The Commissioner Of Income-Tax v. Shri Mohan Singh Chandail

ITA No. 952 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH The Commissioner of Income-tax Versus Shri Mohan Singh Chandail ITA No. 952 of 2008 Date of Decision: 31.1.2011 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This appeal has been filed by the revenue under Section260A of the Income Tax Act, 1961 against the order dated 4.7.2008passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”,Chandigarh, in ITA No. 316/Chandi/2008 for the assessment year 2003-04, claiming following substantial questions of law:- “1.Whether on the basis and in the circumstances of thecase, the Ld. ITAT was right in dismissing the appealof Revenue on the grounds that the interest onenhancementcompensationamountingtoRs.75,71,149/-, even when actually received by theassessee, shall not be assessed in the year underappeal i.e. year of its receipt, but will be assessed as and when the matter is finally settled? 2.Whether the Hon'ble ITAT was right in holding thatprovisions of sections 45(5)(c) & 155(16) are notapplicable with retrospective effect for the A.Y. 2003-04 contrary to the ratio laid down by the Hon'bleSupreme Court in 224 ITR 677 in Allied Motors (P)Ltd. Vs. CIT?” 2.Put shortly, the facts necessary for adjudication as narratedin the appeal are the assessee is an individual and filed return for theassessment year 2003-04 declaring an income of Rs.10,77,501/- on31.3.2003. The Assessing Officer vide order dated 30.12.2005completed the assessment at 86,48,650/- by adding Rs.75,71,149/-received by the assessee on account of interest on enhancedcompensation on acquisition of land. Against the said order, theassessee filed an appeal before the Commissioner of Income Tax(Appeals) [in short “the CIT(A)”] who vide order dated 23.1.2008allowed the appeal and deleted the addition of Rs.75,71,149/-. Againstthe order of the CIT(A), the revenue took the matter in appeal before theTribunal and the Tribunal vide order dated 4.7.2008 dismissed theappeal. Hence, the present appeal by the revenue. 3.We have heard learned counsel for the appellant. 4.The point that arises in this appeal is whether the intereston enhanced compensation is taxable in the hands of the assessee inthe year of receipt. 5.The similar issue came up for consideration before thisCourt in ITA No. 209 of 2004 (The Commissioner of Income Tax, Faridabad v. Bir Singh (HUF) Ballabgarh) decided on 27.10.2010, wherein it was concluded as under:- “(a)that 'income from Business or profession' and'income from other sources' are ascertained on thebasis of system of accountancy followed by theassessee;'income from other sources' are ascertained on thebasis of system of accountancy followed by theassessee; (b)where assessee is not maintaining books of accountsby adopting any specific method, it shall be treated toby adopting any specific method, it shall be treated to be cash system of accountancy; (c)the interest under Section 34 to be awarded by theCollector partakes the characters of compensationand is taxable in the year of receipt in view of Section45(5)(b) of the Act; and Collector partakes the characters of compensationand is taxable in the year of receipt in view of Section45(5)(b) of the Act; and (d)under cash system of accountancy, the element ofinterest awarded by the Court received on enhancedamount of compensation under Section 28 of the1894 Act falls for taxation under Section 56 as'income from other sources' in the year of receipt.”interest awarded by the Court received on enhancedamount of compensation under Section 28 of the1894 Act falls for taxation under Section 56 as'income from other sources' in the year of receipt.” be cash system of accountancy; (c)the interest under Section 34 to be awarded by theCollector partakes the characters of compensationand is taxable in the year of receipt in view of Section45(5)(b) of the Act; and Collector partakes the characters of compensationand is taxable in the year of receipt in view of Section45(5)(b) of the Act; and (d)under cash system of accountancy, the element ofinterest awarded by the Court received on enhancedamount of compensation under Section 28 of the1894 Act falls for taxation under Section 56 as'income from other sources' in the year of receipt.”interest awarded by the Court received on enhancedamount of compensation under Section 28 of the1894 Act falls for taxation under Section 56 as'income from other sources' in the year of receipt.” 6.In view of the above, question No.1 is answered in favour ofthe revenue. Question No.2 has been rendered academic.the revenue. Question No.2 has been rendered academic. 7.The appeal stands disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE January 31, 2011gbs (ADARSH KUMAR GOEL) JUDGE