Hari Kishan v. The Presiding Officer, Income Tax Appellatetribunal, New Delhi And Others

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I .T.A.No. 345 of 2007 Hari Kishan Versus .....APPELLANT The Presiding Officer, Income Tax AppellateTribunal, New Delhi and others ....RESPONDENTS I .T.A.No. 361 of 2007 Smt. Chandrawati Versus .....APPELLANT The Presiding Officer, Income Tax AppellateTribunal, New Delhi and others ....RESPONDENTS DATE OF DECISION: APRIL 09, 2008 CORAM:HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG --- Present:Mr.Shiv Kumar, Advocate,for the appellant. Mr. Yogesh Putney, Advocate,for the respondents. .. SATISH KUMAR MITTAL, J. This order shall dispose of I.T.A. Nos.345 and 361 of 2007which are arising from the common order dated 31.1.2007 passed by theIncome Tax Appellate Tribunal, New Delhi (hereinafter referred to as `theAppellate Tribunal'). These appeals have been filed by the assessees under Section260A of the Income Tax Act against the aforesaid order dated 31.1.2007 I .T.A.No. 345 of 2007 and another -2- passed by the Appellate Tribunal, by raising the following substantialquestion of law:- Whether, in the facts and circumstances of the case, thelearned Income Tax Appellate Tribunal is right in law inholding that the enhanced compensation received by theassessees during the pendency of dispute of compensationbefore the Hon'ble Courts is deemed to be income for thepurpose of computation of Capital gain in the year of receiptin terms of the provisions of Section 45(5) of the Income TaxAct? While deciding ITA No.2568/Del/2003 of assessee HariKishan (HUF) and ITA No.2569/Del/2003 of assessee Smt.Chandrawati,both for the Assessment Year 1998-99, it has been held by the AppellateTribunal vide aforesaid order that the amount of enhanced compensationas received by the assessee during the pendency of the dispute before thecourt will be liable to be considered for the purpose of capital gains underSection 45 of the Income Tax Act, 1961 (hereinafter referred to as `theAct') in the year of its receipt, irrespective of the fact that the dispute hasnot attained finality. In this case, the aforesaid assessees received the interimcompensation during the pendency of the appeal on account of acquisitionof their land during the Assessment Year 1998-99 amounting toRs.19,23,468/- and 12,89,026/-, respectively. The Assessing Officer taxedthe capital gain on the enhanced compensation holding that the same wastaxable in the year of receipt under Section 45(5) of the Act. In appeal,Commissioner of Income Tax (Appeals) confirmed the decision of theAssessing Officer. Against that order, the assessees filed appeals beforethe Appellate Tribunal. The Appellate Tribunal by following the decision I .T.A.No. 345 of 2007 and another -3- of the Special Bench in case DCIT Versus Padam Parkash (HUF) 104ITD 1 (Del)(SB) has held that the enhanced compensation is taxable inthe year of receipt, irrespective of the fact whether any dispute waspending or not. The Appellate Tribunal has distinguished the judgment ofthe Hon'ble Supreme Court in case of Commissioner of Income-Tax,West Bengal-II Versus Hindustan Housing and Land DevelopmentTrust Limited, 161 ITR 524 while observing that in that case there wasno occasion to take note of the provisions contained in sub-section (5) ofSection 45 inserted from 1.4.1988. The Appellate Tribunal has also heldthat clause (c) to sub-section (5) of Section 45 of the Act was insertedw.e.f. 1.4.2004 and the said amendment is of declaratory in character,therefore, it will deem to be applicable retrospectively w.e.f. 1.4.1988, thedate on which sub-section (5) of Section 45 was inserted in the Act. The controversy in these appeals is exactly the same asinvolved in ITA No.4 of 2005 (Shri Chandi Ram Versus TheCommissioner of Income Tax, Faridabad), decided by this Court onFebruary 25, 2008, wherein it has been held as under:- The controversy in these appeals is exactly the same asinvolved in ITA No.4 of 2005 (Shri Chandi Ram Versus TheCommissioner of Income Tax, Faridabad), decided by this Court onFebruary 25, 2008, wherein it has been held as under:- “In the present cases, the dispute relates to the assessmentyears 1994-95 to 1998-99 and during that period, onlySection 45(5)(b) of the Act was applicable, which has alreadybeen interpreted by this Court and various other Courts,wherein it has been clearly held that Section 45(5)(b) will beattracted only when the assessee receives the enhancedcompensation in pursuance of a final award/order of a court,Tribunal or other authority increasing the compensation. Ifany amount is received after stay of the award, in pursuanceof any interim order, as a payment subject to the final result,it will not be an amount received as enhanced compensationas contemplated under section 45(5)(b), but only an interim I .T.A.No. 345 of 2007 and another -4- payment received subject to final decision. Since this Courthas already taken the view, therefore, in our opinion, theTribunal was not justified in taking contrary view to the viewtaken by this Court in ITR No.26 of 1997 (the Commissionerof Income Tax, Patiala vs. Shri Karanbir Singh, RajinderKuti, Patiala, decided on 17.01.2007) and ITA No.695 of2005 (The Commissioner of Income Tax, Faridabad vs. ShriPrem Singh; decided on 16.5.2007), by following thedecision of the Karnataka High Court in the case of ChiefCommissioner of Income Tax vs. Smt.Shantavva (2004)267 ITR 67 (supra).” Counsel for the revenue is unable to controvert the aforesaidlegal position and stated that the controversy involved in this case issquarely covered by the aforesaid judgment in favour of the assessee. Consequently, both the appeals are allowed and thesubstantial question of law is, thus, answered in favour of the assesseesand against the revenue. (SATISH KUMAR MITTAL) JUDGE April 09, 2008vkg (RAKESH KUMAR GARG) JUDGE