Shri Chandi Ram v. The Commissioner Of Income Tax, Faridabad

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T. Appeals No. 4 to 7 of 2005DATE OF DECISION : _____.02.2008 Shri Chandi Ram .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 415 of 2007DATE OF DECISION : _____.02.2008 Smt. Sheesh Kaur (Individual) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 416 of 2007 DATE OF DECISION : _____.02.2008 Shri Fateh Singh (HUF) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 4 of 2005 -2- I.T.A. No. 417 of 2007DATE OF DECISION : _____.02.2008 Shri Sultan Singh (HUF) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 433 of 2007DATE OF DECISION : _____.02.2008 Shri Ved Pal (HUF) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 434 of 2007 DATE OF DECISION : _____.02.2008 Shri Man Singh (HUF) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 4 of 2005 -3- I.T.A. No. 435 of 2007 DATE OF DECISION : _____.02.2008 Shri Nepal Singh (HUF) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 436 of 2007 DATE OF DECISION : _____.02.2008 Smt. Onkari Devi (Individual) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 437 of 2007 DATE OF DECISION : _____.02.2008 Shri Amer Lal (Individual) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT I.T.A. No. 4 of 2005 -4- I.T.A. No. 438 of 2005DATE OF DECISION : _____.02.2008 Shri Raghubir Singh (HUF) .... APPELLANT Versus The Commissioner of Income Tax, Faridabad ..... RESPONDENT CORAM :- HON'BLE MR. JUSTICE SATISH KUMAR MITTALHON'BLE MR. JUSTICE RAKESH KUMAR GARG Present:Mr. Sanjay Bansal, Senior Advocate, with Mr. Parveen Saini & Mr. Parshant Bansal, Advocates,for the appellant-assessee(in ITAs No.4 to 7 of 2005) Mr. Avneesh Jhingan & Mr. Vijay Gupta, Advocates,for the appellants-assessees (in ITAs No. 415 to 417 of 2007 & 433 to 438 of 2007) Mr. Yogesh Putney, Advocate,for the respondent-revenue. * * * SATISH KUMAR MITTAL, J. These appeals have been filed by the assessees against the orderpassed by the Income Tax Appellate Tribunal, Delhi Bench “E” Delhi(hereinafter referred to as `the Appellate Tribunal'), whereby it has beenheld that the entire amount of additional compensation as received by theassessees on the basis of the Award given by the District Judge will be liable to be considered for the purpose of computation of capital gain underSection 45 of the Income Tax Act, 1961 (hereinafter referred to as `theAct'), in the year of its receipt, irrespective of the fact that 50% amount ofthe additional enhanced compensation was received on furnishing securityin terms of the interim order passed by the Appellate Authority till the finaldecision of the appeal filed by the State, challenging the award of enhancingthe additional compensation. liable to be considered for the purpose of computation of capital gain underSection 45 of the Income Tax Act, 1961 (hereinafter referred to as `theAct'), in the year of its receipt, irrespective of the fact that 50% amount ofthe additional enhanced compensation was received on furnishing securityin terms of the interim order passed by the Appellate Authority till the finaldecision of the appeal filed by the State, challenging the award of enhancingthe additional compensation. The appellants have questioned the aforesaid decision of theAppellate Tribunal on the ground that it has failed to consider the basic factthat the amount of additional compensation received by the assessee underthe interim order of the Appellate Court on furnishing security cannot beconsidered to have been received by the assessee in the year of receipt,which has not become final and against which the appeal is pending. Theexpression “received” as existing in Section 45 (5) (b) of the Act wouldmean received in pursuance of the accrual of right to receive as a result of orin consequence of a decision given by a Court, Tribunal or Authoritysettling the lis between the claimant and the State finally. The word“Received” cannot be given a meaning of physical receipt of additionalcompensation without any right or title conferred upon the claimant by theadjudicatory process of the Court, Tribunal or Authority. According to theappellants, the additional compensation is considered to be received in themeaning of Section 45 (5) (b) of the Act, not when the additionalcompensation was actually received under the interim order of the Court subject to furnishing security and subject to the final decision of theAppellate Authority, but it will be considered to be received on the date thedispute is finally decided by the Appellate Court. Therefore, the additionalcompensation awarded in such situation cannot be assessed in the year inwhich it was actually received. Therefore, the appellants have made theprayer that the Tribunal has erred in law while holding that the provisions ofSection 45 (5) (b) of the Act were attracted to the case of the appellantsherein, and have raised the following substantial questions of law which arearising from the order of the Tribunal for consideration/ adjudication by thisCourt : (i)Whether on a proper and correct interpretation of theprovisions of Section 45 (5) (b) of the Income Tax Act,1961, the Tribunal was right in law in holding that theamount of additional compensation received by theassessees, appellants herein, in pursuance of the interimorders subject to furnishing of security would be deemedto be the income for the purpose of computation ofcapital gain in the year of receipt of such amounts? (ii)Whether the Tribunal was correct in holding that theamount received by the assessees fell within the ambit ofSection 45 (5) (b) of the Income Tax Act, 1961 as thedecision rendered by the Hon'ble Supreme Court in thecase of CIT Vs. Hindustan Housing and Land Development Trust Ltd. (1986) 161 ITR 524 no longerholds the field? The ITAs No. 4 to 7 of 2005 were admitted on August 10, 2006, to be heardwith ITA No. 322 of 2004, in which the following question of law wasframed : (ii)Whether the Tribunal was correct in holding that theamount received by the assessees fell within the ambit ofSection 45 (5) (b) of the Income Tax Act, 1961 as thedecision rendered by the Hon'ble Supreme Court in thecase of CIT Vs. Hindustan Housing and Land Development Trust Ltd. (1986) 161 ITR 524 no longerholds the field? The ITAs No. 4 to 7 of 2005 were admitted on August 10, 2006, to be heardwith ITA No. 322 of 2004, in which the following question of law wasframed : “Whether the Hon'ble ITAT was justified in applying the ratiolaid down in the case of CII vs. Hindustan & LandDevelopment Trust Limited in the present case even afterinsertion of Section 45 (5) in the Income Tax Act specificallyfor charging of enhanced compensation in the year of receipt.”It is pertinent to mention here that the Revenue filed appeals against severaldecisions of the Appellate Tribunal, wherein while applying the ratio laiddown in the case of CIT vs. Hindustan & Land Development TrustLimited and various other decisions of the different High Courts, includingthe Karnataka High Court in the case of Chief Commissioner of IncomeTax vs. Smt. Shantavva (2004) 267 ITR 67, it was held that Section 45 (5)(b) would be attracted only when the assessee receives the enhancedcompensation in pursuance of final Award/order of a Court, Tribunal orother authority increasing the compensation and not on the actual receipt ofthe said amount under the interim order passed by the Appellate Court. Allthose appeals filed by the revenue i.e. ITA No. 322 of 2004 and otherconnected appeals were dismissed by this Court in ITA No. 695 of 2005 (The Commissioner of Income Tax, Faridabad vs. Shri Prem Singh, decidedon 16.5.2007), while observing as under : “At the outset, learned counsel for the assesseecontended that the question of law raised in the present appealsis squarely covered by the decision of this Court in ITR No. 26of 1997, the Commissioner of Income Tax, Patiala vs. ShriKaranbir Singh, Rajinder Kuti, Patiala, decided on 17.01.2007,as these appeals also involved the same question of law as hasbeen decided in the aforesaid case (supra). However, Mr. Putney, learned counsel appearing for therevenue has contended that amendment in Section 45 (5) of theIncome Tax Act, 1961 (for short `the Act') has not been noticedin the said judgment. We are afraid that the contention of learned counsel forthe revenue is not correct as the Division Bench hasspecifically noticed the judgment of Karnataka High Court incase Chief Commissioner of Income Tax and another vs. Smt.Shantavva (2004) 267 ITR 67, wherein the amendment insertedto Section 45 (5) of the Act had been specifically dealt with andthe similar question, as has been raised in these appeals, wasdecided against the revenue and in favour of the assessee. Wehave also perused the judgment rendered in Bikram Singh andothers vs. Land Acquisition Collector and Ors. 224 ITR 551 (SC). After going through the above referred to decisions, weare of the considered view that question raised in the presentappeals is squarely covered by the aforesaid decisions.”It is also pertinent to mention here that in all the aforesaid appeals, filed bythe Revenue, the additional enhanced amount of compensation actuallyreceived was pertaining to the assessment years 1994-95 to 1998-99. Whiledismissing the appeals of the Revenue, another Division Bench decision ofthis Court in ITR No. 26 of 1997 (The Commissioner of Income Tax, Patialavs. Shri Karanbir Singh, Rajinder Kuti, Patiala) decided on 17.01.2007, wasfollowed. (SC). After going through the above referred to decisions, weare of the considered view that question raised in the presentappeals is squarely covered by the aforesaid decisions.”It is also pertinent to mention here that in all the aforesaid appeals, filed bythe Revenue, the additional enhanced amount of compensation actuallyreceived was pertaining to the assessment years 1994-95 to 1998-99. Whiledismissing the appeals of the Revenue, another Division Bench decision ofthis Court in ITR No. 26 of 1997 (The Commissioner of Income Tax, Patialavs. Shri Karanbir Singh, Rajinder Kuti, Patiala) decided on 17.01.2007, wasfollowed. Shri Sanjay Bansal, learned Senior Counsel for the appellant-assessee submitted that the substantial questions of law involved in theseappeals are squarely covered by the abovesaid two decisions rendered bythis Court in ITR No. 26 of 1997 (the Commissioner of Income Tax, Patialavs. Shri Karanbir Singh, Rajinder Kuti, Patiala, decided on 17.01.2007) andITA No. 695 of 2005 (The Commissioner of Income Tax, Faridabad vs. ShriPrem Singh, decided on 16.5.2007), in which judgments of the SupremeCourt in Bikram Singh and othersvs. Land Acquisition Collector and Ors.224 ITR 551 (SC) and of the Karnataka High Court in the case of ChiefCommissioner of Income Tax vs. Smt. Shantavva (2004) 267 ITR 67(supra) were followed. Those cases have been decided in favour of theassessee and against the revenue. Therefore, the Appellate Tribunal was not justified in law in taking a view contrary to the view taken by the KarnatakaHigh Court and this Court. Learned counsel further submitted that theaforesaid view taken by two Division Benches of this Court, following theview taken by the Karnataka High Court has been taken by various otherHigh Courts in the following cases : (i) CIT vs. Jeevan & sons (2000) 161 CTR (Rajasthan) 242; (ii) Darapaneni Chenna vs. CIT (2007) 291 ITR 98 (AP) (iii) CIT vs. Dehradun Tea Co. (2007) 291 ITR 212 (Uttarakhand) (iv) CIT vs. Abdul Mannan Shah (2001) 248 ITR 614 (Bombay) (v) CIT vs. C.P. Lonappan & sons (2004) 265 ITR 101 (Kerala)(vi) CIT vs. Laxman Dass (2000) 246 ITR 622 (Allahabad) (vii) Anil Kumar Forma (HUF) vs. Cit (2007) ITR 245 (Madras). On the other hand, Mr. Yogesh Putney, Advocate, learnedcounsel for the revenue submitted that neither in the case of Karnataka HighCourt in Chief Commissioner of Income Tax vs. Smt. Shantavva (2004)267 ITR 67 (supra) nor in the Division Bench decisions of this Court in ITANo. 695 of 2005 (The Commissioner of Income Tax, Faridabad vs. ShriPrem Singh, decided on 16.5.2007) and ITR No. 26 of 1997, theCommissioner of Income Tax, Patiala vs. Shri Karanbir Singh, RajinderKuti, Patiala (supra), decided on 17.01.2007, or any other judgment cited bylearned counsel for the appellants, the effect of provision of Clause (c) ofSection 45 (5) of the Act and sub-section (16) of Section 155 of the Act,which were inserted by the Finance Act 2003 with effect from 1.4.2004, was considered. However, both these provisions have been taken intoconsideration by the learned Appellate Tribunal, while passing theimpugned order. For ready reference, both the aforesaid provisions are re-produced herein below : “45 (5) (c) where in the assessment for any year, the capital gainarising from the transfer of a capital asset is computed by takingthe compensation or consideration referred to in clause (a) or, asthe case may be, enhanced compensation or considerationreferred to in clause (b), and subsequently such compensation orconsideration is reduced by any court, Tribunal or otherauthority, such assessed capital gain of that year shall berecomputed by taking the compensation or consideration as soreduced by such court, Tribunal or other authority to be the fullvalue of the consideration.” For ready reference, both the aforesaid provisions are re-produced herein below : “45 (5) (c) where in the assessment for any year, the capital gainarising from the transfer of a capital asset is computed by takingthe compensation or consideration referred to in clause (a) or, asthe case may be, enhanced compensation or considerationreferred to in clause (b), and subsequently such compensation orconsideration is reduced by any court, Tribunal or otherauthority, such assessed capital gain of that year shall berecomputed by taking the compensation or consideration as soreduced by such court, Tribunal or other authority to be the fullvalue of the consideration.” “155 (16) Where in the assessment for any year, a capital gainarising from the transfer of a capital asset, being a transfer byway of compulsory acquisition under any law, or a transfer, theconsideration for which was determined or approved by theCentral Government or the Reserve Bank of India, is computedby taking the compensation or consideration as referred to inclause (a) or, as the case may be, the compensation orconsideration enhanced or further enhanced as referred to in clause (b) of sub-section (5) of section 45, to be the full value ofconsideration deemed to be received or accruing as a result ofthe transfer of the asset and subsequently such compensation orconsideration is reduced by any court, Tribunal or otherauthority, the Assessing Officer shall amend the order ofassessment so as to compute the capital gain by taking thecompensation or consideration as so reduced by the court,Tribunal or any other authority to be the full value ofconsideration; and the provisions of section 154 shall, so far asmay be, apply thereto, and the period of four years shall bereckoned from the end of the previous year in which the orderreducing the compensation was passed by the court, Tribunal orother authority.” Mr. Putney submitted that the main section under which thecapital gain is charged to tax is sub-section (1) of Section 45 of the Act. Asper the scheme of the said section, capital gain is to be brought to tax “in theyear in which the transfer takes place”. However, during the course of time,difficulties were faced by the Revenue in realising tax on enhancedcompensation awarded by the Courts in appellate proceedings. In order toremedy those difficulties, sub-section (7A) of Section 155 of the Act wasintroduced by the Finance Act, 1978, with retrospective effected from1.4.1974. However, the said amendment also did not serve the purpose andtherefore, sub-section (7A) was omitted with effect from 1.4.1988. Mr. Putney submitted that the main section under which thecapital gain is charged to tax is sub-section (1) of Section 45 of the Act. Asper the scheme of the said section, capital gain is to be brought to tax “in theyear in which the transfer takes place”. However, during the course of time,difficulties were faced by the Revenue in realising tax on enhancedcompensation awarded by the Courts in appellate proceedings. In order toremedy those difficulties, sub-section (7A) of Section 155 of the Act wasintroduced by the Finance Act, 1978, with retrospective effected from1.4.1974. However, the said amendment also did not serve the purpose andtherefore, sub-section (7A) was omitted with effect from 1.4.1988. Thereafter, sub-section (5) of Section 45 of the Act was added vide FinanceAct, 1987, with effect from 1.4.1988 to charge the compensation enhancedor further enhanced. However, even this provision was not adequate to dealwith the situation where the enhanced compensation was reduced on appeal.Therefore, clause (c) in sub-section (5) of Section 45 of the Act was insertedby Finance Act, 2003 with effect from 1.4.2004, which provides that “wherein the assessment for any year, the capital gain arising from the transfer of acapital asset is computed by taking the compensation or considerationreferred to in clause (a) or, as the case may be, enhanced compensation orconsideration referred to in clause (b), and subsequently such compensationor consideration is reduced by any court, Tribunal or other authority, suchassessed capital gain of that year shall be recomputed by taking thecompensation or consideration as so reduced by such court, Tribunal orother authority to be the full value of the consideration.” Learned counselfurther submitted that for re-computation of capital gain in case of reductionin compensation, a new sub-section (16) in Section 155 of the Act was alsoinserted by the Finance Act, 2003, with effect from 1.4.2004, to provide thatthe Assessing Officer shall amend the order of assessment to revise thecomputation of said capital gain of that year by taking the compensation orconsideration so reduced by the court, Tribunal or other authority to be thefull value of consideration. Learned counsel submitted that very scheme ofintroduction of sub-section (5) to Section 45 of the Act was to bring tocharge the compensation on receipt basis. Therefore, there is no justification for ignoring of assessment of enhanced compensation on receipt basis.Learned counsel submitted that the enhanced compensation is to be assessedin the year in which it is actually received. He submitted that now clause (c)of sub-section (5) of Section 45 read with sub-section (16) of Section 155 ofthe Act automatically takes care of the situation where the enhancedcompensation is subsequently reduced by any court, Tribunal or otherauthority. He submitted that clause (c) which was inserted with effect from1.4.2004 was only a declaratory in character, therefore, it will applyretrospectively. Thus, even in case of the appellants, where the cases pertainto the assessment years 1994-95 to 1998-99, the further enhancedcompensation, even if the same was received on the basis of the interimorder passed by the Appellate Court, will be taxed in the year in which itwas actually received and not on the date the dispute is finally decided bythe Appellate Court. He submitted that the provision of clause (c) of Section45 (5) of the Act is not substantive but procedural and clarificatory in natureas it only takes into consideration the law as it stood even prior to that,therefore, these provisions will apply retrospectively. He submitted that therule of retrospectivity has to apply to the procedural amendment. On the other hand, Shri Sanjay Bansal, learned counsel for theappellants-assessees submitted that the right to receive compensation isessential to tax enhanced compensation. A non-operative, non-effective,non-enforceable order or decree on account of stay or conditions imposedby superior Court cannot give rise to any chargeable income. The income must accrue or arise before it can be brought to tax under the Act. Theexpression “received” as existing in Section 45 (5) (b) of the Act meanreceived in pursuance of the accrual of right to receive as a result of or inconsequence of a decision given by a Court, Tribunal or Authority settlingthe lis between the claimant and the State. Learned counsel submitted thatthe expression “received” cannot be given a meaning of physical receipt ofadditional compensation without any right or title conferred upon theclaimant by the adjudicatory process of the Court, Authority or Tribunal.“Received” means lawfully received or received under a legal title. Hesubmitted that the enhanced compensation received under the conditionalorder of the court cannot be taken as income received because the order isliable to be varied, reversed or set aside. Such temporary arrangementcannot give rise to “accrual” of income. Learned counsel submitted that asfar as application of clause (c) of Section 45 (5) and sub-section (16) ofSection 155 of the Act, which were inserted by Finance Act, 2003 isconcerned, these clauses will not be applicable and taken into considerationwhile deciding the present appeals, which pertain to the assessment years1994-95 to 1998-99, because these provisions are prospective and madeapplicable with effect from 1.4.2004 and will only apply in relation to theassessment year 2004-05 and subsequent years. Learned counsel furthersubmitted that sub-section (5) of Section 45 including clauses (a) (b) and (c)is a substantive provision and is a charging section, therefore, any part ofthis sub-section cannot be made applicable retrospectively. We have considered the submissions made by learned counselfor the parties and have also perused the impugned order as well as thevarious judgments cited by learned counsel for the parties. Section 45 of the Act provides for charging of capital gain andsuch profits and gains shall be deemed to be the income of the previousyear, in which transfer took place. Subsequently, when the department hadto face difficulties in realising capital gains arising on compensation bycourts at different stages i.e. at the level of District Judge, High Court andthe Supreme Court, the legislation introduced sub-section (5) to Section 45with effect from 1.4.1988. Vide this sub-section, the enhancedcompensation was brought to charge to capital gain in the year in which itwas received. Prior to this, where capital gains accrue or arise by way ofcompensation, the additional compensation is taken into consideration fordetermining the capital gain for the year in which transfer took place. Toprovide for rectification of assessment of the year in which the capital gainwas originally assessed, Section 155 (7A) was introduced. The additionalcompensation was awarded in several stages by different appellateauthorities. That necessitates rectification of the original assessment at eachstage. This again caused great difficulty in carrying out the requiredrectification and in effecting the recovery of additional demand. With aview to remove these difficulties, a new sub-section (5) to Section 45 wasinserted which provides for taxation of additional compensation in the yearof receipt instead of in the year of transfer of the capital asset. This provision was interpreted by various High Courts as well as by this Courtand it has been held that Section 45 (5) (b) of the Act would be attractedonly when the assessee receives the enhanced compensation in pursuance ofa final award/order of a Court, Tribunal or other authority increasing thecompensation. If any amount is received after stay of the award, inpursuance of any interim order, as payment subject to the final result, it willnot be an amount received as enhanced compensation under Section 45 (5)(b). This provision will be attracted only when the final decision is renderedby the Appellate or other Authority. In these decisions, the decision of theSupreme Court in CIT Vs. Hindustan Housing and Land DevelopmentTrust Ltd. (supra) was constantly followed. We do not see any reason tohave a contrary view to these judgments, which have already been followedby this Court in ITR No. 26 of 1997 (The Commissioner of Income Tax,Patiala vs. Shri Karanbir Singh, Rajinder Kuti, Patiala) decided on17.01.2007 and ITA No. 695 of 2005 (The Commissioner of Income Tax,Faridabad vs. Shri Prem Singh) decided on 16.5.2007. In these appeals, learned counsel for the Revenue has arguedthat the two provisions i.e. clause (c) of Section 45 (5) and sub-section (16)of Section 155 of the Act, which have been inserted by the Finance Act,2003 and which have changed the entire dimension, have not beenconsidered. After the introduction of these two provisions, the view takenby this Court and the other Courts in the aforesaid judgments is not sustainable. It is the case of the Revenue that both these provisions areprocedural in nature, therefore, these will be applicable retrospectively, andthus will also be applicable in the cases in hand, which pertain to theassessment years 1994-95 to 1998-99. We do not find any substance in the aforesaid argument raisedby learned counsel for the Revenue. Clause (c) to Section 45 (5) and sub-section (16) to Section 155 of the Act have been inserted by the FinanceAct, 2003, with effect from 1.4.2004. The Notes on these clauses whichhave been published in (2003) 260 ITR 166 clearly state that theseamendments will take effect from 1[st] April, 2004 and will, accordingly,apply in relation to the assessment year 2004-2005 and subsequent years.Clause (c) to Section 45 (5) of the Act was inserted to provide that wherethe amount of the compensation is subsequently reduced by any court,Tribunal or other authority, the capital gain of that year, in which thecompensation received was taxed, shall be recomputed accordingly. Sub-section (16) to Section 155 of the Act was inserted empowering theAssessing Officer to amend the order of assessment to revise thecomputation of said capital gain of that year by taking into consideration thecompensation, so reduced by the authority. Actually, these provisions wereinserted to meet the situation when compensation is subsequently reducedand in that situation, it was provided that the assessment of additionalcompensation is to be reduced in the year of reduction. We are unable to accept the reasoning given by the Special Bench of the Tribunal that clause(c) to sub-section (5) of Section 45 of the Act inserted by Finance Act, 2003is to be made applicable retrospectively, and taken to be introduced witheffect from 1.4.1988. It has been observed that this clause was inserted tomake the entire scheme workable and to supply an obvious omission in theprovision. Therefore, the said clause has to be taken to be declaratory incharacter and is applicable with retrospective effect. In our opinion, theentire sub-section (5) of Section 45 of the Act is a charging section. Thesaid sub-section itself is a code and contains substantive provisions.Therefore, its provisions cannot be made applicable retrospectively withoutany express indication. Clause (c) to Section 45 (5) was inserted by FinanceAct, 2003 with effect from 1.4.2004. In the purpose clause, it wasspecifically stated that this amendment will take effect from 1.4.2004 andwill, accordingly, apply in relation to the assessment year 2004-2005 andsubsequent years. Similarly, sub-section (16) to Section 155 of the Act wasintroduced with effect from 1.4.2004 and as per Note [published in (2003)260 ITR 166] the amendment was to apply in relation to the assessment year2004-05 and subsequent years. If the legislation wanted to insert theseclauses with retrospective effect, it could have been so stated in theAmending Act. Previously, when sub-section (7A) to Section 155 of the Actwas inserted by Finance Act, 1978, it was specifically mentioned that it wasinserted with retrospective effect from 1.4.1974. If the legislation wanted toinsert these clauses with retrospective effect, it could have been so mentioned in the Amending Act, but when specifically the legislation hasmentioned that these clauses have been inserted with effect from 1.4.2004and will be applicable in relation to the assessment year 2004-2005 and notprior to that, then these clauses cannot be given retrospective operationmerely on the ground that these are declaratory in character. It is settledlaw, as has been held in Virtual Soft Systems Ltd.v. Commissioner ofIncome-Tax,(2007) 289 ITR 83 (SC), that a taxing provision imposingliability is governed by the normal presumption that it is not retrospective.There is no assumption as to the retrospectivity of an amendment.Retrospectivity has to be enacted specifically in the fiscal statute. Regardingconsidering an amendment to be declaratory or clarificatory, in thisjudgment it has been observed as under : “... It is the well-settled legal position that an amendment canbe considered to be declaratory and clarificatory only if thestatute itself expressly and unequivocaly states that it is adeclaratory and clarificatory provision. If there is no such clearstatement in the statute itself, the amendment will not beconsidered to be merely declaratory or clarificatory. Even if the statute does contain a statement to the effectthat the amendment is declaratory or clarificatory, that is not theend of the matter. The court will not regard itself as beingbound by the said statement made in the statute but willproceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratoryprovision or whether it is an amendment which is intended tochange the law and which applies to future periods.” Even if the statute does contain a statement to the effectthat the amendment is declaratory or clarificatory, that is not theend of the matter. The court will not regard itself as beingbound by the said statement made in the statute but willproceed to analyse the nature of the amendment and then conclude whether it is in reality a clarificatory or declaratoryprovision or whether it is an amendment which is intended tochange the law and which applies to future periods.” In the present case, it may be noted that amendment to Section45 of the Act by inserting clause (c ) by the Finance Act 2003 only statesthat the amended provision would come into force with effect from1.4.2004. The statute no where states that the said amendment was eitherclarificatory or declaratory. On the contrary, in the Note [published in(2003) 260 ITR 166], it was clearly stated that this amendment would comeinto force with effect from 1.4.2004 and will be applicable on theassessment year 2004-2005. Therefore, we are of the opinion that theseamendments would apply only to future period and not to any period priorto 1.4.2004 or any assessment year prior to the assessment year 2004-2005. In the present cases, the dispute relates to the assessment years1994-95 to 1998-99 and during that period, only Section 45 (5) (b) of theAct was applicable, which has already been interpreted by this Court andvarious other Courts, wherein it has been clearly held that Section 45 (5) (b)will be attracted only when the assessee receives the enhancedcompensation in pursuance of a final award/order of a court, Tribunal orother authority increasing the compensation. If any amount is received afterstay of the award, in pursuance of any interim order, as a payment subject tothe final result, it will not be an amount received as enhanced compensationas contemplated under section 45 (5) (b), but only an interim payment received subject to final decision. Since this Court has already taken theview, therefore, in our opinion, the Tribunal was not justified in takingcontrary view to the view taken by this Court in ITR No. 26 of 1997 (theCommissioner of Income Tax, Patiala vs. Shri Karanbir Singh, RajinderKuti, Patiala, decided on 17.01.2007) and ITA No. 695 of 2005 (TheCommissioner of Income Tax, Faridabad vs. Shri Prem Singh, decided on16.5.2007), by following the decision of the Karnataka High Court in thecase of Chief Commissioner of Income Tax vs. Smt. Shantavva (2004)267 ITR 67 (supra). Consequently, the impugned order is not sustainable and allthese appeals are accordingly allowed. The substantial questions of law are,thus, answered in favour of the assessees and against the Revenue. ( SATISH KUMAR MITTAL )JUDGE February , 2008 ndj ( RAKESH KUMAR GARG )JUDGEJUDGE