Bal Ram v. Presiding Officer, Income-tax

HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present: Mr. Shiv Kumar, Advocate, for the appellant. --- AJAY KUMAR MITTAL, J. This order will dispose of two appeals, i.e. Income-tax Appeal Nos. 411 and 412 of 2010 as similar questions of law have been claimed in both the appeals. The facts have, however, been taken from Income-tax Appeal No. 411 of 2010. This appeal under Section 260A of the Income-tax Act, 1961 (for short “the Act’”) has been filed by the assessee against the order dated 2.11.2007, Annexure A-1, passed by Income Tax Officer, Faridabad and order dated 30.9.2009, Annexure A-3, passed by the Income Tax Appellate Tribunal, Delhi Bench, ‘A”, New Delhi, (in short Income-tax Appeal No. 411 of 2010 2 “the Tribunal”) in ITA No. 3233/Del/08 in respect of the assessment year 2000-01, claiming the following substantial questions of law for determination by this Court: a- Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal is right in law in holding that enhanced compensation received by the assessee during the pendency of dispute of compensation before the Hon’ble Courts is deemed to be income for the purpose of computation of Capital Gain in the year of receipt in terms of provision of Section 45(5) of the Income Tax Act? b- Whether on the facts and circumstances of the case the learned Tribunal was right in law and fact while holding that because of award of compensation got finalized on

10.8.2005, therefore, the amount of interest on enhanced compensation got taxed in the year in question i.e. assessment year 2000-2001? c- Whether on facts and circumstances of the case the learned Tribunal was right in law and fact while holding that because of award of compensation got finalized on 10.8.2005, therefore, the amount of interest on enhanced compensation got taxed in the year in question i.e. Assessment year 2000- 2001? d- Whether the learned Tribunal was right on the facts and law in holding that the enhanced amount of interest thereon received in the year under consideration is taxable in the same year? Income-tax Appeal No. 411 of 2010 3 Briefly stated the facts necessary for adjudicating as narrated in the appeal are that land of the appellant-assessee was acquired by the State Government in the year 1991. Compensation for the land was awarded on 5.5.1993. The assessee sought reference under the Land Acquisition Act, 1894. The Reference Court, vide order dated 15.12.1997 enhanced the compensation in respect of the acquired land at the rate of Rs.360/- per square yard, besides other statutory benefits and interest on late payment of enhanced compensation. The State as well as the claimants filed appeals before this Court. An amount of Rs. 15,71,790/-, on account of compensation was paid in the assessment year 2000-2001, and while making the payment, the Government deducted tax of Rs. 1,72,896/- under the head ‘tax deducted at source’ (TDS) and paid the balance amount of Rs. 13,98,894/-. Besides this, an amount of Rs. 15,69,721/- was also paid as interest on enhanced compensation for delayed payment. The assessing officer assessed the income tax as per the following details, vide order dated 26.10.1997, Annexure A/1. Enhanced compensation : Rs. 13,98,894/- Interest thereon : Rs. 15,69,721/- Bank interest : Rs. 1,48,430/- Total: : Rs. 31,17,045/- Aggrieved by the aforesaid assessment, the assessee preferred appeal before the Commissioner of Income-tax (Appeals) [in short “CIT(A)]. The CIT(A), after appreciating the facts and the evidence on record accepted the appeal of the assessee vide order dated 25.8.2008, Annexure A-2. It was held that taxability of the Income-tax Appeal No. 411 of 2010 4 amount of enhanced compensation in the assessment year 2000- 2001 was not warranted. As regards allowability of TDS deducted by the Government while paying the amount of enhanced compensation and the interest thereon, the assessing officer was directed to allow the claim of the assessee after proper verification and as per law. So far as the interest accrued on the amount that remained deposited in the bank is concerned, the CIT(A) held that the addition thereof was purely based on presumptions and accordingly, deleted the same. The Revenue preferred appeal challenging the order of the CIT(A). The Tribunal accepted the appeal and reversed the order of the CIT(A) regarding the question of taxability of the amount of enhanced compensation by relying on Commissioner of Income- tax v. Ghanshyam (HUF) [2009] 315 ITR 1 (SC). The interest received on enhanced amount of compensation was also held to be taxable in the current assessment year. It is how the present appeal has been filed by the assessee. We have heard learned counsel for the appellant and perused the record. The issue in this case requires answer on following two points: i) Chargeability of capital gains tax arising out of receipt of enhanced compensation. ii) Whether interest received on enhanced compensation is exigible to tax in the current assessment year? The answer to the first point stands concluded by the decision of the Apex Court in Ghanshyam (HUF)’s case (supra) wherein it was held that irrespective of the fact, whether litigation with Income-tax Appeal No. 411 of 2010 5 regard to award of compensation had attained finality or not, taxability of such income shall be in the year of receipt in terms of Section 45(5)(b) of the Act, which was inserted retrospectively w.e.f.

1.4.1988. Adverting to the second point, it is undisputed that the system being adopted by the assessee is cash receipt basis as has been recorded by the assessing officer. Once that is so, then the amount of interest received on the enhanced compensation has to be taxed in the year of receipt irrespective of pendency of any dispute regarding quantum of compensation. In view of the above, no substantial question of law arises for consideration of this Court. The appeals are consequently dismissed. (AJAY KUMAR MITTAL) JUDGE October 27, 2010 *rkmalik* (ADARSH KUMAR GOEL) JUDGE