The New Friends Cooperative House Building Societyltd., Faridabad v. The Commissioner Of Income Tax, Faridabad And Another

In the High Court for the States of Punjab and Haryana at Chandigarh… ITA No.360 of 2007 Date of decision: 10.4.2008 The New Friends Cooperative House Building SocietyLtd., Faridabad Appellant Versus The Commissioner of Income Tax, Faridabad and another. .. Respondent Coram: Hon’ble Mr.Justice Satish Kumar MittalHon'ble Mr.Justice Rakesh Kumar Garg Present:Mr.Akshay Bhan,Advocatefor the Appellant. Mr.Yogesh Putney, Advocatefor the Revenue/respondents. Rakesh Kumar Garg,J The assessee has filed the present Appeal under Section260-A of the Income Tax Act, 1961(for short ‘the Act’) against theorder dated 31.1.2007(Annexure A-3) passed by the Income TaxAppellate Tribunal, Delhi Bench ‘F’ New Delhi (for short ‘theTribunal’), in ITA No.5370/Del/04 for the Assessment Year 2001-02. The assessee firm is a co-operative society and its mainobject is to acquire land and built houses on that land. The landacquired by the society was compulsorily acquired by theGovernment. During the year under consideration, the society has ITA No.360 of 2007 received enhanced compensation of Rs.9,45,32,917/- from thereference court comprising of additional compensation ofRs.6,40,00,000/- and interest of Rs.3,08 crores thereon. Theassessee declared a capital loss of Rs.2,52,55,221/- carried forwardto next year on long term capital gain of Rs.12.32 lacs. The assesseealso declared net income of Rs.30,89,258/- on account of interestreceived. Accordingly, the assessee declared a returned income ofRs.18,56,620/-.. The Assessing Officer vide his order dated 27.2.2004passed under section 143(3) of the Act held that entire amount ofRs.9.56 crores on account of enhanced compensation is taxable inassessment year 2001-02 only. The amount of Rs.5.29 crores washeld to be as a receipt under section 45(5)(b) of the Act and interestof Rs.4.27 crores was ordered to be taxed under the head “Incomefrom other sources”. The conclusion drawn by the Assessing Officerare reproduced as under:- i) The fact that enhanced compensation ofRs.9.46 crores including interest is very muchtaxable, is not disputed by the assessee andtherefore, this amount is held to be taxable. ii) The only point raised by the assessee is theyear in which the said amount shall be taxed i.e.,the year when the issue of enhanced compensationis finally decided and there is no appeal filed by theState Government against such final order of theHon'ble High Court or the year in which enhanced compensation has been received. iii) The assessee has relied upon the decision ofHon'ble Supreme Court in CIT Vs. Hindustan Land& House Dev. Corp. Ltd. For assessment year1956-57 which has been further followed by Patna& Delhi ITAT Benches mentioned by the assessee.iv) However it is very important to note thatGovernment of India duly considered all thesejudicial pronouncements and made consequentamendments in the I.T.Act. As per the latestposition of law in clauses (a), (b), © of Section 45(5)of I.T.Act, there remains no ambiguity and receipt ofcompensation, it's enhanced or reduction by anycourt there after has been separately considered.Therefore, the enhanced compensation is to betaxed in the year of such receipt. The assesseeinterest of reduction by any Court later on aspointed out by Hon'ble Supreme Court have beenduly safeguarded as per clause(c) of section 45(5)that the assessee can re-computed that the samein the year of any such reduction later on. v) Therefore, it is held that the entire amount ofRs.9.56 crores on account of enhancedcompensation is taxable in assessment year of2001-2002 only. The amount of Rs. 5.29 croresshall be taxed under the head “Income from other sources”. The assessee filed an appeal before the Commissioner of IncomeTax(Appeals), Faridabad challenging the order dated 27.2.2004passed by the Assessing Authority. v) Therefore, it is held that the entire amount ofRs.9.56 crores on account of enhancedcompensation is taxable in assessment year of2001-2002 only. The amount of Rs. 5.29 croresshall be taxed under the head “Income from other sources”. The assessee filed an appeal before the Commissioner of IncomeTax(Appeals), Faridabad challenging the order dated 27.2.2004passed by the Assessing Authority. The Commissioner of Income Tax(Appeals) vide his orderdated 4.10.2004 accepted the appeal and the addition made onaccount of enhanced compensation and interest thereon was deletedholding that enhanced compensation and interest thereon cannot becharged to tax until the same had attained finality from the highestcourt. The Commissioner of Income Tax(Appeals) while allowing theappeal found that in the present case, the assessee had not acquiredany absolute right on the enhanced compensation received as thesame was received with conditions and since the assessee did notacquire any right over the enhanced compensation and the interestthereon, the same cannot be charged to tax in the hands of theassessee. Not satisfied with the order of the Commissioner ofIncome Tax(Appeals), the Revenue filed the appeal before theIncome Tax Appellate Tribunal,Delhi Bench”F”, New Delhichallenging the above said order. However, it was conceded by therevenue before the Tribunal that the issues involve in the presentcase is covered by the Special Bench decision of the Tribunal in thecase of Deputy Commissioner of Income Tax Versus Padam Parkash(HUF) 104 TTJ (Del) (SB) 989, wherein it has been held thatenhanced compensation for acquisition of land is chargeable to tax inthe year in which such compensation is received. However, interest ITA No.360 of 2007 on enhanced compensation is to be assessed on accrual basis fromyear to year and it can be subjected to tax only after it is finallydetermined. In view of the stand taken by the Revenue, the Tribunaldirected the Assessing Officer to tax the compensation in the year ofreceipt and interest on enhanced compensation in the assessmentyear relevant to the previous year in which it is finally determined. In spite of the fact that the revenue has conceded beforethe Tribunal over the issues involved in the case, yet the presentappeal has been filed raising the following questions of law:- i) Whether in the facts and circumstances of thepresent case the impugned orders A-1 and A-3 are legallysustainable in the eyes of law ? ii)Whether in the facts and circumstances of thepresent case the ITAT was right in law in holding that theamount of interest on enhanced compensation inconsequence upon judgment of District Judge and theamount having been utilized/invested in discretion of theassessee, was not includible in the total of theassessee ? We have heard learned counsel for the parties. Shri Akshay Bhan, Advocate, learned counsel for theassessee has argued that the point in issue is covered in favour ofthe assessee by a decision of this Court in ITA No.427 of 2005decided on 25.2.2008 in the case of Chandi RamVersusCommissioner of Income Tax, Faridabad and othersand ITA No.490 of 2007 Commissioner of Income Tax, Faridabad and othersVersusHardwari Lal(HUF) decided on 26.3.2008. In support of the appeal, Shri Akshay Bhan, Advocate hasalso argued that the issue involved has been authoritatively settledby the Hon'ble Supreme Court of India, while dismissing the SLP filedby the Revenue against the decision of the Bombay High Court in thecase of Commissioner of Income Tax Versus Abdul Manan Shah248ITR 614. Besides the above, the learned counsel has also placed areliance upon a judgment of Karnataka High Court in the case ofChief Commissioner of Income Tax Versus Smt. Shanta Vva267 ITR67(Karnataka). of 2007 Commissioner of Income Tax, Faridabad and othersVersusHardwari Lal(HUF) decided on 26.3.2008. In support of the appeal, Shri Akshay Bhan, Advocate hasalso argued that the issue involved has been authoritatively settledby the Hon'ble Supreme Court of India, while dismissing the SLP filedby the Revenue against the decision of the Bombay High Court in thecase of Commissioner of Income Tax Versus Abdul Manan Shah248ITR 614. Besides the above, the learned counsel has also placed areliance upon a judgment of Karnataka High Court in the case ofChief Commissioner of Income Tax Versus Smt. Shanta Vva267 ITR67(Karnataka). On the other hand, Shri Yogesh Putney, Advocate,learned counsel for the Revenue/respondent has argued to supportthe order of the Assessing Officer on the ground that no remedy willbe available to the Revenue if the enhanced compensation as well asinterest are finally upheld after the prescribed time of issue of noticeunder Section 148 of the Act. He further argued that in view of theclear provisions of Section 45(5) of the Income Tax Act, the amountof enhanced compensation and interest thereon received by theappellant-assessee is liable to be taxed in the year of its receipt. We find force in the argument raised by Shri AkshayBhan, Advocate, learned counsel for the assessee/appellant. Thepoint in issue is squarely covered by our judgment in ITA No.427 of2005 Chandi Ram Versus Commissioner of Income Tax, Faridabadand others and ITA No.490 of 2007 Commissioner of Income Tax,Faridabad and othersVersus Hardwari Lal(HUF).Not only this, the same view has also been taken by this Court in ITA No.177 of 2005decided on 14.11.2005. The issue regarding the taxability onenhanced compensation thereon has also been clearly dealt with bythe Bombay High Court in the case of Commissioner of Income TaxVersus Abdul Manan Shah 248 ITR 614 against which the SLP filedby the Revenue has been dismissed by the Hon'ble Supreme Courtof India. The relevant part of the judgment is reproduced here below:- “The agricultural lands owned by the assessee wasacquired by the Government in 1989 under the LandAcquisition Act. The assessee filed a civil suit. An awardof Rs.33,80,172/- was made in favour of the assesses.Being aggrieved, the State Government moved the HighCourt against the decision of the reference Court. At thisstage, it may be mentioned that the said amount ofRs.33,80,172/- included an amount of Rs.13,50 lakhs asinterest on the additional compensation, pending theappeal. The assessee was permitted to withdraw theamount on giving security. The question which arise fordetermination compensation is either the additionalcompensation which was deposited in the Court andpermitted to be withdrawn was taxable at that stage.Secondly, whether the said amount could be taxed whenit was specifically deposited by the Government inappeal to the High Court. In the case of CIT Vs.Hindustan Housing and Land Development Trust Ltd.(1986) 161 ITR 524 (SC), the Supreme Court has held that when the Government has appealed against theaward the additional amount of compensation wasdeposited in the court, it was not taxable at that stage asthe additional compensation would not accrue asincome when it was specifically disputed by theGovernment in appeal. In view of the said judgment ofthe Supreme Court,there is no merit in this appeal. Nosubstantial question of law arises. The judgment of theSupreme Court on facts, squarely appeal to the facts ofthe present case. Hence, the appeal is dismissed.” In view of the above settled proposition of law, thequestions raised by the assessee are answered in the negative, i.e.,against the Revenue and in favour of the Assessee. Thus the appealfiled by the Assessee is allowed. (RAKESH KUMAR GARG) JUDGE April 10,2008 nk (SATISH KUMAR MITTAL) JUDGE