Commissioner Of Income Tax, Faridabad v. Shri Naval Singh

ITA No. 547 of 2006 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 547 of 2006 Date of Decision: 6.12.2010 Commissioner of Income Tax, Faridabad Versus Shri Naval Singh ....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. None for the respondent. AJAY KUMAR MITTAL, J. 1.This appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (in short “the Act”) againstthe order dated 24.3.2006 passed by the Income Tax AppellateTribunal, Delhi Bench “F”, New Delhi (hereinafter referred to as “theTribunal”) in ITA No. 942/Del/2002 for the assessment year 1998-99,raising following substantial questions of law:- “1.Whether on the facts and circumstances of the case,the Hon'ble ITAT was right in law in holding the orderof the CIT(A) directing the Assessing Officer not totreat that percentage of capital gain and interestarising out of payment which is covered by securityas income for the year when the law had alreadythe Hon'ble ITAT was right in law in holding the orderof the CIT(A) directing the Assessing Officer not totreat that percentage of capital gain and interestarising out of payment which is covered by securityas income for the year when the law had already been changed by amendment and new section 45(5) was inserted w.e.f. 01.04.1988? 2.Whether on the facts and in the circumstances of the case the Hon'ble ITAT has erred in not adjudicatingthe issue of deduction u/s 54B & 54F?”the issue of deduction u/s 54B & 54F?” 2.We have heard learned counsel for the revenue. 3.The point that arises in this appeal is whether the amountof enhanced compensation which was released against security andinterest received thereon would be taxable in the year of receipt. 4.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 enhancedinterest awarded by the Court received on enhanced amount 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.Further, the Apex Court in Commissioner of Income-taxv. Ghanshyam (HUF), [2009] 315 ITR 1 (SC) had held that the amountof enhanced compensation received by the assessee would be taxablein the year of receipt in view of insertion of Section 45(5)(b) of the Actirrespective of whether any litigation is pending at the behest of theState in any court of law. 6.Accordingly, question No.1 is decided in favour of therevenue and against the assessee. The appeal is allowed to thatextent. 7.Since the Tribunal has not decided the issue relating todeduction under Sections 54B and 54Fof the Act, the matter isremanded to the Tribunal for decision in this regard in accordance withlaw. (AJAY KUMAR MITTAL) JUDGE December 6, 2010gbs (ADARSH KUMAR GOEL)JUDGE