COMMISSIONER OF INCOME TAX V. RAMA NAND

ITA/221/2007

AI Insights

The case involves the Commissioner of Income Tax, Faridabad, as the appellant, contesting a decision by the Income Tax Appellate Tribunal, Delhi Bench 'E', regarding the taxability of interest on enhanced compensation. The dispute centered on whether interest on enhanced compensation should be taxed on an accrual basis only after the finality of litigation concerning enhanced compensation or interest. The High Court referenced a previous decision in Commissioner of Income Tax, Faridabad v. Shri Hardwari Lal, HUF, which had similar issues and found that the interest on enhanced compensation does not accrue until the enhanced compensation is finally determined by the court.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 684495 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 19-08-2008
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Rama Bai, CIT, Faridabad Vs. Naresh Kumar, CIT, Faridabad Vs. Dilbagh Singh, Commissioner of Income Tax, Faridabad v. Shri Hardwari Lal, HUF, K.S. Krishna Rao v. Commissioner of Income-Tax, Andhra Pradesh, Vikram Singh v. Land Acquisition Collector
• Laws Referred To: Income Tax Act, Land Acquisition Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AVNEESH JHINGAN
• Assessee Lawyers: YOGESH PUTNEY
• Keywords: Accrual basis; Enhanced compensation; Finality of Litigation; Interest on enhanced compensation
• Section: 181 ITR 400; 181 ITR 408; 224 ITR 551

Judgement Text

"I.T.A. No. 221 of 2007 [1] IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income Tax Appeal No. 221 of 2007 Date of decision: 19.8.2008 Commissioner of Income Tax, Faridabad. ... Appellant. v. Sh. Ramanand (HUF). ... Respondent. CORAM: HON'BLE MR. JUSTICE HEMANT GUPTA HON'BLE MR. JUSTICE RAJESH BINDAL Present: Mr. Yogesh Putney, Advocate for the appellant. Mr. Avneesh Jhingan, Advocate for the respondent. .. Rajesh Bindal J. The appellant (hereinafter described as `the Revenue') is in appeal before this Court raising following substantial questions of law, arising out of order dated 29.9.2006, passed by the Income Tax Appellate Tribunal, Delhi Bench `E' in ITA No. 2213/DEL/03 for the assessment year 1998-99: “1. Whether, on the facts and circumstances of the case, the Hon'ble ITAT is right in holding that interest on enhanced compensation will not accrue and not be liable to tax till the time the dispute relating to interest payable on enhanced compensation is pending before a Court of law and not attained finality ? 2. Whether, on the facts and circumstances of the case, the Hon'ble ITAT is right in holding that the interest on enhanced compensation to be taxed on accrual basis only after the finality of litigation regarding enhanced compensation or interest, in contradiction with the judgment of Hon'ble jurisdictional High Court of Punjab and Haryana following the judgment of Apex Court in the case of CIT Vs. Rama Bai (181 ITR 400). [ITA No. 176 of 05 and ITA No. 177 of 05 in the case of CIT, I.T.A. No. 221 of 2007 [2] Faridabad Vs. Naresh Kumar and CIT, Faridabad Vs. Dilbagh Singh, respectively].” It is not disputed by learned counsel for the parties that the issues raised in the present appeal are squarely covered by a judgment of this Court in I.T.A. No. 490 of 2007-- Commissioner of Income Tax, Faridabad v. Shri Hardwari Lal, HUF, decided on 26.3.2008. Relevant paras thereof are extracted below: “In the present case, the question posed by the revenue is slightly different. The pith and substance of the question raised before us is whether in the circumstances of a compensation case where the matter of enhanced compensation has not attained finality, the interest on enhanced compensation would not accrue and could be subjected to tax only when the issue of enhanced compensation is finally settled. The Hon'ble Supreme Court of India in the case of K.S. Krishna Rao v. Commissioner of Income-Tax, Andhra Pradesh 181 ITR 408 has held that the interest on enhanced compensation cannot be taxed all in a lump-sum as having accrued on the date on which the Court passes the order for enhanced compensation and the interest has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the Court on a time basis. In another case titled as Vikram Singh v. Land Acquisition Collector 224 ITR 551, the Hon'ble Apex Court has held that the interest received on delayed payment of compensation under the Land Acquisition Act is a revenue receipt assessable to income tax. However, the assessee is entitled to spread over the income for the period for which payment came to be made, so as to continue the income for assessing tax for the relevant accounting year. Thus, in view of the above discussed judgments of the Hon'ble Apex Court and this Court, the interest on enhanced compensation would not accrue till the issue of enhanced compensation is finally decided and thereafter on attaining the finality of determination of enhanced compensation by the Court, the interest accrued to the assessee has to be spread over I.T.A. No. 221 of 2007 [3] on an annual basis right from the date of delivery of possession till the date of the order of the Court on the time basis.” For the detailed reasons recorded in the judgment of this Court in Commissioner of Income Tax, Faridabad v. Shri Hardwari Lal (supra), we do not find that any substantial question of law arises in the present appeal. Accordingly, the appeal is dismissed. (Rajesh Bindal) Judge (Hemant Gupta) Judge 19.8.2008 mk "