DCIT, Bellary V. Ramvallabh Asawa, Bellary

ITA 1045/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73371 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-11-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 17-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: M V SHESHACHALA SHRI SUN
• Keywords: Capital asset; Deemed to accrue or arise in india
• Section: 45(5); 147; 148; 56; 28

Judgement Text

ITA.1045 TO 1047/BANG/2012 PAGE - 1 CO.200 TO 202/BANG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAYPAL RAO, JUDICIAL MEMBER I.T.A NOS.1045 TO 1047/BANG/2012 (ASSESSMENT YEARS : 2004-05 TO 2006-07) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -1, BELLARY .. APPELLANT V. SHRI. PADAMNARAYANA ASAWA, SON & LEGAL HEIR OF LATE SRI. RAMVALLABH ASAWA, NO.22, NEHURU COLONY, 4 TH CROSS, BELLARY .. RESPONDENT PAN : AKIPA2549J CROSS OBJECTION NOS.200 TO 202/BANG/2015 I.T.A NOS.1045 TO 1047/BANG/2012 (ASSESSMENT YEARS : 2004-05 TO 2006-07) (BY THE ASSESSEE) ASSESSEE BY : SHRI. M. V. SHESHACHALA, ADVOCATE REVENUE BY : SHRI. SUNIL KUMAR AGARWALA, JCIT HEARD ON : 13.11.2015 PRONOUNCED ON : 18.11.2015 O R D E R PER BENCH : THESE APPEALS HAVE BEEN REMITTED BACK TO THIS TRIB UNAL BY HONBLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DT.27.08.20 14 IN ITA ITA.1045 TO 1047/BANG/2012 PAGE - 2 CO.200 TO 202/BANG/2015 NOS.100021/2014 C/W ITA NOS.100021/2014 & 100022/20 14. CROSS OBJECTIONS HAVE BEEN FILED BY THE ASSESSEE ON 02.11 .2015 MUCH AFTER THE PRONOUNCEMENT OF THE JUDGMENT OF THE HONBLE JURISD ICTIONAL HIGH COURT. OPERATIONAL PART OF JUDGMENT OF HONBLE JURISDICTIO NAL HIGH COURT IS REPRODUCED HERE UNDER : THE ASSESSEE IS REPORTED TO HAVE DIED ON 21.11.201 2 WHILE THE ORDERS IMPUGNED ARE PASSED ON 17.01.2014 MUCH AFTER THE DEATH OF THE ASSESSEE AND THEREFORE THE ORDERS PASSED AGAINST THE DEAD MAN ARE VOID. IN THA T VIEW OF THE MATTER, THESE APPEALS ARE ACCORDINGLY ALLOWED. THE ORDERS IMPUGNED ARE QUASHED AND THE PROCEEDING REMI TTED TO THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE, FOR F RESH CONSIDERATION. SINCE THE LEGAL REPRESENTATIVES OF D ECEASED ARE ALREADY ON RECORD, THERE IS NO NECESSITY TO FIL E A SEPARATE APPLICATION TO BRING THEM ON RECORD. THE RESPONDENT-REVENUE TO AMEND THE CAUSETITLE IN THE APPEALS BEFORE THE TRIBUNAL. 02. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THI S TRIBUNAL HAD RELIED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE O F CIT V GHANSHYAM (HUF) [(2009) 315 ITR 1] AND HELD THAT INTEREST ON ENHANCED COMPENSATION AWARDED U/S.28 OF THE LAND ACQUISITION ACT, 1984 WO ULD FORM PART OF ENHANCED VALUE OF LAND, WHEREAS INTEREST U/S.34 OF THE SAID ACT WOULD BE CONSTRUED AS INTEREST SIMPLICITOR FOR DELAY IN PAYM ENT AND WOULD BE GOVERNED BY LAW RELATING TO ASSESSMENT OF INTEREST ON SUCH DELAY. AS PER ITA.1045 TO 1047/BANG/2012 PAGE - 3 CO.200 TO 202/BANG/2015 THE LD. AR, ASSESSEE HAD DECLARED INTEREST ON ACCRU AL BASIS BUT AO HAD ASSESSED INTEREST ON RECEIPT BASIS. 03. PER CONTRA LD. DR SUBMITTED THAT THE DIRECTIONS OF THE HONBLE JURISDICTIONAL HIGH COURT WAS ONLY TO AMEND THE CAU SE-TITLE IN THE APPEALS BEFORE THE TRIBUNAL AND NOTHING MORE. 04. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. REVENUE HAS AMENDED FORM NO.36 WHEREIN LEGAL HEIR O F SHRI. RAMVALLABH ASAWA, NAMELY SHRI PADAM NARAYAN ASAWA HAS BEEN SH OWN AS THE RESPONDENT. SHRI. PADAM NARAYAN ASAWA, THE LEGAL HEIR IS THE SON OF LATE RAMVALLABH ASAWA. 05. COMING TO THE ARGUMENTS RAISED BY THE LD. AR BE FORE US, WE FIND THAT ALL WHAT HAVE BEEN SUBMITTED BEFORE US WERE CO NSIDERED IN DETAIL BY THIS TRIBUNAL IN ITS ORDER DT.17.01.2014. PARAS 4 TO 6 OF THE SAID ORDER IS REPRODUCED HERE UNDER : 4. BRIEFLY STATED, THE FACTS OF THE ISSUE ARE AS UN DER: THE ASSESSEE, AN INDIVIDUAL, IS A PARTNER IN M/S. RADHESHYAM TRAD ING COMPANY, BELLARY. THE ASSESSEE HAD FILED HIS RETURNS OF INCO ME, DECLARING TOTAL INCOMES AT RS.8,48,032/-, RS.8,98,604/- AND R S.44,98,155/- FOR THE AYS 2004-05 TO 2006-07 RESPECTIVELY ON 31.7 .2009. THE ASSESSEE HAD ALSO DECLARED INTERESTS OF RS.7,89,014 /-, RS.7,95,713/- AND RS.7,27,020/-ON ADDITIONAL COMPEN SATIONS RECEIVED ON ACQUISITION OF HIS LAND BY THE GOVERNME NT FOR THE ABOVE MENTIONED ASSESSMENT YEARS. ACCORDING TO THE AO, AS THE INCOMES OF THE ASSESSEE HAD ESCAPED ASSESSMENTS WIT HIN THE PURVIEW OF THE PROVISIONS OF S. 147 OF THE ACT, THE ASSESSEE WAS ITA.1045 TO 1047/BANG/2012 PAGE - 4 CO.200 TO 202/BANG/2015 REQUIRED TO FURNISH HIS RETURNS OF INCOME FOR THE A YS UNDER CONSIDERATION BY ISSUANCE OF NOTICES U/S 148 OF THE ACT. IN COMPLIANCE, THE ASSESSEE HAD REQUESTED THE AO TO TR EAT THE RETURNS OF INCOME FILED ORIGINALLY BE TREATED AS IN RESPONS E TO THE SAID NOTICES. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF PROPERTIES ACQU IRED, COMPENSATION AND INTEREST RECEIVED ON ACQUISITION E TC., IN RESPONSE, THE ASSESSEE, AMONG OTHERS, SUBMITTED THA T ON ACCOUNT OF ACQUISITION OF LAND BY THE LAND ACQUISITION OFFICER , THE INITIAL VALUE AT RS.53,658/- PER ACRE WAS FIXED IN THE ACQU ISITION PROCEEDINGS DATED 7.3.1990. AGGRIEVED BY THE INADEQ UACY OF THE COMPENSATION, THE ASSESSEE HAD APPROACHED THE HONB LE CIVIL COURT WHICH HAD AWARDED, AMONG OTHERS, HIGHER COMPE NSATION OF RS.3,00,000 PER ACRE AND INTEREST @ 9% FROM 7.2.199 0 TO 6.2.1991 FOR ONE YEAR. THE AUTHORITIES TOOK UP THE ISSUE BEF ORE THE HONBLE HIGH COURT. THE HONBLE COURT HAD, IN ITS RULING ON 24.10.2005, FIXED THE AWARD AT RS.2,75,000/ACRE BESIDES OTHER B ENEFITS AS ALLOWED BY THE LOWER COURT. KEEPING IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RAMA BAI V . CIT (1990) 181 ITR 400 (SC), THE ASSESSEE HAD RETURNED THE INT EREST INCOMES ON ACCRUAL BASIS. HOWEVER, PLACING RELIANCE ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. GHA NSHYAM (HUF) REPORTED IN (2009) 315 ITR 1 (SC) WHICH HAS B EEN DULY FOLLOWED BY THE HONBLE ITAT, DELHI BENCH REPORTED IN (2011) 15 TAXMANN.COM 366 (DELHI), THE AO HAD ASSESSED THE IN TEREST RECEIVED ON ADDITIONAL COMPENSATION TO TAX IN THE Y EAR(S) OF RECEIPT AT RS.9,50,000/-, RS.43,50,000/- AND RS.4,5 0,000/- FOR THE AYS 2004-05, 2005-06 AND 2006- 07 RESPECTIVELY. 4.1 AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE, AMON G OTHERS, BEFORE THE CIT (A) FOR ALL THE AYS UNDER CONSIDERAT ION. AFTER TAKING INTO ACCOUNT THE CONTENTIONS OF THE ASSESSEE , THE CIT (A) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. TH E IDENTICAL REASONING OF THE CIT (A) FOR THE AYS UNDER DISPUTE IS EXTRACTED [FROM THE ORDER FOR AY 2004-05) AS UNDER: I HAVE GONE THROUGH THE FACTS OF THE CASE, CONTENT S IN THE ASSESSMENT ORDER AND ASSESSEES WRITTEN SUBMISSIONS . THE AO HAS ADDED THE INTEREST INCOME ON RECEIPT BASIS, RELYING ON HONBLE ITA.1045 TO 1047/BANG/2012 PAGE - 5 CO.200 TO 202/BANG/2015 SUPREME COURT JUDGMENT IN THE CASE OF CIT V. GHANSH YAM (HUF) (2009) 315 ITR 1/182 TAXMAN 368. THE FACTS OF THE C ASE RELIED BY THE AO ARE DISTINGUISHABLE. IN THE SUPREME COURT CA SE THE ENHANCED COMPENSATION AND THE INTEREST RECEIVED BY ASSESSEE WAS IN DISPUTE AND IS PENDING BEFORE THE COURT, AND THE ASSESSEE HAS RECEIVED THE AMOUNT AGAINST THE SECURITY FURNISHING UP TO THE SATISFACTION OF THE EXECUTING COURT. IN THIS REGARD , IT IS PERTINENT TO MENTION THAT THE AMENDMENT INCLUDE CLAUSE (VIII) T O SUB-SECTION 2 TO SEC. 56 WHICH IS INTRODUCED THROUGH FINANCE BILL (2), 2009 WITH EFFECT FROM 01.04.2010 PROSPECTIVELY AND THE AMENDM ENT TO SEC. 145A WITH EFFECT FROM 01.04.2010 WHEREIN CLAUSE (B) HAS BEEN INTRODUCED WHICH IS OF A MANDATORY TO TAX THE INTER EST RECEIVED ON COMPENSATION ON RECEIPT BASIS ONLY WHICH IS EFFECTI VE FROM THE ASSESSMENT YEAR 2010.11. HENCE, THIS TREATMENT IS M ANDATORY FOR THE ASSESSMENT YEAR 2010-11 AND ONWARDS AND NOT FOR EARLIER YEARS. 4.2. AGGRIEVED, THE REVENUE HAS COME UP BEFORE US W ITH THE PRESENT APPEAL. DURING THE COURSE OF HEARING, THE L EARNED DR SUBMITTED THAT THE CIT (A) OUGHT TO HAVE APPRECIATE D THE FACTS RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDERS THAT THE INTEREST RECEIVED BY THE ASSESSEE RELATES TO ADDITI ONAL COMPENSATION, THE INTEREST SO RECEIVED HAS TO BE CH ARGED TO TAX IN THE YEAR OF RECEIPT. IT WAS, FURTHER, SUBMITTED THA T THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE AMENDME NTS TO SECTION 145A OF THE ACT WAS DONE LATER ON THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF CIT V. GHANSHYAM (HUF) (SUPRA) AND, THUS, IT WAS ARGUED THAT THE FACTS OF THE SAID OF THE HONBLE COURT IS APPLICABLE TO ALL SIMILAR CASES PRIOR TO T HE ASSESSMENT YEAR 2010-11. IT WAS, FURTHER, POINTED OUT BY THE L EARNED DR THAT THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACTS OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF GHANSHYAM (HU F) (SUPRA) AS DISCUSSED BY THE ASSESSING OFFICER IN THE ASSESS MENT ORDERS WHEREIN IT WAS HELD THAT THE INTEREST ON ACCOUNT OF ACQUISITION OF LAND WAS TO BE TAXED IN YEAR IN WHICH IT WAS RECEIV ED. IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE AO REQUIRE S TO BE RESTORED AND THAT OF THE CIT (A) BE CANCELLED. ITA.1045 TO 1047/BANG/2012 PAGE - 6 CO.200 TO 202/BANG/2015 4.2.1 ON THE OTHER HAND, THE SUBMISSION MADE BY THE LEARNED AR IS SUMMARIZED AS UNDER: - THAT THE AO HAD NEITHER FURNISHED ANY REASON NOR COMMUNICATED AS TO WHY THE REASONS COULD NOT BE FURNISHED FOR IN ITIATING ACTION U/SS. 147 AND 148 OF THE ACT. IN THIS CONNECTION, T HE ASSESSEE RELIES ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (I) LTD V. ITO (2003) 259 ITR 19 (SC); - THAT THE INTEREST IN THE CASE OF THE ASSESSEE ON ACCOUNT OF THE HONBLE JURISDICTIONAL HIGH COURT DATED 24.10.2005 HAD TO BE SPREAD OVER FOR THE PERIOD FROM MARCH 1990 TO OCTOB ER, 2005 ON ACCRUAL OR MERCANTILE BASIS. FOR THIS PROPOSITION, THE ASSESSEE RELIES ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RAMA BAI V. CIT (1990) 181 ITR 400 (SC); - THAT THE AO HAD REFERRED TO THE VERDICT OF THE HO NBLE SUPREME COURT IN THE CASE OF GHANSHYAM (HUF) (SUPRA) WHEREI N IT WAS HELD THAT THE INTEREST ON ACQUISITION OF LAND WOULD BE TAXED IN YEAR IN WHICH IT WAS RECEIVED. SINCE THE ASSESSEES CASE IS DISTINGUISHABLE WITH THAT OF THE JUDGMENT OF THE HO NBLE SUPREME COURT (SUPRA), IT IS NOT APPLICABLE TO THE ASSESSEE S CASE; - THAT IN THE PRESENT CASE, AS THE ISSUE DEALT WITH IS ONLY IN RELATION TO INTEREST RECEIVED ON ENHANCED COMPENSATION, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN RAMA BAIS CAS E (SUPRA) CONTINUES TO APPLY UNTIL THE AMENDMENT TO S. 145A B Y FINANCE ACT, 2009 PROSPECTIVELY FROM THE AY 2010-11. THUS, UNTIL THE AMENDMENT TO THE FINANCE ACT, 2009, INTEREST ON ENH ANCED COMPENSATION COULD BE OFFERED TO TAX UNDER MERCANTI LE BASIS USING THE PRECEDENCE OF SUPREME COURTS VERDICT IN RAMA B AIS CASE (SUPRA); - THAT THE VERDICT IN CASE OF RAMA BAI WAS DELIVERE D BY A THREE JUDGES BENCH WHEREAS THE VERDICT IN GHANSHYAMS CA SE WAS PRONOUNCED BY TWO JUDGES BENCH OF THE HONBLE APEX COURT AND ACCORDING TO THE RULING OF THE HONBLE SUPREME COUR T IN PRADIP CHANDRA PARIJA & OTHERS V. PRAMOD CHANDRA PATNAIK & OTHERS REPORTED IN (2002) 254 ITR 99 (SC) THAT THE BENCH O F TWO JUDGES IS BOUND TO FOLLOW THE DECISION OF BENCH OF THREE J UDGES AND, HENCE, THE JUDGMENT IN GHANSHYAM CASE IS PER INCURI AM; AND THAT THE CIT (A) HAD RIGHTLY CONSIDERED THIS FACT AND DE CIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA.1045 TO 1047/BANG/2012 PAGE - 7 CO.200 TO 202/BANG/2015 4.2.2. IN CONCLUSION, IT WAS PRAYED THAT THERE WAS NO INFIRMITY IN THE FINDINGS OF THE CIT (A) ON THE ISSUE WARRANTING INTERFERENCE. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO THE CASE LAWS ON WHICH EITHER OF THE PARTY HAVE PLACED STRONG RELIANCE. TH E PROPERTY OWNED BY THE ASSESSEE WAS ACQUIRED BY THE GOVERNMEN T BY FIXING THE COMPENSATION AT RS.53,658/ACRE AS PER THE ACQUI SITION PROCEEDINGS DATED 7.3.1990. THE COMPENSATION AMOUNT WAS ENHANCED TO RS.3 LAKHS PER ACRE BY THE CIVIL COURT WHICH WAS, HOWEVER, SUBSEQUENTLY FIXED AT RS.2,75,000/- PER AC RE BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE ITS JUDGMENT DATED 24.10.2005. BASED ON THE SAID JUDGMENT, THE ASSESSE E HAD FURNISHED HIS RETURNS OF INCOME FOR THE ASSESSMENT YEARS UNDER DISPUTE, ADMITTING, AMONG OTHERS, INTEREST RECEIVED ON ENHANCED COMPENSATION ON ACCRUAL BASIS BY PLACING RELIANCE O N THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST LTD [161 ITR 524 (SC)]. THE AO HAS, AFTER DUE CONSIDERATION OF THE A SSESSEES CONTENTIONS, AS RECORDED IN THE RESPECTIVE ASSESSME NT ORDERS AND BY RELYING ON THE FINDINGS OF THE HONBLE ITAT, DEL HI BENCH REPORTED IN (2011) 15 TAXMANN.COM 366 DELHI AND ALS O THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F GHANSHYAM (HUF) (SUPRA), HELD THAT THE INTEREST RECEIVED ON T HE ADDITIONAL COMPENSATION WERE TO BE ASSESSED TO TAX IN THE YEAR (S) OF RECEIPT. THIS WAS STRONGLY OBJECTED TO BY THE ASSESSEE BEFOR E THE CIT (A). THE CIT (A) HAS, IN HIS IDENTICAL REASONS, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE ON THE PREMISE THAT THE FACT S OF THE CASE CIT V. GHANSHYAM (HUF) RELIED ON BY THE AO ARE DISTINGUISHABLE. 5.1 BEFORE CONSIDERING THE ISSUE IN DEPTH, WE WOULD LIKE TO POINT OUT THAT NEITHER THE ORDERS OF THE AUTHORITIES BELO W NOR THE LD. AR WAS ABLE TO THROW MUCH LIGHT AS TO THE NATURE OF IN TEREST, WHETHER IT IS INTEREST PAID U/S. 28 OR U/S. 34 OF LAND ACQU ISITION ACT, 1894. HOWEVER, SINCE IT IS AN INTEREST RECEIVED ALONG WIT H ENHANCED COMPENSATION, WE PROCEED TO CONSIDER THE MATTER AS IF INTEREST IS IN THE NATURE OF INTEREST MENTIONED U/S. 28 OF THE LAN D ACQUISITION ACT, 1894. ITA.1045 TO 1047/BANG/2012 PAGE - 8 CO.200 TO 202/BANG/2015 5.2 THE HONBLE SUPREME COURT IN THE CASE OF GHANSH YAM (HUF) (SUPRA) HAS CONSIDERED THE IMPACT OF INTRODUCTION O F SECTION 45(5) AND TAXABILITY OF INTEREST ON ENHANCED COMPENSATION IN DEPTH. THE ISSUE BEFORE THE HONBLE APEX COURT IN THE CASE OF GHANSHYAM (HUF) (SUPRA), IN BRIEF, WAS THAT DURING THE PREVIO US YEAR RELEVANT TO THE AY 1999-2000, THE ASSESSEE RECEIVED ENHANCED COMPENSATION ON HIS LANDS BEING ACQUIRED BY THE HAR YANA URBAN DEVELOPMENT AUTHORITY AS ALSO INTEREST THEREON. IN THE RETURN OF INCOME FOR THE RELEVANT AY, THE ASSESSEE DID NOT OF FER THE AMOUNT OF ENHANCED COMPENSATION AND THE INTEREST RECEIVED THEREON FOR TAXATION, ON THE PLEA THAT THE AMOUNT OF ENHANCED C OMPENSATION RECEIVED HAD NOT ACCRUED TO HIM DURING THE YEAR OF RECEIPT AS THE ENTIRE AMOUNT WAS IN DISPUTE IN APPEAL BEFORE THE H C WHICH APPEAL STOOD FILED BY THE STATE AGAINST THE ORDER O F THE REFERENCE COURT GRANTING ENHANCED COMPENSATION; AND THAT THE AMOUNT OF ENHANCED COMPENSATION AND THE INTEREST THEREON WERE RECEIVED BY HIM IN TERMS OF THE INTERIM ORDER OF THE HC AGAINST HIS FURNISHING OF SECURITY. THE AO DID NOT ACCEPT THE ASSESSEES C ONTENTIONS ON THE PREMISE THAT IN TERMS OF S. 45(5) ENACTED W.E.F . 1.4.1988, THE AMOUNT BY WHICH COMPENSATION OR CONSIDERATION STOOD ENHANCED OR FURTHER ENHANCED BY THE COURT WOULD BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS OF THE PR EVIOUS YEAR IN WHICH THE SAID AMOUNT CAME TO BE RECEIVED. HE ACCOR DINGLY, BROUGHT TO TAX THE AMOUNT OF ENHANCED COMPENSATION AND THE INTEREST THEREON RECEIVED BY THE ASSESSEE IN THE YE AR OF RECEIPT. ON APPEAL, THE CIT (A) ACCEPTED THE ASSESSEES CONTENT ION AND DELETED THE AMOUNT OF ENHANCED COMPENSATION AND INTEREST TH EREON FROM THE TOTAL INCOME OF THE ASSESSEE. THE TRIBUNAL UPHE LD THE ORDER THE CIT (A). THE HIGH COURT ALSO DISMISSED THE REVENUE S APPEAL. WHEN THE ISSUE HAD FINALLY REACHED BEFORE THE HONB LE SUPREME COURT FOR CONSIDERATION, THE HONBLE COURT, AFTER D ULY ANALYSING THE PROVISIONS OF SECTIONS, 2 (47), 45(1) (AS IT ST OOD PRIOR TO 1.4.2004) , 45(5) (AS IT STOOD PRIOR TO 1.4.2004), 45(5) AFTER 1.4.2004, 155(6) AFTER 1.4.2004, CAME TO THE CONCLU SION THAT 32. THE ISSUE TO BE DECIDED BEFORE US WHAT IS TH E MEANING OF THE WORDS ENHANCED COMPENSATION/CONSIDERATION IN SECTION 45(5)(B) OF THE 1961 ACT? WILL IT COVER INTEREST? THESE QUESTIONS ALSO BRING IN THE CONCEPT OF THE YEAR OF TAXABILITY . ITA.1045 TO 1047/BANG/2012 PAGE - 9 CO.200 TO 202/BANG/2015 33. IT IS TO ANSWER THE ABOVE QUESTIONS THAT WE HAV E ANALYSED THE PROVISIONS OF SECTIONS 23, 23(1A), 23(2), 28 AND 34 OF THE 1894 ACT. AS DISCUSSED HEREINABOVE, SECTION 23(1A) PROVI DES FOR ADDITIONAL AMOUNT. IT TAKES CARE OF INCREASE IN THE VALUE AT THE RATE OF 12 PER CENT PER ANNUM. SIMILARLY, UNDER SECTION 23(2) OF THE 1894 ACT, THERE IS A PROVISION FOR SOLATIUM WHICH A LSO REPRESENTS PART OF ENHANCED COMPENSATION. SIMILARLY, SECTION 2 8 EMPOWERS THE COURT IN ITS DISCRETION TO AWARD INTEREST ON TH E EXCESS AMOUNT OF COMPENSATION OVER AND ABOVE WHAT IS AWARDED BY T HE COLLECTOR. IT INCLUDES ADDITIONAL AMOUNT UNDER SECTION 23 (1A) AND SOLATIUM UNDER SECTION 23(2) OF THE SAID ACT. SECTION 28 OF THE 1894 ACT APPLIES ONLY IN RESPECT OF THE EXCESS AMOUNT DETERM INED BY THE COURT AFTER REFERENCE UNDER SECTION 18 OF THE 1894 ACT. IT DEPENDS UPON THE CLAIM, UNLIKE INTEREST UNDER SECTION 34 WH ICH DEPENDS ON UNDUE DELAY IN MAKING THE AWARD. IT IS TRUE THAT I NTEREST IS NOT COMPENSATION. IT IS EQUALLY TRUE THAT SECTION 45(5) OF THE 1961 ACT, REFERS TO COMPENSATION. BUT AS DISCUSSED HEREINABOV E, WE HAVE TO GO BY THE PROVISIONS OF THE 1894 ACT WHICH AWARDS INTEREST BOTH AS AN ACCRETION IN THE VALUE OF THE LANDS ACQUIRED AND INTEREST FOR UNDUE DELAY, INTEREST UNDER SECTION 28 UNLIKE INTER EST UNDER SECTION 34 IS AN ACCRETION TO THE VALUE, HENCE, IT IS A PART OF ENHANCED COMPENSATION OF CONSIDERATION WHICH IS NOT THE CASE WITH INTEREST UNDER SECTION 34 OF THE 1894 ACT. SO ALSO ADDITIONAL AMOUNT UNDER SECTION 23(1A) AND SOLATIUM U/S 23(2) OF THE 1961 ACT FORMS PART OF ENHANCED COMPENSATION U/S 45(5)(B ) OF THE 1961 ACT. IN FACT, WHAT WE HAVE STATED HEREINABOVE IS RE INFORCED BY THE NEWLY INSERTED CLAUSE (C) IN SECTION 45(5) BY THE F INANCE ACT, 2003 WITH EFFECT FROM 1.4.2004. THIS NEWLY ADDED CLAUSE ENVISAGES A SITUATION WHERE IN THE ASSESSMENT FOR ANY YEAR:- - THE CAPITAL GAIN ARISING FROM THE TRANSFER OF A CAPITAL ASSET IS COMPUTED BY TAKING THE - COMPENSATION OR CONSIDERATION REFERRED TO IN CLAU SE (A) OF SECTION 45(5) OR, AS THE CASE MAY BE, - ENHANCED COMPENSATION OR CONSIDERATION REFERRED T O IN CLAUSE (B) OF SECTION 45(5), AND SUBSEQUENTLY SUCH COMPENS ATION OR CONSIDERATION IS REDUCED BY ANY COURT, TRIBUNAL OR OTHER AUTHORITY. ITA.1045 TO 1047/BANG/2012 PAGE - 10 CO.200 TO 202/BANG/2015 34. IN SUCH A SITUATION, SUCH ASSESSED CAPITAL GAIN OF THAT YEAR SHALL BE RECOMPUTED BY TAKING THE COMPENSATION OR C ONSIDERATION AS SO REDUCED BY SUCH COURT, TRIBUNAL OR OTHER AUTH ORITY TO BE THE FULL VALUE OF THE CONSIDERATION. FOR GIVING EFFECT TO SUCH RE- COMPUTATION, THE PROVISIONS OF THE NEWLY INSERTED ( WITH EFFECT FROM 1.4.2004) SECTION 155 (16) BY THE FINANCE ACT, 2003 (32 OF 2003), HAVE BEEN ENACTED. 35. IT WAS URGED ON BEHALF OF THE ASSESSEE THAT SEC TION 45(5) (B) OF THE 1961 ACT DEALS ONLY WITH RE-WORKING, ITS OBJECT IS NOT TO CONVERT THE AMOUNT OF ENHANCED COMPENSATION INTO DE EMED INCOME ON RECEIPT. WE FIND NO MERIT IN THIS ARGUMEN T. THE SCHEME OF SECTION 45(5) OF THE 1961 ACT WAS INSERTED WITH EFFECT FROM 1.4.1988 AS AN OVERRIDING PROVISION. AS STATED ABOV E, COMPENSATION UNDER THE LA ACT 1894, ARISES AND IS P AYABLE IN MULTIPLE STAGES WHICH DOES NOT HAPPEN IN CASES OF T RANSFERS BY SALE ETC. HENCE, THE LEGISLATURE HAD TO STEP IN AND SAY THAT AS AND WHEN THE ASSESSEE CLAIMANT IS IN RECEIPT OF ENHANCED COM PENSATION, IT SHALL BE TREATED AS DEEMED INCOME AND TAXED ON R ECEIPT BASIS. OUR ABOVE UNDERSTANDING IS SUPPORTED BY INSERTION O F CLAUSE (C) IN SECTION 45(5) WITH EFFECT FROM 1.4.2004 AND SECTION 155(16) WHICH REFER TO A SITUATION OF A SUBSEQUENT REDUCTION BY T HE COURT, TRIBUNAL OR OTHER AUTHORITY AND RE-COMPUTATION/AMEN DMENT OF THE ASSESSMENT ORDER. SECTION 45(5) READ AS A WHOLE (IN CLUDING CLAUSE C) NOT ONLY DEALS WITH RE-WORKING AS URGED ON BEH ALF OF THE ASSESSEE BUT ALSO WITH THE CHANGE IN THE FULL VALUE OF THE CONSIDERATION (COMPUTATION) AND SINCE THE ENHANCED COMPENSATION/CONSIDERATION (INCLUDING INTEREST UNDE R SECTION 28 OF THE 1894 ACT) BECOMES PAYABLE/PAID UNDER 1894 AC T AT DIFFERENT STAGES, THE RECEIPT OF SUCH ENHANCED COMPENSATION/C ONSIDERATION IS TO BE TAXED IN THE YEAR OF RECEIPT SUBJECT TO AD JUSTMENT, IF ANY, UNDER SECTION 155(16) OF THE 1961 ACT, LATER ON. HE NCE, THE YEAR IN WHICH ENHANCED COMPENSATION IS RECEIVED IS THE YEAR OF TAXABILITY. CONSEQUENTLY, EVEN IN CASES WHERE PENDING APPEAL, T HE COURT/TRIBUNAL/AUTHORITY BEFORE WHICH APPEAL IS PEN DING, PERMITS THE CLAIMANT TO WITHDRAW AGAINST SECURITY OR OTHERW ISE THE ENHANCED COMPENSATION (WHICH IS IN DISPUTE), THE SA ME IS LIABLE TO BE TAXED UNDER SECTION 45(5) OF THE 1961 ACT. WE MA Y CLARIFY THAT ITA.1045 TO 1047/BANG/2012 PAGE - 11 CO.200 TO 202/BANG/2015 EVEN BEFORE THE INSERTION OF SECTION 45(5) (C) AND SECTION 155(16) WITH EFFECT FROM 1.4.2004, THE RECEIPT OF ENHANCED COMPENSATION UNDER SECTION 45(5)(B) WAS TAXABLE IN THE YEAR OF R ECEIPT WHICH IS ONLY REINFORCED BY INSERTION OF CLAUSE (C) BECAUSE THE RIGHT TO RECEIVE PAYMENT UNDER THE 1894 ACT IS NOT IN DOUBT . 5.3. IT IS PERTINENT TO MENTION HERE THAT WHILE COM ING TO THE ABOVE CONCLUSION, THE HONBLE COURT HAD DULY CONSIDERED T HE JUDGMENT OF HONBLE SUPREME COURT IN CIT V. HINDUSTAN HOUSIN G & LAND DEVELOPMENT TRUST LTD (1986) 161 ITR 524 (SC) AND D ISTINGUISHED THE SAME. 5.4 LIKEWISE, THE ITAT, DELHI BENCH A HAS, IN THE CASE OF DCIT V. AJAY SHARMA REPORTED IN (2011) 15 TAXMANN.COM 36 6 (DELHI)/ (2011) 48 SOT 164 (DELHI) HELD AS UNDER: THE SUPREME COURT IN THE CASE OF CIT V. GHANSHYAM (HUF)[2009] 315 ITR 1 / 182 TAXMAN 368 HAS VIEWED T HAT THE ADDITIONAL COMPENSATION RECEIVED BY THE ASSESSEE IS TO BE ASSESSED IN THE YEAR IN WHICH IT IS RECEIVED. THE SUPREME CO URT ALSO HELD THAT INTEREST ON ENHANCED COMPENSATION UNDER SECTIO N 28 OF THE LAND ACQUISITION ACT, 1894, WILL FORM PART OF THE E NHANCED VALUE OF THE LAND. WHILE SECTION 34 OF THAT ACT WILL BE C ONSTRUED AS INTEREST SIMPLICITER FOR DELAY IN PAYMENT SO THAT I T WOULD BE GOVERNED BY LAW RELATING TO ASSESSMENT OF INTEREST ON SUCH DELAY BEING ON ACCRUAL BASIS. IN THE INSTANT CASE, THE AS SESSEE HAD RECEIVED INTEREST ON ENHANCED VALUE OF LAND AND IT WAS COVERED BY SECTION 28 OF THE LAND ACQUISITION ACT, AND, THEREF ORE, INTEREST AMOUNT WAS ALSO TO BE ASSESSED IN THE ASSESSMENT YE AR 2002-03 IN WHICH THE AMOUNT HAD BEEN RECEIVED. IT WAS, THEREFO RE, HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ASSESSING TH E AMOUNT OF ENHANCED COMPENSATION ALONG WITH INTEREST THEREUPON IN THE YEAR IN WHICH IT WAS RECEIVED 5.5. FURTHER, WE WOULD LIKE TO REFER TO THE OBSERVA TION OF THE CIT (A) THAT THE JUDGMENT OF THE HONBLE SUPREME COURT IN GHANSHYAMS CASE IS DISTINGUISHABLE ON THE PREMISE THAT IN THE SUPREME COURT CASE THE ENHANCED COMPENSATION AND TH E INTEREST RECEIVED BY ASSESSEE WAS IN DISPUTE AND IS PENDING BEFORE THE ITA.1045 TO 1047/BANG/2012 PAGE - 12 CO.200 TO 202/BANG/2015 COURT AND THE ASSESSEE HAS RECEIVED THE AMOUNT AGAI NST THE SECURITY FURNISHING UP TO THE SATISFACTION OF THE E XECUTING COURT [SOURCE: PAGE 9 OF CIT (A)S ORDER]. HOWEVER, THE H ONBLE SUPREME COURT HAD EXPLICITLY CLARIFIED THAT 35. .. CONSEQUENTLY, EVEN IN CASES WHERE PENDING APPEAL, T HE COURT/TRIBUNAL/AUTHORITY BEFORE WHICH APPEAL IS PEN DING, PERMITS THE CLAIMANT TO WITHDRAW AGAINST SECURITY OR OTHERW ISE THE ENHANCED COMPENSATION (WHICH IS IN DISPUTE), THE SA ME IS LIABLE TO BE TAXED UNDER SECTION 45(5) OF THE 1961 ACT. THUS , THE JUDGMENT OF THE HONBLE APEX COURT IS DIRECTLY ON THE POINT AND IS NOT DISTINGUISHABLE AS CLAIMED BY THE CIT (A). 5.6. WITH REGARD TO THE ASSESSEES ARGUMENT THAT TH E HONBLE SUPREME COURTS VERDICT IN RAMA BAIS CASE WAS DELI VERED BY A THREE JUDGES BENCH WHEREAS THE VERDICT IN GHANSHYA MS CASE WAS PRONOUNCED ONLY BY A TWO JUDGES BENCH AND, THU S, THE TWO JUDGES BENCH WAS BOUND TO FOLLOW THE DECISION OF T HREE JUDGES BENCH; WE WOULD LIKE TO POINT OUT THAT SECTION 45(5 ) OF THE ACT INSERTED BY THE FINANCE ACT, 1987 W.E.F. 1.4.1988 W AS NOT CONSIDERED BY THE HONBLE SUPREME COURT (SINCE THAT CASE PERTAINED TO A.Y. 1968-69); WHEN THE QUESTION OF AC CRUAL OF INTEREST ON ENHANCED COMPENSATION WAS DEALT WITH IN THE CASE OF RAMA BAI AND ORS V. CIT REPORTED IN (1990) 181 ITR 400 (SC). ACCORDINGLY, WE ARE OF THE VIEW THAT THE CONTENTION THAT THE TWO MEMBERS BENCH WAS BOUND TO FOLLOW THE DECISION OF THE THREE MEMBERS BENCH DOES NOT FIT IN, IN THE INSTANT CASE , AS ARGUED BY THE ASSESSEE. 5.7. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCUMST ANCES OF THE ISSUE AS ANALYSED IN THE FOREGOING PARAGRAPHS AND A LSO IN CONFORMITY WITH (I) THE RULING OF THE HONBLE SUPRE ME COURT IN THE CASE OF GHANSHYAM (HUF) AND (II) THE FINDINGS OF TH E HONBLE DELHI BENCH OF THE ITAT IN THE CASE OF AJAY SHARMA (SUPRA); WE ARE OF THE VIEW THAT THE CIT (A) WAS NOT JUSTIFIED IN ALLOWING THE ASSESSEES APPEAL. IN SUBSTANCE, THE REVENUES APPE AL IS ALLOWED. 6. BEFORE PARTING WITH, WE WOULD LIKE TO DEAL WITH THE ISSUES RAISED BY THE LEARNED AR DURING THE COURSE OF HEARI NG AS UNDER: ITA.1045 TO 1047/BANG/2012 PAGE - 13 CO.200 TO 202/BANG/2015 (I) THE AO HAD NEITHER FURNISHED NOR COMMUNICATED T HE REASONS FOR INITIATION OF PROCEEDINGS U/S 147 OF THE ACT: AT THE OUT-SET, WE WOULD LIKE TO POINT OUT THAT, AS COULD BE SEEN FROM THE ASSESSMENT ORDER UNDER CONSIDERATION, THE ASSESSEE HAD NOT OBJECTED TO THE RE-OPENING OF THE ASSESSMENT DU RING THE COURSE OF RE-ASSESSMENT PROCEEDINGS AND, THEREFORE, THE JU DGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT S (I) LTD V. ITO (SUPRA) CANNOT BE OF ANY HELP TO THE ASSESSEE. (II) CAPITAL GAINS COMPUTED ON PROTECTIVE BASIS IN THE AY 2006-07: AS A MATTER OF FACT, THE ISSUE RAISED BY THE REVEN UE IN ITS APPEALS UNDER CONSIDERATION IS ONLY THE ASSESSING OF THE IN TEREST RECEIVED DURING THE AY 2006-07. MOREOVER, THE ASSESSEE HAS N OT VENTURED TO FILE ITS CROSS OBJECTION BEFORE THIS BENCH AGAIN ST THE AOS ALLEGED STAND IN COMPUTING THE CAPITAL GAINS ON PRO TECTIVE BASIS. IT IS PERTINENT TO MENTION HERE THAT THE ISSUE UNDE R CONSIDERATION IS, WHETHER THE INTEREST RECEIVED IS TO BE ASSESSE D ON ACCRUAL OR ON RECEIPT BASIS? HOWEVER, ON A PERUSAL OF THE ASS ESSMENT ORDER UNDER DISPUTE, IT IS OBSERVED THAT THE AO HAD RIGHT LY ASSESSED THE INTEREST ON RECEIPT BASIS. FOR APPRECIATION OF FACT S, THE RELEVANT PORTION OF THE AOS OBSERVATION IS EXTRACTED AS UND ER: ACCORDINGLY, THE ADDITIONAL COMPENSATION AND INTER EST RECEIVED THEREON IS PROPOSED TO TAX IN THE YEAR OF RECEIPT. AS THE ASSESSEE HAS ERRONEOUSLY DECLARED ADDITIONAL COMPENSATION AN D INTEREST ON ACCRUAL BASIS, THE SAID RETURNS WILL BE ASSESSED ON A PROTECTIVE MEASURE. THUS, FOR THE ASSESSMENT YEAR UNDER CONSID ERATION, THE CAPITAL GAINS ADDITIONAL COMPENSATION IS ASSESSED O N A PROTECTIVE MEASURE SINCE THE SAME HAS TO BE ASSESSED TO TAX ON RECEIPT BASIS FOR THE ASSESSMENT YEAR 2007- 08. HOWEVER, INTEREST IS ASSESSED AT RS.4,50,000/- ON RECEIPT BASIS FOR THE YEAR UNDER C ONSIDERATION I.E., 2006-07. [SOURCE: PAGE 10 OF THE ASST. ORDER FOR AY 2006- 07]. THEREFORE, THE ASSESSEES CLAIM ON THIS COUNT IS N OT VALID AND, ACCORDINGLY, THE ISSUE OF CAPITAL GAINS COMPUTED O N PROTECTIVE BASIS IS NOT ADJUDICATED. ITA.1045 TO 1047/BANG/2012 PAGE - 14 CO.200 TO 202/BANG/2015 WE ARE IN FULL AGREEMENT WITH THE ABOVE. NOTHING H AS BEEN BROUGHT OUT BY THE LD. AR AS TO WHY WE SHOULD DEVIATE FROM THE ABO VE FINDINGS. ACCORDINGLY REVENUES APPEALS FOR A. YS. 2004-05TO 2006-07 ARE ALLOWED. 06. COMING TO THE CROSS OBJECTIONS FILED BY THE ASS ESSEE THERE IS A DELAY OF MORE THAN THREE YEARS. IN THE CONDONATION PETIT ION ASSESSEE MERELY STATES THAT EXEMPTION U/S.10(37) OF THE ACT WOULD BE AVAIL ABLE TO IT AND ASSESSEE WANTED TO AVAIL OF THE SAID BENEFIT. 07. WE FIND THAT THE CROSS OBJECTIONS HAVE BEEN FIL ED WITH SUBSTANTIAL DELAY AND THE ONLY EXPLANATION OF THE ASSESSEE IS T HAT BALANCE OF CONVENIENCE AND HARDSHIP WERE IN ITS FAVOUR. WE AR E OF THE OPINION THAT FAILURE TO RAISE AN ISSUE IN THE EARLIER STAGE OF P ROCEEDINGS CANNOT BE CONSIDERED AS A REASON WHICH WAS BEYOND THE CONTROL OF THE APPELLANT SO AS TO CONDONE THE DELAY. WE ALSO FIND THAT THE CROSS OBJECTIONS HAVE BEEN FILED AFTER THE JUDGMENT OF THE HONBLE JURISDICTIO NAL HIGH COURT. WE ARE THEREFORE NOT INCLINED TO ADMIT THE CROSS OBJECTION S. ITA.1045 TO 1047/BANG/2012 PAGE - 15 CO.200 TO 202/BANG/2015 08. TO SUMMARISE THE RESULT APPEALS OF THE REVENUE ARE ALLOWED WHILE THE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. DATE : 18.11.2015 SD/- SD/- (VIJAYPAL RAO) (ABRAH AM P GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER MCN COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR