Bal Ram v. Presiding Officer, Income-Taxappellate Tribunal, New Delhi ‘A’and Others

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH --- Income-tax Appeal No. 411 of 2010Date of decision: 27.10.2010 Bal Ram --- Appellant Versus Presiding Officer, Income-taxAppellate Tribunal, New Delhi ‘A’and others --- Respondents CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. Shiv Kumar, Advocate,for the appellant. --- AJAY KUMAR MITTAL, J. This order will dispose of two appeals, i.e. Income-taxAppeal Nos. 411 and 412 of 2010 as similar questions of law havebeen claimed in both the appeals. The facts have, however, been taken from Income-taxAppeal No. 411 of 2010. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the assessee against theorder dated 2.11.2007, Annexure A-1, passed by Income Tax Officer,Faridabad and order dated 30.9.2009, Annexure A-3, passed by theIncome Tax Appellate Tribunal, Delhi Bench, ‘A”, New Delhi, (in short “the Tribunal”) in ITA No. 3233/Del/08 in respect of the assessmentyear 2000-01, claiming the following substantial questions of law fordetermination by this Court: a-Whether on the facts and circumstances of the case thelearned Income Tax Appellate Tribunal is right in law inholding that enhanced compensation received by theassessee during the pendency of dispute of compensationbefore the Hon’ble Courts is deemed to be income for thepurpose of computation of Capital Gain in the year of receiptin terms of provision of Section 45(5) of the Income Tax Act?b-Whether on the facts and circumstances of the case thelearned Tribunal was right in law and fact while holding thatbecause of award of compensation got finalized on10.8.2005, therefore, the amount of interest on enhancedcompensation got taxed in the year in question i.e.assessment year 2000-2001? c-Whether on facts and circumstances of the case the learnedTribunal was right in law and fact while holding that becauseof award of compensation got finalized on 10.8.2005,therefore, the amount of interest on enhanced compensationgot taxed in the year in question i.e. Assessment year 2000-2001? d-Whether the learned Tribunal was right on the facts and lawin holding that the enhanced amount of interest thereonreceived in the year under consideration is taxable in thesame year? Briefly stated the facts necessary for adjudicating asnarrated in the appeal are that land of the appellant-assessee wasacquired by the State Government in the year 1991. Compensationfor the land was awarded on 5.5.1993. The assessee soughtreference under the Land Acquisition Act, 1894. The ReferenceCourt, vide order dated 15.12.1997 enhanced the compensation inrespect of the acquired land at the rate of Rs.360/- per square yard,besides other statutory benefits and interest on late payment ofenhanced compensation. The State as well as the claimants filedappeals before this Court. An amount of Rs. 15,71,790/-, on accountof compensation was paid in the assessment year 2000-2001, andwhile making the payment, the Government deducted tax of Rs.1,72,896/- under the head ‘tax deducted at source’ (TDS) and paidthe balance amount of Rs. 13,98,894/-. Besides this, an amount ofRs. 15,69,721/- was also paid as interest on enhanced compensationfor delayed payment. The assessing officer assessed the income taxas per the following details, vide order dated 26.10.1997, AnnexureA/1. Aggrieved by the aforesaid assessment, the assesseepreferred appeal before the Commissioner of Income-tax (Appeals)[in short “CIT(A)]. The CIT(A), after appreciating the facts and theevidence on record accepted the appeal of the assessee vide orderdated 25.8.2008, Annexure A-2. It was held that taxability of the Aggrieved by the aforesaid assessment, the assesseepreferred appeal before the Commissioner of Income-tax (Appeals)[in short “CIT(A)]. The CIT(A), after appreciating the facts and theevidence on record accepted the appeal of the assessee vide orderdated 25.8.2008, Annexure A-2. It was held that taxability of the amount of enhanced compensation in the assessment year 2000-2001 was not warranted. As regards allowability of TDS deducted bythe Government while paying the amount of enhanced compensationand the interest thereon, the assessing officer was directed to allowthe claim of the assessee after proper verification and as per law. Sofar as the interest accrued on the amount that remained deposited inthe bank is concerned, the CIT(A) held that the addition thereof waspurely based on presumptions and accordingly, deleted the same. The Revenue preferred appeal challenging the order ofthe CIT(A). The Tribunal accepted the appeal and reversed the orderof the CIT(A) regarding the question of taxability of the amount ofenhanced compensation by relying on Commissioner of Income-tax v. Ghanshyam (HUF) [2009] 315 ITR 1 (SC). The interestreceived on enhanced amount of compensation was also held to betaxable in the current assessment year. It is how the present appealhas been filed by the assessee. We have heard learned counsel for the appellant andperused the record. The issue in this case requires answer on following two points: i)Chargeability of capital gains tax arising out of receipt ofenhanced compensation.enhanced compensation. ii)Whether interest received on enhanced compensation isexigible to tax in the current assessment year?exigible to tax in the current assessment year? The answer to the first point stands concluded by the decision of the Apex Court in Ghanshyam (HUF)’s case (supra)wherein it was held that irrespective of the fact, whether litigation with regard to award of compensation had attained finality or not,taxability of such income shall be in the year of receipt in terms ofSection 45(5)(b) of the Act, which was inserted retrospectively w.e.f.1.4.1988. Adverting to the second point, it is undisputed that thesystem being adopted by the assessee is cash receipt basis as hasbeen recorded by the assessing officer. Once that is so, then theamount of interest received on the enhanced compensation has to betaxed in the year of receipt irrespective of pendency of any disputeregarding quantum of compensation. In view of the above, no substantial question of law arisesfor consideration of this Court. The appeals are consequentlydismissed. (AJAY KUMAR MITTAL) JUDGE October 27, 2010*rkmalik* (ADARSH KUMAR GOEL) JUDGE