, the impugned order is quashed. The matter is remanded back to the respondent for reassessment, where, if the respondent agrees with the claim now made by the petitioner, seeking for total exemption for paying the income tax for the entire income shown in the return, which is in question for the assessment year 2007-08 on the ground that it is an income by way of receipt of interest for additional compensation of the land of the petitioner being acquired by the Land Acquisition Authority, they paid such interest under Section 28 of the Land Acquisition Act, certainly, the respondent can pass a suitable order. If the respondent still does not agree with such a claim of the petitioner, it is open to the respondent to issue a notice under Section 143(2)(i) of the Act and in case, such a notice is received by the petitioner, the petitioner can very well make an explanation, in the light of the aforesaid judgment and the discussion made in this order before the respondent and on receipt of such explanation from the petitioner, the respondent shall pass order, in view of the law declared by the Honourable Apex Court in the judgment cited supra and the above exercise shall be done by the respondent, within a period of two months from the date of receipt of copy of this order. 17. In the result, the writ petition is allowed to the extent indicated above. Consequently, connected miscellaneous petition is closed. There shall be no order as to costs.