CIT, PANCHKULA V. PREM SINGH, RAMGARH

ITA/85/2010

AI Insights

The case involves the Commissioner of Income-tax, Panchkula as the appellant and Prem Singh as the respondent, concerning the taxability of enhanced compensation received for agricultural land acquired by the government. The land was initially agricultural and was later classified as a 'capital asset' due to a notification dated 6.1.1994. However, the acquisition and compensation were completed before this notification. The main legal questions revolved around the taxability of the enhanced compensation and the interest on it, under various sections of the Income Tax Act, 1961. The Tribunal had earlier ruled in favor of the respondent, which was upheld by the High Court.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 720641 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 05-07-2010
• Assessment Year: misc
• Other Referred Cases: Buddaiah v. Commissioner of Income Tax, Karnataka-2, [1985] 155 ITR 277
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AKSHAY BHAN
• Assessee Lawyers: YOGESH PUTNEY
• Keywords: Capital asset; Enhanced compensation; Income Tax; Land Acquisition; Taxability
• Section: 2(14); 260A; 45(5)(b)

Judgement Text

"ITA No. 85 of 2010 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 85 of 2010 Date of Decision: 5.7.2010 Commissioner of Income-tax, Panchkula ....Appellant. Versus Prem Singh ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Mr. Akshay Bhan, Advocate for the respondent. ADARSH KUMAR GOEL, J. 1. This order shall dispose of ITA Nos. 85 and 163 of 2010 and 659 of 2009. The facts are being taken from ITA No. 85 of 2010. 2. This appeal has been filed under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 28.5.2009 passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B' (hereinafter referred to as “the Tribunal”) passed in ITA No. 685/Chandi/2007, for the assessment year 2003-04. The following substantial questions of law have been claimed for determination of this Court:- “(i). Whether, on the facts and in the circumstances of the case learned ITAT is right in law in holding that the amount of enhanced compensation received by the assessee before its final determination does not entail ITA No. 85 of 2010 -2- assessability u/s 45 (5)(b) of the Income-tax Act, 1961? (ii) Whether, on the facts and in the circumstances of the case learned ITAT is right in law in holding that the interest on enhanced compensation does not accrue for taxation purposes till the issue of determination of enhanced compensation is finally decided? (iii) Whether, on the facts and in the circumstances of the case learned ITAT has erred in law in holding that the interest on enhanced compensation is not liable for taxation till the issue of determination of enhanced compensation is finally decided within the meaning of Section 2 (14) of the I.T. Act, 1961? (iv) Whether, on the facts and in the circumstances of the case, learned ITAT is right in law in holding that the land in question was not a capital asset thereby completely ignoring the evidence on record considered by the Assessing Officer? (v) Whether, on the facts and in the circumstances of the case, learned ITAT is right in law in admitting the additional evidence in the shape of copy of bank pass book and certificate from ITA No. 85 of 2010 -3- LAC, Panchkula for holding that the original compensation of Rs.983027.50 had been received by the assessee on 28.01.1993 without recording any reasons as required under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 and without giving any opportunity of being heard to the revenue before admitting and considering this evidence?” 3. The assessee owned agricultural land which was included within 5 kms. from the urban limits of Panchkula under notification dated 6.1.1994 and thus the same became 'capital asset' within the meaning of Section 2 (14)(iii)(b) of the Act. Prior to that, the land was acquired in pursuance of notification dated 29.1.1990 for public purpose. Award in respect of the land was rendered by the Land Acquisition Collector on 21.1.1993 and compensation was paid on 28.1.1993. Since the crop was standing thereon, the assessee was given time to hand over possession by 15.4.1993. 4. The question before the Assessing Officer was whether the capital gain was taxable or exempt as agricultural income when such gain was prior to 6.1.1994. The Assessing Officer held that possession was taken over by Haryana Urban Development Authority (HUDA) in the year 1996 which was after the date of notification, i.e. 6.1.1994 and thus, the capital gain was taxable. On appeal, the CIT (A) reversed the finding of the Assessing Officer which view was affirmed by the Tribunal in the following terms:- ITA No. 85 of 2010 -4- “Now having found that the land in question was agricultural land not falling with the definition of “capital asset” in the year when the land was compulsorily acquired, it cannot also be permitted to be treated as a 'capital asset' in the year in which enhanced compensation is received. As a consequence, the question of taxing the additional compensation as 'capital gain' u/s 45 (5) of the Act does not arise. In this manner, the plea of the assessee is that enhanced compensation received during the year is not assessable to tax as the relevant agricultural land does not fall within the definition of 'capital asset'. The assessee succeeds on this issue.” 5. We have heard learned counsel for the parties and perused the record with their assistance. 6. Learned counsel for the revenue submits that on the date of taking over of possession of the land, the title of the land vested in the Government under Section 16 of the Land Acquisition Act. He relied upon a judgment of Karnataka High Court in Buddaiah v. Commissioner of Income Tax, Karnataka-2, [1985] 155 ITR 277. 7. Learned counsel for the assessee submits that the proposition of law is not disputed but in the present case, date of possession being prior to the date of notification on which agricultural land became 'capital asset' by virtue of notification, referred to above, no substantial question of law arises. Finding of the Tribunal that award ITA No. 85 of 2010 -5- was made on 21.1.1993, payment of compensation was made on 28.1.1993 and time to take possession was extended upto 15.4.1993 in para 8 of the order of the Tribunal is not shown to be perverse. 8. Learned counsel for the revenue relied upon the observation made in the order of the Assessing Officer that the possession was taken in the year 1996. However, no material has been produced to show that possession was taken in the year 1996. Award was made in the year 1993 and time to take possession was extended only till 15.4.1993 as the crop was standing thereon which finding is not shown by the learned counsel for the revenue to be erroneous. Entry in roznamcha recording the date of taking of possession has not been shown. The finding of the Tribunal cannot, thus, be held to be erroneous. Even otherwise, no question of law has been raised regarding the correctness of the finding of date of possession. 9. As regards payment of enhanced compensation, the same is not relevant. If on the date of acquisition the land was not covered by the definition of 'capital asset' under Section 2 (14)(iii)(b) of the Act, the compensation payable to the assessee on such land was not exigible to tax. 10. In view of the above, the questions of law raised before this Court do not arise. Accordingly, the appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE July 5, 2010 (AJAY KUMAR MITTAL) gbs JUDGE ITA No. 85 of 2010 -6- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 659 of 2009 Date of Decision: 5.7.2010 Commissioner of Income-tax, Hisar ....Appellant. Versus Mohan Lal, Nand Lal etc. ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. Ravi Shankar, Advocate for the respondent. ADARSH KUMAR GOEL, J. For orders, see ITA No. 85 of 2010 (Commissioner of Income-tax, Panchkula v. Prem Singh). (ADARSH KUMAR GOEL) JUDGE July 5, 2010 (AJAY KUMAR MITTAL) gbs JUDGE ITA No. 85 of 2010 -7- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 163 of 2010 Date of Decision: 5.7.2010 Commissioner of Income-tax, Panchkula ....Appellant. Versus Prem Singh ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. Mr. Akshay Bhan, Advocate for the respondent. ADARSH KUMAR GOEL, J. For orders, see ITA No. 85 of 2010 (Commissioner of Income-tax, Panchkula v. Prem Singh). (ADARSH KUMAR GOEL) JUDGE July 5, 2010 (AJAY KUMAR MITTAL) gbs JUDGE "