Commissioner Of Income Tax, Faridabad v. Shri Attar Singh

ITA No. 555 of 2008 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Commissioner of Income Tax, Faridabad Versus Shri Attar Singh ITA No. 555 of 2008 (O&M)Date of Decision: 31.1.2011 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been filed by the revenue under Section260A of the Income Tax Act, 1961 against the order dated 13.11.2006passed by the Income Tax Appellate Tribunal, Delhi Bench “G”, Delhi(in short “the Tribunal”), in ITA No. 4398/Del/2004 for the assessmentyear 1997-98, claiming following substantial question of law:- “Whether on the facts and circumstances of the case, the Hon'ble ITAT is right in holding that assessmentof interest cannot be made until the matter is finallysettled by the High Court, in contradiction with thejudgment of Hon'ble Jurisdictional High Court ofPunjab & Haryana following the judgment of ApexCourt in the case of CIT vs. Rama Bai (181 ITR 400) whereby interest on enhanced compensation is to betaxed on accrual basis irrespective of the pendencyof appeal in higher courts in respect of enhancedcompensation. [ITA No. 175 of 05 and ITA No. 177 of05 in the cases of CIT, Faridabad Vs. Naresh Kumarand CIT, Faridabad Vs. Dilbagh Singh, respectively]? 2.Put shortly, the facts necessary for adjudication as narratedin the appeal are that the assessee received interest on enhancedcompensation at Rs.82,58,720/-. The assessee expired and noticesunder Section 148 of the Act were issued to the legal heirs of theassessee on 21.3.2003 and returns declaring nil income were filed bysome of the legal heirs. The Assessing Officer completed theassessment on 17.11.2003 at an income of Rs.82,58,720/-. On appeal,the Commissioner of the Income Tax (Appeals) [in short “the CIT(A)”]upheld the view of the Assessing Officer. On further appeal, theTribunal set aside the orders of the CIT (A) as well as the AssessingOfficer and directed the Assessing Officer to assess the interest paid tothe assessee on enhanced compensation in the light of the directions ofthe Special Bench. Hence, the present appeal by the revenue. 3.We have heard learned counsel for the appellant. 4.The point that arises in this appeal is whether the intereston enhanced compensation is taxable in the hands of the assessee inthe year of receipt. 5.The similar issue came up for consideration before thisCourt in ITA No. 209 of 2004 (The Commissioner of Income Tax,Faridabad v. Bir Singh (HUF) Ballabgarh) decided on 27.10.2010, wherein it was concluded as under:- “(a)that 'income from Business or profession' and'income from other sources' are ascertain on thebasis of system of accountancy followed by theassessee; (b)where assessee is not maintaining books of accountsby adopting any specific method, it shall be treated tobe cash system of accountancy; (c) the interest under Section 34 to be awarded by theCollector partakes the characters of compensationand is taxable in the year of receipt in view of Section45(5)(b) of the Act; and (d)under cash system of accountancy, the element ofinterest awarded by the Court received on enhancedamount of compensation under Section 28 of the1894 Act falls for taxation under Section 56 as'income from other sources' in the year of receipt.”interest awarded by the Court received on enhancedamount of compensation under Section 28 of the1894 Act falls for taxation under Section 56 as'income from other sources' in the year of receipt.” 6.In view of the above, the appeal is allowed and thesubstantial question of law is answered in favour of the revenue. (AJAY KUMAR MITTAL) JUDGE (ADARSH KUMAR GOEL)JUDGE