Court 1N-Commissioner Ofincome Tax, Faridabad v. Ghanshyam (Huf

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH CWP No.2276 of 2015 (O&M)Date of decision: 3.11.2015 Ram Pal and others eee Petition State of Haryana and others. ....mespondent CORAM: HON BLE MR. JUSTICK AJAY KUMAR MITTALHON BLE MR. JUSTICEK RAMENDRA JAIN 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?3. Whether the judgment should be reported 1n the Digest? Present: Mr. Suresh Kumar Kaushik, Advocate for the petitioners, Ms. Mamta Singh Talwar, DAG, Haryana with Mr. Saurabh Mago,AAG, Haryana. Mr. Jagdish Manchanda, Advocate for respondent No.2 (HUDA). Mr. Yogesh Putney, Advocate for respondent No.4. Ajay Kumar Mittal,J, 1.The petitioners pray for quashing the certificate of deduction of tax at source, Annexure P.2 being contrary to the law laid down by the Apex Court 1n-Commissioner ofIncome Tax, Faridabad vs. Ghanshyam (HUF), (2009) 315 ITR 1 as well as Circular dated 13.4.2011, Annexure P.4. Further prayer has been made for directing the respondents to refund the amount oftax deducted at source with interest.|A few facts relevant for the decision of the controversy,involved as narrated in the petition may be noticed. The petitioners wereowners of agricultural land situated at Village Wazirabad, Tehsil and DistrictGurgaon. It was acquired by the State of Haryana for a public purpose 1.e.for residential, commercial and institution of Sector 57, Gurgaon videnotification dated 24.8.2000 under Section 4 of the Land Acquisition Act,1894 (in short, “the Act’) followed by notification under section 6 of theAct on 21.7.2013. Award was passed on 21.7.2014. Thereafter, thepetitioners filed reference petition under Section 28A(3) of the Act. Thepetitioners had not filed any petition under Section 18 of the Act. However,other land owners filed reference petitions. The reference petition wasdisposed of in terms ofjudgment in LA Case No.86 dated 7.5.2005 decidedon 23.8.2011 by the Additional Sessions Judge Gurgaon. The petitionerswere held entitled to compensation at the rate ofL1697.83 per square yardalongwith other statutory benefits under sections 23(1A), 23(2) and 28 ofthe Act and the interest was to start from the date of application undersection 28A of the Act. While depositing the amount of enhancedcompensation with the reference court, the respondents though calculatedthe same asTL7,46,591/- but deducted|<45235/- as Tax Deduction at source(TDS) on the amount of enhanced compensation and paid a sum of=7,01,356/-. According to the petitioners, deduction of tax at source 1srequired to be made in respect of compensation paid for acquisition ofimmovable property other than agricultural land. The interest was on the CWP No.2276 of 2015 (O&M) excess amount of compensation which was awarded by the reference courtand therefore, the same was part of enhanced compensation. Further thecircular dated 13.4.2011, Annexure P.4 provides that in case ofcompensation on account of compulsory acquisition of agricultural lands,TDS should not be deduced. The petitioners met the respondents manytimes for releasing their amount with interest which was withheld by thedepartment in lieu of TDS but they did not pay any heed. Hence the instantwrit petition. CWP No.2276 of 2015 (O&M) excess amount of compensation which was awarded by the reference courtand therefore, the same was part of enhanced compensation. Further thecircular dated 13.4.2011, Annexure P.4 provides that in case ofcompensation on account of compulsory acquisition of agricultural lands,TDS should not be deduced. The petitioners met the respondents manytimes for releasing their amount with interest which was withheld by thedepartment in lieu of TDS but they did not pay any heed. Hence the instantwrit petition. 3)A written statement has been filed on behalf of respondent No.4— Union of India through Commissioner of Income Tax (TDS) II,Chandigarh wherein it has been inter alia stated that the interest onenhanced compensation being revenue receipt and exigible to tax in the yearof receipt in view of the amendment to sub section (2) of Section 56, clause(b) of Section 145A and Section 57(iv) by the Finance (No.2) Act 2009 w.e.f1.4.2010 applicable to the assessment year 2013-14 and in view of the lawlaid down by this Court 1nCIT, Faridabad vs. Bir Singh,ITA No.209 of2004 andCIT, Panchkula vs. Prem Singhdecided on 16.12.2010. Thus, inview of the law laid down by the Apex court 1nGhanshyam'scase (supra),the interest under Section 28 of the Act 1s exigible to tax in the year ofreceipt. With regard to the refund on the basis of circular dated 13.4.2011 1sconcerned, the said circular relates to compensation only and exemptionunder Section 10(37) of the Income Tax Act, 1961 (in short, “the 1961 Act’)and not on the amount of interest component received either under section28 or 34 of the Act. Section 10(37) of the 1961 Act contemplates exemptionon transfer of agricultural land on fulfilling conditions laid down under CWP No.2276 of 2015 (O&M) section 2(14)(111) of the 1961 Act which applies to income chargeable underthe head ‘capital gains' and not on interest which is taxable under the headincome from other sources under section 56 of the 1961 Act. With regard tothe issue of chargeability of interest under sections 28 and 34 of the Act bytreating the same to be part of enhanced compensation, it 1s submitted thatas held by this Court, the interest awarded by court on enhancedcompensation 1s interest under section 28 of the Act and chargeable to tax inthe year of receipt. The judgment inbir Singh'scase (supra) was deliveredafter considering the judgment of the Apex court in|Ghanshyam's case(supra). The judgment inGhanshyam'scase (supra) was delivered on16.7.2009 whereas Amendment was made to sub section (2) of Section 56of the 1961 Act by Finance (No.2) Act, 2009 w.e.f 1.4.2010 to the followingeffect:- (vill) Income by way of interest received on compensation oron enhanced compensation referred to clause (b) of section145A.” Further amendment was carried out under Section 145A by inserting clause(b) by Finance Act, 2009 w.e.f 1.4.2010 to the following effect:- ‘“(b) interest received by an assessee on compensation orenhanced compensation, as the case may be, shall be deemed tobe the income of the year in which it 1s received. In view of theaforesaid amendments, the interest component on the amount ofcompensation or enhanced compensation being revenue receiptwas exigible to tax in the year of receipt, On these premises, prayer for dismissal of the petition has been made. 4 After hearing learned counsel for the parties, we find merit in the stand taken by the respondent authorities. Admittedly, interest had been CWP No.2276 of 2015 (O&M) Further amendment was carried out under Section 145A by inserting clause(b) by Finance Act, 2009 w.e.f 1.4.2010 to the following effect:- ‘“(b) interest received by an assessee on compensation orenhanced compensation, as the case may be, shall be deemed tobe the income of the year in which it 1s received. In view of theaforesaid amendments, the interest component on the amount ofcompensation or enhanced compensation being revenue receiptwas exigible to tax in the year of receipt, On these premises, prayer for dismissal of the petition has been made. 4 After hearing learned counsel for the parties, we find merit in the stand taken by the respondent authorities. Admittedly, interest had been CWP No.2276 of 2015 (O&M) awarded to the petitioners on the enhanced compensation on account ofacquisition of their land on which TDS was deducted by the respondentauthorities. According to the petitioners, the action of the respondents incharging TDS is not legal and valid as per the law laid down inGhanshyam'‘scase (supra) and the circular dated 13.4.2011 issued by therespondents. It needs to be noticed that the judgment in Ghanshyam's case(supra) was delivered on 16.7.2009 by the Apex Court. Thereafter,amendments were made to Sections 56 and 145A of the 1961 Act wef1.4.2010 thereby including income by way of interest received oncompensation or on enhanced compensation to be income of the year inwhich it was received. In view of the said amendments, the interestcomponent on the amount of compensation or enhanced compensationbeing revenue receipt was exigible to tax in the year of receipt irrespectiveof the method of accounting employed. Similarly, inbir Singh's Case(supra), 1t was held that the interest awarded by court on enhancedcompensation was interest under section 28 of the Act and chargeable to taxin the year of receipt. This court 1n Prem Singh'scase (supra) whileconsidering identical issue recorded as under:- “Il. In this view of the matter, the interest component onenhanced compensation under section 28 1s liable to be taxedunder Section 56 of the Act even when compensation 1s treatedas agricultural income and 1s not covered by Section 45(c) ofthe Act. We thus answer the questions in favour of the revenueand modify our order dated 5.7.2010 accordingly. The amountof interest on enhanced compensation 1s held to be taxable inthe year of receipt irrespective of pendency of proceedingsagainst award of enhanced compensation.” CWP No.2276 of 2015 (O&M) 5 In view of the above, we do not find any error in the action ofthe respondents warranting interference by this Court. Consequently,finding no merit in the petition, the same is hereby dismissed. (Ajay Kumar Mittal)Judge November 3, 2015<9'< (Ramendra Jain)Judge