Itta/47/2002 Of Ch.ashok Kumar v. Income Tax Officer Ongole

*THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND*THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM+I.T.T.A.No.47 of 2002 % Dated 23.07.2014 Shri Chakiri Ashok Kumar, Ongole. ….Appellant $ The Income Tax Officer. ….Respondents ! Counsel for the appellant : Sri A.V.Krishna Kaundinya^ Counsel for respondent : Sri J.V.Prasad < GIST: > HEAD NOTE: ? Cases referred: THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYANDTHE HON’BLE SRI JUSTICE CHALLA KODANDA RAMI.T.T.A.No.47 of 2002JUDGMENT: (Per LNR,J) The appellant is an assessee. His land, admeasuringAc.1.62 cents was acquired by the Government of A.P. in theyear 1976, by invoking the provisions of the Land Acquisition Act(for short ‘the Act’). The Land Acquisition Officer fixed the marketvalue at Rs.6.50 ps. per square yard. Not satisfied with that, theappellant sought for reference under Section 18 of the Act. The same was taken up by the subordinate Judge, Ongole andthrough its order, dated 31.07.1986, the trial Court enhanced themarket value to Rs.20/- per square yard. The statutory benefitssuch as solatium, additional market value were also awarded. Seeking further enhancement of compensation, the appellantfiled an appeal before this Court. Through its judgment, dated16.08.1991, this Court the fixed the market value at Rs.70/- persquare yard. All the statutory benefits were also extended. Theappellant filed returns year after year. In the context of levy ofthe capital gains tax, the appellant claimed the benefitunder Section 54-H of the Income Tax Act (for short ‘theI.T.Act’). The Assessing Officer restricted the benefit only to theamount awarded by the Land Acquisition Officer. Theenhancement ordered by the trial Court as well as this Courtwere treated as additional compensations and not covered bySection 54-H of the I.T.Act. The Commissioner of Appealsdismissed the appeals through order, dated 19.12.1995. Furtherappeals preferred before the Hyderabad Bench of the IncomeTax Appellate Tribunal being I.T.T.A.Nos.571 and 572/Hyd/96were also rejected, through order, dated 30.05.2001. Hence, thisappeal against the common order. reads: The substantial question of law raised by the appellant “Whether on the facts and circumstances of the case theword compensation as referred to in Section 45(5)/54H of theIncome Tax Act, 1961 includes the additional compensation ornot?” Heard learned counsel for the appellant and learnedcounsel for the respondent. The compensation received by the owner of the propertywhenever it is acquired under the Act is treated as ‘capital gains’and it is made subject to levy of capital gains tax. However,certain relief is granted by the Parliament to such persons. In case, the compensation so received is invested in acquiringsimilar properties or constructing buildings within the stipulatedtime, the amount is exempted from capital gains tax. It has already been mentioned that the determination of thecompensation for the land acquired from the appellant occurredat three stages viz., Land Acquisition Officer, Civil Court and theHigh Court. Naturally the payment of compensation was alsomade in a staggered manner depending on the nature ofadjudication. In the context of allowing the benefit under Section 54-H ofthe I.T.Act, the assessing authority took the view that it is onlyamount which is determined by the Land Acquisition Officer, thatcan be the subject matter of the exemption under Section 54 ofthe Act. The same view was upheld by the appellate authority aswell as the Tribunal. It has already been mentioned that the determination of thecompensation for the land acquired from the appellant occurredat three stages viz., Land Acquisition Officer, Civil Court and theHigh Court. Naturally the payment of compensation was alsomade in a staggered manner depending on the nature ofadjudication. In the context of allowing the benefit under Section 54-H ofthe I.T.Act, the assessing authority took the view that it is onlyamount which is determined by the Land Acquisition Officer, thatcan be the subject matter of the exemption under Section 54 ofthe Act. The same view was upheld by the appellate authority aswell as the Tribunal. Though one may call the amount awarded by the LandAcquisition Officer towards compensation as the considerationfor the acquired land, that figure is not final. The Act conferredright upon the owner of the land to seek reference under Section18 of the Act and to prefer appeal under Section 54 thereof. It iscommon that in a given case, the matter may reach even theSupreme Court either at the instance of the owner of the land orthe State. It is only when the market value and thereby thecompensation is determined by the Court, that the matter wouldassume finality. Through out the proceedings, the authorities under the Acthave employed the expression “additional compensation”. In ourview, it is a misnomer to call the enhanced amount as “additionalcompensation”. The word “compensation” connotes not only themarket value but also the other components such as solatiumand additional market value provided for under the Act. Thedetermination thereof may assume finality, in some case, at thestage of the award and in some cases, in the reference made under Section 18 of the Act by the Civil Court and in yet othercases, by the High Court. In certain given cases, the matter mayeven reach the Supreme Court. At various levels, thecompensation may be either enhanced or reduced. The finalfigure represents the compensation. There is nothing likeadditional compensation, in matters of this nature. Since the very adjudication before various authoritiesproceeded on the assumption that there exists a separatecomponent of additional compensation and since we find thatsuch a concept is alien to the Scheme and the Act or for thatmatter, the I.T.Act, we allow the appeal and accordingly set asidethe impugned order. It is directed that the benefit under Section54-H of the I.T.Act shall be extended to the entire amount ofcompensation as enhanced by the High Court. The miscellaneous petition filed in this appeal shall alsostand disposed of. There shall be no order as to costs. ____________________ L.NARASIMHA REDDY, J ______________________ CHALLA KODANDA RAM, J Date: 23.07.2014Note: L.R.Copy to be marked.JSU THE HON’BLE SRI JUSTICE L.NARASIMHA REDDYAND THE HON’BLE SRI JUSTICE CHALLA KODANDA RAM JSU I.T.T.A.No.47 of 2002 Date: 23.07.2014