Shri Mool Chand (Huf v. The Commissioner Of Income Tax,Faridabad

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A.No. 440 of 2007 DATE OF DECISION: APRIL 10, 2008 Shri Mool Chand (HUF) Versus .....APPELLANT The Commissioner of Income Tax,Faridabad ....RESPONDENT CORAM:HON'BLE MR.JUSTICE SATISH KUMAR MITTALHON'BLE MR.JUSTICE RAKESH KUMAR GARG--- Present:Mr.Avneesh Jhingan, Advocate,for the appellant-assessee. Mr. Yogesh Putney, Advocate,for the respondent-revenue. .. SATISH KUMAR MITTAL, J. The instant appeal filed by the assessee under Section 260Aof the Income Tax Act (hereinafter referred to as `the Act') is directedagainst the order dated 29.3.2007 passed by the Income Tax AppellateTribunal, New Delhi (hereinafter referred to as `the Appellate Tribunal'),in ITA No.2769/Del/2005 in case of the appellant-assessee for theAssessment Year 2002-03 by raising the following substantial question oflaw:- Whether, in the facts and circumstances of the case, theenhanced compensation is to be taxed in the year of itsreceipt in terms of the provisions of Section 45(5) of theIncome Tax Act, notwithstanding that the order under whichcompensation has been enhanced is challenged before thehigher courts and litigation is pending? In the present case, the assessee received enhanced amount of I .T.A.No. 440 of 2007 -2- compensation amounting to Rs.6,91,620/- including interest on account ofacquisition of his land from Haryana Urban Development Authority. TheAssessing Officer, while assessing the return of income of the assessee forthe Assessment Year 2002-03, taxed the above-said amount on receiptbasis in the year of receipt. Against the aforesaid order, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals), who vide order dated10.3.2005 deleted the addition made in the assessment order whileobserving that the Assessing Officer had erred in bringing to tax theenhanced compensation and interest received thereon for taxation in thisparticular year. Against the aforesaid order, the revenue filed an appealbefore the Appellate Tribunal. While deciding ITA No.2769/Del/2005 ofthe assessee for the Assessment Year 2002-03, the Appellate Tribunalvide order dated 29.3.2007 reversed the order passed by theCommissioner of Income Tax (Appeals) relating to the taxability ofenhanced compensation while holding that the amount of enhancedcompensation received by the assessee in the year under consideration isliable to be included in the income chargeable to tax. As far as thetaxability of interest on enhanced compensation is concerned, it has beenheld by the Appellate Tribunal that the interest received by the assesseenot having been finally determined because of the appeals pending in thiscourt, the same is not liable to be taxed in the year under appeal. To thatextent, the order passed by the Commissioner of Income Tax (Appeals)has been upheld in principle. The Appellate Tribunal came to the saidconclusion by following the decision of the Special Bench in the case I .T.A.No. 440 of 2007 -3- DCIT Versus Padam Parkash (HUF) 104 ITD 1 (Del)(SB), which wasarrived at after considering the judgment of the Madras High Court in thecase of CIT Versus T.Girija Ammal, 282ITR 614(Mad.).Consequently, it was held that the Assessing Officer shall be within hisjurisdiction to bring to tax the enhanced compensation in the year of itsreceipt, irrespective of the fact that the order of enhanced compensationhad not attained finality. The controversy in this appeal 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:- I .T.A.No. 440 of 2007 -3- DCIT Versus Padam Parkash (HUF) 104 ITD 1 (Del)(SB), which wasarrived at after considering the judgment of the Madras High Court in thecase of CIT Versus T.Girija Ammal, 282ITR 614(Mad.).Consequently, it was held that the Assessing Officer shall be within hisjurisdiction to bring to tax the enhanced compensation in the year of itsreceipt, irrespective of the fact that the order of enhanced compensationhad not attained finality. The controversy in this appeal 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 interimpayment 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 the I .T.A.No. 440 of 2007 -4- decision 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, the appeal is allowed and the substantialquestion of law is, thus, answered in favour of the assessee and againstthe revenue. (SATISH KUMAR MITTAL) JUDGE April 10, 2008vkg (RAKESH KUMAR GARG) JUDGE