Commissioner Of Income Tax, Faridabad v. Shri Krishan Lal

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 290 of 2006 Date of Decision: 24.2.2011 Commissioner of Income Tax, Faridabad Versus Shri Krishan Lal ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant.for the appellant. None for the respondent. AJAY KUMAR MITTAL, J. 1.Since the Registry has not been able to send the files onaccount of fire in the Court premises, learned counsel for the appellanthas furnished paper books which are taken on record. We proceed todecide the matter after hearing learned counsel for the revenue. 2.This order shall dispose of ITA Nos. 290 of 2006 and 59 of2007 as according to the learned counsel for the revenue the similarquestions of law are involved therein. 3.ITA No. 290 of 2006 has been filed by the revenue underSection 260A of the Income Tax Act, 1961 against the order dated5.7.2005 passed by the Income Tax Appellate Tribunal, Delhi Bench“D”, New Delhi in ITA Nos. 3938 & 3939/Del/01 for the assessment year 1998-99, claiming the following substantial questions of law:- “(i)Whether, on the facts and in the circumstances of thecase, the Hon'ble ITAT was right in holding thatinterest received on enhanced compensation is nottaxable in the year of receipt, in view of the decisionof the Apex Court in the case of CIT Vs. TNKGovindarajulu Chetty, despite the fact that theassessee is not following the mercantile system ofaccount?case, the Hon'ble ITAT was right in holding thatinterest received on enhanced compensation is nottaxable in the year of receipt, in view of the decisionof the Apex Court in the case of CIT Vs. TNKGovindarajulu Chetty, despite the fact that theassessee is not following the mercantile system ofaccount? (ii)Whether, on the facts and in the circumstances of thecase, the Hon'ble ITAT was right in holding thatalthough interest would be charged on year to yearbasis but it shall be done only when the dispute isfinally settled by the Court?”case, the Hon'ble ITAT was right in holding thatalthough interest would be charged on year to yearbasis but it shall be done only when the dispute isfinally settled by the Court?” 4.We have heard learned counsel for the appellant. 5.The point that arises for consideration in this appeal iswhether the interest received on enhanced compensation is taxable inthe hands of the assessee in the year of receipt.whether the interest received on enhanced compensation is taxable inthe hands of the assessee in the year of receipt. 6.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 ascertained on thebasis of system of accountancy followed by theassessee;'income from other sources' are ascertained on thebasis of system of accountancy followed by theassessee; ITA No. 290 of 2006 (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.” 5.In view of the above, the appeals are allowed and thequestions of law are answered in favour of the revenue and against theassessee. (AJAY KUMAR MITTAL) JUDGE February 24, 2011gbs (ADARSH KUMAR GOEL)JUDGE (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.” 5.In view of the above, the appeals are allowed and thequestions of law are answered in favour of the revenue and against theassessee. (AJAY KUMAR MITTAL) JUDGE February 24, 2011gbs (ADARSH KUMAR GOEL)JUDGE ITA No. 290 of 2006 -4- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 59 of 2007 Date of Decision: 24.2.2011 Commissioner of Income Tax, Faridabad Versus Shri Kishori Lal ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Ms. Urvashi Dhugga, Senior Standing Counsel,for the appellant.for the appellant. None for the respondent. AJAY KUMAR MITTAL, J. The appeal is allowed. For reasons, see order of even date recorded in ITA No. 290 of 2006 (Commissioner of Income Tax, Faridabad v. ShriKrishan Lal). (AJAY KUMAR MITTAL) JUDGE February 24, 2011gbs (ADARSH KUMAR GOEL) JUDGE