Commissioner Of Income Tax, Faridabad v. The New Vikas Cooperative House Building Society Limited

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.292 of 2009 (O&M)Date of decision:09.1.2014 Commissioner of Income Tax, Faridabad Versus ..Appellant The New Vikas Cooperative House Building Society Limited ...Respondent CORAM:|HON'BLE MR.JUSTICK AJAY KUMAR MITTALHON'BLE MS. JUSTICE ANETTA CHAUDHR Present:Mr. Tajinder K.Joshi, Advocate for the appellant. Mr. Sanjay Bansal, Sr. Advocate with Mr. Vijay Gupta,Advocate, for the respondent. Ajay Kumar Mittal,J inThis order shall dispose of ITA Nos. 292, 313 to 316 of2009 as the legal issue involved therein 1s identical. All the appealsarise from the common order of the Tribunal dated 12.9.2008.However, the facts are being extracted from ITA No.292 of 2009.?)ITA No.292 of 2009 has been preferred by the revenueunder section 260A of the Income Tax Act, 1961 (in short, “the Act’)against the order dated 12.9.2008, Annexure A.III passed by theIncome Tax Appellate Tribunal, Delhi Bench 'F' New Delhi (in short,“the Tribunal’) in ITA No.2215/DEL/2008 for the assessment year2000-01. On 10.3.2010, this Court while admitting the appeal hadpassed the following order:- “After hearing the learned counsel for the parties, we findthat the following substantial question of law wouldemerge 1n this case: "|. Whether on the facts and jn the circumstances of thecase and in law, the Id. ITAT was correct in holding thathe activities of the society were governed by theprinciple of mutuality.'case and in law, the Id. ITAT was correct in holding thathe activities of the society were governed by theprinciple of mutuality.' However, on request made by learned Senior counsel forthe assessee and in pursuance of proviso to Section 260A(4) read with sub section (6) of the Income Tax Act, 1961,the following question is framed at the instance of theassessee-respondent: '2. Whether the amount of compensation and interestreceived by the assessee under the interim orders of theHon'ble High Court during the pendency of appealsfiled by the State could be charged to tax under theprovisions of Section 45(5) (b) of the Income Tax Act,1961 in view of the findings of fact recorded by theCIT(A) and accepted by the department/Revenue thatthe assessee was not a ‘person’ as defined under Section2(31) of the said Act before 1.4.2002 and thereforesuch receipts did not attract the levy of tax by virtue ofnon-applicability of charging provisions of Section 4 ofthe Act?! Admitted.” 3.Briefly, the relevant facts are that the assessee had receivedenhanced compensation of Lv8,/3,93,278/- and imterest on enhancedcompensation of|=a4,70,68,03 1/- during the financial year 2002-03. Thassessee did not file its return of income under Section 139(1) of theAct. Notice under Section 148 of the Act was issued on 22.3.2006. Theassessee filed its return of income declaring loss ofan69,030/- on ITA No.292 of 2009 (O&M) Admitted.” 3.Briefly, the relevant facts are that the assessee had receivedenhanced compensation of Lv8,/3,93,278/- and imterest on enhancedcompensation of|=a4,70,68,03 1/- during the financial year 2002-03. Thassessee did not file its return of income under Section 139(1) of theAct. Notice under Section 148 of the Act was issued on 22.3.2006. Theassessee filed its return of income declaring loss ofan69,030/- on ITA No.292 of 2009 (O&M) 12.6.2006 and tax was not paid on interest on enhanced compensationon accrual basis though the assessee was maintaining its books ofaccount on mercantile system and on the plea that payment was receivedon furnishing security ofLv5,/73,46,367/- and the amount of enhancecompensation and interest was challenged by the State Governmentbefore this court. The assessment was completed under sections147/143(3) of the Act on 27.10.2006, Annexure A.1, at total Income ofLT1,27,50,360/-. The said amount of interest on enhanced compensationwas included in the total income on accrual basis. Aggrieved by theorder, the assessee filed an appeal before the Commissioner of IncomeTax (appeals). Vide order dated 24.3.2008, Annexure A.II, the CIT(A)allowed the appeal holding that since the society was a mutual benefitconcern, therefore it was not covered under Section 2(24) of the Act.He further deleted the addition of enhanced compensation and interestthereon by relying on the judgment of this Court in ITA No.695 of 2005CIT Faridabad y. Prem Singh,decided on 16.5.2007 holding thatenhanced compensation and interest thereon could not be charged to taxunless it attained finality from the highest court. Dissatisfied with theorder, the revenue filed appeal before the Tribunal. Vide order dated12.9.2008, Annexure A.III, the Tribunal dismissed the appeal. Hence thepresent appeals by the revenue. A We have heard learned counsel for the parties and perusedthe record. 4 It is agreed between the learned counsel for the parties thatin view of the subsequent decisions of this Court inCommissioner of Income Tax v. Shri Prem Singh,ITA No.85 of 2010, decided on5.7.2010,Commissioner ofIncome Tax, Faridabad v. Karambir SinghL/H of Late Shri Khushi Ram,ITA No.283 of 2006, decided onl24.38.2010,Commissioner of Income Tax, Faridabad v. bir Singh(HUF) Ballabgarh,ITA No.209 of 2004, decided on 27.10.2010 andCM No.27928-29-CII of 2010 (Commissioner of Income Tax,Panchkula vy. Prem Singh)inITA No.85 of 2010, decided on16.12.2010 and judgment of the Apex Court in-Bangalore Club ys,Commissioner of Income Tax and another,(2013) 350 ITR 509 andinsertion of Explanation to Section 2(31) by Finance Act, 2002 effectivefrom 1.4.2002, the matter 1s required to be remanded to the Tribunal toadjudicate the issue afresh in accordance with law. Ordered accordingly.The appeals stand disposed of, (Ajay Kumar Mittal)Judge January 09, 201495#9 (Anita Chaudhry)Judge