ITAT Chandigarh upholds reassessment and 50% taxation of interest on enhanced compensation under section 57(iv)

5-Second Takeaway

The Tribunal held that reassessment under section 147 was valid because the Assessing Officer had specific information that the assessee had received interest on enhanced compensation and had not offered it to tax. It also held that, after the Finance Act, 2009 amendments, such interest is taxable as income from other sources in the year of receipt, with only a 50% deduction under section 57(iv).

The Income Tax Appellate Tribunal, Division Bench, Chandigarh, upheld the reopening of assessment under section 147 in Birbal’s case. The Assessing Officer had received specific information that the assessee had received interest on enhanced compensation but had not included it in the return of income, and the Tribunal held that this information justified initiation of reassessment proceedings.

On the merits, the Tribunal applied the post-2009 regime governing interest on compensation or enhanced compensation. It held that, after the Finance Act, 2009 amendments, such interest is taxable as income from other sources in the year of receipt.

The Tribunal further noted that only a 50% deduction is available under section 57(iv) against that receipt. Following the coordinate bench decision on identical facts, it accepted the Revenue’s approach and held that the Assessing Officer had rightly taxed 50% of the interest received by the assessee.

The assessee’s appeal was dismissed.