Commissioner Of Income-Tax, Faridabad v. Sh.shantivir Vashist

Income-tax Appeal No.494of 2010-1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH Income-tax Appeal No.494of 2010 Date of decision: 18.1.2011 Commissioner of Income-Tax, Faridabad ...Appellant Versus Sh.Shantivir Vashist ...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. **** ADARSH KUMAR GOEL, J (Oral). 1.As per office report, the respondent refused to acceptnotice and the notice was affixed at the door. Thus, service istreated to be completed. 2.This Appeal has been preferred by the revenue underSection 260A of the Income Tax Act, 1961 (hereinafter referred to as“the Act”) against order dated 29.6.2009 passed by the Income TaxAppellate Tribunal, Delhi Bench 'G', New Delhi in ITA No.1772/(Del)/08, for the assessment year 2001-02, raising following substantialquestion of law:- “Whether on the facts and in the circumstances ofthe case, the ld. ITAT was right in law in confirmingthe order of the ld. CIT(A) in holding that since in **** the present case the matter is still under dispute,the enhanced compensation and interest thereonreceived by the assessee is subject to litigation andhas not reached the finality and therefore cannot betaxed in the year of dispute disregarding the factthat the entire controversy on the year of taxabilityof enhanced compensation and interest thereon hasnow come to rest with the judgment of Hon'bleSupreme Court in case of Commissioner of IncomeTax, Faridabad Vs. Ghanshyam (HUF) reported in(2009) 315 ITR 1 (SC) wherein the Hon'ble ApexCourt has held that the year in which enhancedcompensation is received is the year of taxabilityand the interest u/s 28 of the Land Acquisition Act,1894 on enhanced compensation is a part ofenhanced compensation, therefore, the interest u/s28 of the Land Acquisition Act on enhancedcompensation will also be taxable in the year ofreceipt? 3.The assessee received compensation for the acquisitionof his land on different dates from 1.9.1999 to 18.4.2002. Enhancedcompensation was received during the assessment year 2001-02.The assessing officer made assessment during the compensationreceived as capital gain. On appeal, CIT(A) held that sinceenhanced compensation had not reached finality, the amount couldnot be taxed in the year of receipt as per judgment of this Court in **** ITA No.595 of 2005 (CIT Vs. Prem Singh)decided on 16.5.2007which was based upon the judgment of this Court in ITR No.26 of1997 (CIT, Patiala Vs. Karanbir Singh Rajinder Kuti, Patiala)decided on 17.1.2007 which in turn based upon the judgment ofHon'ble Supreme Court in Commissioner of Income Tax, West -BengalII v. Hindustan Housing and Land Development TrustLtd., (1986) 161 ITR 524. On appeal, the said view has beenaffirmed by the Tribunal. 4.The matter was considered by Hon'ble Supreme Court in Commissioner of Income Tax, Faridabad Vs. Ghanshyam (HUF) (2009) 315 ITR 1 and it was held that enhanced compensation wastaxed in the year of receipt even if the proceeding has not attainedfinality in view of the amendment to Section 45(5) of the Act. Intereston compensation awarded by the Collector was part of compensationwhile interest on enhanced compensation was to be treated asincome from other sources. Following the said judgment, this Courthas dealt with the matter in ITA No.209 of 2004 (TheCommissioner of Income-Tax, Faridabad Vs. Bir Singh (HUF),Ballabgarh) decided on 27.10.2010. It was held that:- “(a) that ‘income from Business or profession’ and ‘income from other sources’ are ascertained on thebasis of system of accountancy followed by theassessee;basis of system of accountancy followed by theassessee; (2009) 315 ITR 1 and it was held that enhanced compensation wastaxed in the year of receipt even if the proceeding has not attainedfinality in view of the amendment to Section 45(5) of the Act. Intereston compensation awarded by the Collector was part of compensationwhile interest on enhanced compensation was to be treated asincome from other sources. Following the said judgment, this Courthas dealt with the matter in ITA No.209 of 2004 (TheCommissioner of Income-Tax, Faridabad Vs. Bir Singh (HUF),Ballabgarh) decided on 27.10.2010. It was held that:- “(a) that ‘income from Business or profession’ and ‘income from other sources’ are ascertained on thebasis of system of accountancy followed by theassessee;basis of system of accountancy followed by theassessee; (b) where assessee is not maintaining books ofaccounts by adopting any specific method, it shallaccounts by adopting any specific method, it shall **** be treated to be cash system of accountancy; (c) the interest under Section 34 to be awarded by theCollector partakes the character of compensationand is taxable in the year of receipt in view ofSection 45(5)(b) of the Act; andCollector partakes the character of compensationand is taxable in the year of receipt in view ofSection 45(5)(b) of the Act; and (d) under cash system of accountancy, the element ofinterest awarded by the Court received onenhanced amount of compensation under Section28 of the 1894 Act falls for taxation under Section56 as ‘income from other sources’ in the year ofreceipt.”interest awarded by the Court received onenhanced amount of compensation under Section28 of the 1894 Act falls for taxation under Section56 as ‘income from other sources’ in the year ofreceipt.” 5.In view of the above, question raised in the appeal isanswered in favour of the revenue in the above terms. 6.Accordingly, the appeal is allowed. (Adarsh Kumar Goel) Judge January 18,2011Pka (Ajay Kumar Mittal) Judge