DCIT, Bellary V. Ramvallabh Asawa & Sons(HUF), Bellary

ITA 1048/BANG/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73373 (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: 09-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-08-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR S PALANI KUMAR JT
• Assessee Lawyers: K GURURAJ ACHARYA
• Keywords: Deemed to accrue or arise in india
• Section: 45(5); 147; 148; 56; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1048/BANG/2012 ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 1, BELLARY. VS. SHRI RAMVALLABH ASAWA & SONS (HUF) , D.NO.22, NEHRU COLONY, 4 TH CROSS, BELLARY. PAN : AAMHR 6830B APPELLANT RESPONDENT APPELLANT BY : DR. S. PALANI KUMAR, JT.CIT(DR) RESPONDENT BY : SHRI K. GURURAJ ACHARYA, C.A. DATE OF HEARING : 09.01.2014 DATE OF PRONOUNCEMENT : 17.01.2014 O R D E R PER GEORGE GEORGE K., JUDICIAL MEMBER THIS APPEAL, AT THE INSTANCE OF THE REVENUE, IS DIRECTED AGAINST THE ORDER OF THE CIT(APPEALS), HUBLI, DATED 30.5.2012. THE RELEVANT ASSESSMENT YEAR IS 2006-07. ITA NO.1048/BANG/2012 PAGE 2 OF 15 2. THE REVENUE HAS, IN ITS MEMORANDUM OF APPEAL, RA ISED A SOLITARY ISSUE, NAMELY, THAT THE CIT (A) ERRED IN DELETING THE ADDITION OF RS.3,47,804/- (SIC) RS.2,00,000/- ADDED TO THE ASSE SSMENT BEING INTEREST ON LAND ACQUISITION COMPENSATION ASSESSED ON RECEIP T BASIS. 3. BRIEFLY STATED, THE FACTS OF THE ISSUE ARE AS UN DER: THE ASSESSEE IS A HUF AND THE KARTA OF HUF IS RAM VALLABH ASAWA. THE ASSESSEE (HUF) FILED ITS RETURN OF INCOME, DECL ARING A TOTAL INCOME AT RS.19,82,370/- ON 31.7.2009 WHEREIN IT HAD ALSO DEC LARED INTEREST RECEIPT OF RS.3,47,804/-ON ACCOUNT OF ADDITIONAL COMPENSATI ON RECEIVED ON ACQUISITION OF ITS LAND BY THE GOVERNMENT. ACCORDI NG TO THE AO, AS THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT WITHI N THE PURVIEW OF THE PROVISIONS OF S. 147 OF THE ACT, THE ASSESSEE WAS R EQUIRED TO FURNISH ITS RETURN OF INCOME FOR THE AY BY ISSUANCE OF A NOTICE U/S 148 OF THE ACT. IN COMPLIANCE, THE ASSESSEE HAD REQUESTED THE AO TO TR EAT THE RETURN OF INCOME FILED ORIGINALLY BE TREATED AS IN RESPONSE T O THE SAID NOTICE. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE W AS ASKED TO FURNISH THE DETAILS OF PROPERTIES ACQUIRED, COMPENSATION AN D INTEREST RECEIVED ON ACQUISITION ETC., IN RESPONSE, THE ASSESSEE SUBMITT ED THAT THE LANDS WERE ORIGINALLY PURCHASED BY SMT. RADHABAI, W/O RAMCHAND RA ASAWA OUT OF JOINT FAMILY FUNDS WAY BACK IN 1960 AND ON HER DEMISE IN MARCH, 1986, THE SAID PROPERTY WAS DEVOLVED ON HER SONS VIZ., RAMNIVAS AS AWA AND RAMVALLABH ASAWA EQUALLY. SINCE RAMNIVAS ASAWA ALSO PASSED AW AY ON 29.3.2002, ITA NO.1048/BANG/2012 PAGE 3 OF 15 50% SHARE IN THE SAID PROPERTY WAS TAKEN OVER BY HI S SONS WHICH ARE HELD IN HUF STATUS BY THE PRESENT KARTHA I.E., MOHANLAL ASAWA AND THE OTHER 50% IS TAKEN OVER BY RAMVALLABH ASAWA & SONS GROUP. ON ACCOUNT OF ACQUISITION OF LAND BY THE LAND ACQUISITION OFFICER , THE INITIAL VALUE AT RS.53,658/- PER ACRE WAS FIXED IN THE ACQUISITION P ROCEEDINGS DATED 7.3.1990. AGGRIEVED BY THE INADEQUACY OF THE COMPE NSATION, THE ASSESSEE (HUF) HAD APPROACHED THE HONBLE CIVIL COURT WHICH HAD AWARDED, AMONG OTHERS, HIGHER COMPENSATION OF RS.3,00,000/- PER AC RE AND INTEREST @ 9% FROM 7.2.1990 TO 6.2.1991 FOR ONE YEAR. THE AUTHOR ITIES TOOK UP THE ISSUE BEFORE THE HONBLE HIGH COURT. THE HONBLE COURT H AD, IN ITS RULING ON 24.10.2005, FIXED THE AWARD AT RS.2,75,000/-PER ACR E, BESIDES OTHER BENEFITS AS ALLOWED BY THE LOWER COURT. KEEPING IN VIEW 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 INTEREST IN COME ON ACCRUAL BASIS. HOWEVER, PLACING RELIANCE ON THE JUDGMENT OF THE HO NBLE SUPREME COURT IN THE CASE OF CIT V. GHANSHYAM (HUF) REPORTED IN (2009) 315 ITR 1 (SC) WHICH HAS BEEN DULY FOLLOWED BY THE ITAT, DELHI BEN CH REPORTED IN (2011) 15 TAXMANN.COM 366 (DELHI) , THE AO HAD ASSESSED THE INTEREST RECEIVED ON ADDITIONAL COMPENSATION TO TAX IN THE YEAR OF RE CEIPT AT RS.2,00,000/-. 4.1. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE, AMONG OTHERS, BEFORE THE CIT (A). AFTER TAKING INTO ACCOUNT THE CONTENT IONS OF THE ASSESSEE, THE CIT (A) HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE. THE REASONING OF THE CIT (A) IS EXTRACTED AS UNDER: ITA NO.1048/BANG/2012 PAGE 4 OF 15 I HAVE GONE THROUGH THE FACTS OF THE CASE, CONTENT S IN THE ASSESSMENT ORDER AND ASSESSEES WRITTEN SUBMISSIONS. THE AO HAS ADD ED THE INTEREST INCOME ON RECEIPT BASIS, RELYING ON HONBLE SUPREME COURT JUDGMENT IN THE CASE OF CIT V. GHANSHYAM (HUF) (2009) 315 ITR 1/182 TAXMAN 368. THE FACTS OF THE CASE RELIED BY THE AO ARE DISTINGUISHABLE. IN THE SUPREME COURT CASE THE ENHANCED COMPENSATION AND THE INTEREST RECEIVED BY ASSESSEE WAS IN DISPUTE AND IS PENDING BEFORE THE COURT, AND THE ASSESSEE H AS RECEIVED THE AMOUNT AGAINST THE SECURITY FURNISHING UP TO THE SATISFACT ION OF THE EXECUTING COURT. IN THIS REGARD, IT IS PERTINENT TO MENTION THAT TH E AMENDMENT INCLUDE CLAUSE (VIII) TO SUB-SECTION 2 TO SEC. 56 WHICH IS INTRODU CED THROUGH FINANCE BILL (2), 2009 WITH EFFECT FROM 01.04.2010 PROSPECTIVELY AND THE AMENDMENT TO SEC. 145A WITH EFFECT FROM 01.04.2010 WHEREIN CLAUSE (B) HAS BEEN INTRODUCED WHICH IS OF A MANDATORY TO TAX THE INTEREST RECEIVE D ON COMPENSATION ON RECEIPT BASIS ONLY WHICH IS EFFECTIVE FROM THE ASSE SSMENT YEAR 2010.11. HENCE, THIS TREATMENT IS MANDATORY FOR THE ASSESSME NT YEAR 2010-11 AND ONWARDS AND NOT FOR EARLIER YEARS. 4.2. AGGRIEVED, THE REVENUE HAS COME UP BEFORE US WITH THE PRESENT APPEAL. DURING THE COURSE OF HEARING, THE LEARNED DR SUBMITTED THAT THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT S RECORDED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDERS THAT THE INTEREST RECEIVED BY THE ASSESSEE RELATES TO ADDITIONAL COMPENSATION, THE IN TEREST SO RECEIVED HAS TO BE CHARGED TO TAX IN THE YEAR OF RECEIPT. IT WA S, FURTHER, SUBMITTED THAT THE CIT (A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE AMENDMENTS TO SECTION 145A OF THE ACT WAS DONE LATER ON THE DECIS ION OF THE 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 HON BLE COURT IS APPLICABLE TO ALL SIMILAR CASES PRIOR TO THE ASSESSMENT YEAR 2010 -11. IT WAS, FURTHER, POINTED OUT BY THE LEARNED DR THAT THE CIT (A) OUGH T TO HAVE APPRECIATED THE FACTS OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF GHANSHYAM (HUF) (SUPRA) AS DISCUSSED BY THE ASSESSING OFFICER IN THE ITA NO.1048/BANG/2012 PAGE 5 OF 15 ASSESSMENT ORDERS WHEREIN IT WAS HELD THAT THE INTE REST ON ACCOUNT OF ACQUISITION OF LAND WAS TO BE TAXED IN YEAR IN WHIC H IT WAS RECEIVED. IT WAS, THEREFORE, PLEADED THAT THE STAND OF THE AO REQUIRE S TO BE RESTORED AND THAT OF THE CIT (A) BE CANCELLED. 4.2.1 ON THE OTHER HAND, THE SUBMISSION MADE BY T HE 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, THE 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 H ONBLE 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 ASSESSEE S 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 WIT H 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 BAIS CASE (SUPRA); ITA NO.1048/BANG/2012 PAGE 6 OF 15 - THAT THE VERDICT IN CASE OF RAMA BAI WAS DELIVER ED 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 COURT IN PRADIP CHANDRA PARIJA & OTHERS V. PRAMOD CHANDRA PA TNAIK & OTHERS REPORTED IN (2002) 254 ITR 99 (SC) THAT THE BENCH OF TWO JUDGES IS BOUND TO FOLLOW THE DECISION OF BENCH OF THREE JUDGES AND, HENCE, THE JUDGMENT IN GHANSHYAM CASE IS PER I NCURIAM; AND THAT THE CIT (A) HAD RIGHTLY CONSIDERED THIS FACT A ND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. 4.2.2. IN CONCLUSION, IT WAS PRAYED THAT THERE W AS NO INFIRMITY IN THE FINDINGS OF THE CIT (A) ON THE ISSUE WARRANTING INT ERFERENCE. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO THE CASE LAWS ON WHICH EITHER OF THE PARTY HAVE PLACED STRONG RELIANCE. THE PROPERTY OW NED BY THE ASSESSEE WAS ACQUIRED BY THE GOVERNMENT BY FIXING THE COMPEN SATION TO BE PAID FOR SUCH ACQUISITION AT RS.53,658/ACRE AS PER THE ACQUI SITION PROCEEDINGS DATED 7.3.1990. THE COMPENSATION AMOUNT WAS ENHANC ED TO RS.3 LAKHS PER ACRE BY THE CIVIL COURT WHICH WAS, HOWEVER, SUB SEQUENTLY FIXED AT RS.2,75,000/- PER ACRE BY THE HONBLE JURISDICTIONA L HIGH COURT VIDE ITS JUDGMENT DATED 24.10.2005. BASED ON THE SAID JUDGM ENT, THE ASSESSEE HAD FURNISHED HIS RETURNS OF INCOME FOR THE ASSESSM ENT 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 OF CIT V. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST LTD [161 ITR 524 (SC)] . THE AO HAS, AFTER DUE ITA NO.1048/BANG/2012 PAGE 7 OF 15 CONSIDERATION OF THE ASSESSEES CONTENTIONS, AS REC ORDED IN THE RESPECTIVE ASSESSMENT ORDERS AND BY RELYING ON THE FINDINGS OF THE HONBLE ITAT, DELHI BENCH REPORTED IN (2011) 15 TAXMANN.COM 366 DELHI AND ALSO THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF GHANSHYAM (HUF) (SUPRA) , HELD THAT THE INTEREST RECEIVED ON THE ADDITIONAL COMPENSATION WERE TO BE ASSESSED TO TAX IN THE YEAR(S) OF RECEIPT. T HIS WAS STRONGLY OBJECTED TO BY THE ASSESSEE BEFORE THE CIT (A). THE CIT (A) HAS, IN HIS IDENTICAL REASONS, DECIDED THE ISSUE IN FAVOUR OF THE ASSESSE E ON THE PREMISE THAT THE FACTS OF THE CASE CIT V. GHANSHYAM (HUF) RE LIED ON BY THE AO ARE DISTINGUISHABLE. 5.1 BEFORE CONSIDERING THE ISSUE IN DEPTH, WE WOU LD LIKE TO POINT OUT THAT NEITHER THE ORDERS OF THE AUTHORITIES BELOW NOR THE LD. AR WAS ABLE TO THROW MUCH LIGHT AS TO THE NATURE OF INTEREST, WHETHER IT IS INTEREST PAID U/S. 28 OR U/S. 34 OF LAND ACQUISITION ACT, 1894. HOWEVER, SI NCE IT IS AN INTEREST RECEIVED ALONG WITH ENHANCED COMPENSATION, WE PROCE ED TO CONSIDER THE MATTER AS IF INTEREST IS IN THE NATURE OF INTEREST MENTIONED U/S. 28 OF THE LAND ACQUISITION ACT, 1894. 5.2 THE HONBLE SUPREME COURT IN THE CASE OF GHANSHYAM (HUF) (SUPRA) HAS CONSIDERED THE IMPACT OF INTRODUCTION OF SECTIO N 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 PREVIOUS YEAR RELEVANT TO THE A Y 1999-2000, THE ITA NO.1048/BANG/2012 PAGE 8 OF 15 ASSESSEE RECEIVED ENHANCED COMPENSATION ON HIS LAND S BEING ACQUIRED BY THE HARYANA URBAN DEVELOPMENT AUTHORITY AS ALSO INT EREST THEREON. IN THE RETURN OF INCOME FOR THE RELEVANT AY, THE ASSESSEE DID NOT OFFER THE AMOUNT OF ENHANCED COMPENSATION AND THE INTEREST RECEIVED THEREON FOR TAXATION, ON THE PLEA THAT THE AMOUNT OF ENHANCED COMPENSATIO N RECEIVED HAD NOT ACCRUED TO HIM DURING THE YEAR OF RECEIPT AS THE EN TIRE AMOUNT WAS IN DISPUTE IN APPEAL BEFORE THE H C WHICH APPEAL STOOD FILED BY THE STATE AGAINST THE ORDER OF THE REFERENCE COURT GRANTING E NHANCED COMPENSATION; AND THAT THE AMOUNT OF ENHANCED COMPENSATION AND TH E 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 CONTENTIONS 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 ENHANC ED OR FURTHER ENHANCED BY THE COURT WOULD BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD CAPITAL GAINS OF THE PREVIOUS YEAR IN WH ICH THE SAID AMOUNT CAME TO BE RECEIVED. HE ACCORDINGLY, BROUGHT TO TAX THE AMOUNT OF ENHANCED COMPENSATION AND THE INTEREST THEREON RECEIVED BY THE ASSESSEE IN THE YEAR OF RECEIPT . ON APPEAL, THE CIT (A) ACCEPTED THE ASSESSEES CONTENTION AND DELETED THE AMOUNT OF ENHANCED COMPE NSATION AND INTEREST THEREON FROM THE TOTAL INCOME OF THE ASSESSEE. THE TRIBUNAL UPHELD THE ORDER THE CIT (A). THE HIGH COURT ALSO DISMISSED TH E REVENUES APPEAL. WHEN THE ISSUE HAD FINALLY REACHED BEFORE THE HONB LE SUPREME COURT FOR CONSIDERATION, THE HONBLE COURT, AFTER DULY ANALY SING THE PROVISIONS OF ITA NO.1048/BANG/2012 PAGE 9 OF 15 SECTIONS, 2 (47), 45(1) (AS IT STOOD PRIOR TO 1.4.2 004) , 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 CONCLUSION THAT 32. THE ISSUE TO BE DECIDED BEFORE US WHAT IS T HE MEANING OF THE WORDS ENHANCED COMPENSATION/CONSIDERATION IN SECT ION 45(5)(B) OF THE 1961 ACT? WILL IT COVER INTEREST? THESE QUESTIONS ALSO BRING IN THE CONCEPT OF THE YEAR OF TAXABILITY. 33. IT IS TO ANSWER THE ABOVE QUESTIONS THAT WE H AVE ANALYSED THE PROVISIONS OF SECTIONS 23, 23(1A), 23(2), 28 AND 34 OF THE 1894 ACT. AS DISCUSSED HEREINABOVE, SECTION 23(1A) PROVIDES 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, THE RE IS A PROVISION FOR SOLATIUM WHICH ALSO REPRESENTS PART OF ENHANCED COM PENSATION. SIMILARLY, SECTION 28 EMPOWERS THE COURT IN ITS DISCRETION TO AWARD INTEREST ON THE EXCESS AMOUNT OF COMPENSATION OVER AND ABOVE WHAT I S AWARDED BY THE COLLECTOR. IT INCLUDES ADDITIONAL AMOUNT UNDER SEC TION 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 DETERMINED BY THE C OURT AFTER REFERENCE UNDER SECTION 18 OF THE 1894 ACT. IT DEPENDS UPON THE CLAIM, UNLIKE INTEREST UNDER SECTION 34 WHICH DEPENDS ON UNDUE DELAY IN MA KING THE AWARD. IT IS TRUE THAT INTEREST IS NOT COMPENSATION. IT IS EQ UALLY TRUE THAT SECTION 45(5) OF THE 1961 ACT, REFERS TO COMPENSATION. BUT AS DI SCUSSED HEREINABOVE, 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 INTEREST UNDER SEC TION 34 IS AN ACCRETION TO THE VALUE, HENCE, IT IS A PART OF ENHANCED COMPENSA TION OF CONSIDERATION WHICH IS NOT THE CASE WITH INTEREST UNDER SECTION 3 4 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 REINFORCED BY THE NEWLY INSERTED CLAUSE (C) IN SECTION 45(5) BY THE FINANCE ACT, 200 3 WITH EFFECT FROM 1.4.2004. THIS NEWLY ADDED CLAUSE ENVISAGES A SITU ATION WHERE IN THE ASSESSMENT FOR ANY YEAR:- - THE CAPITAL GAIN ARISING FROM THE TRANSFER OF A C APITAL 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), ITA NO.1048/BANG/2012 PAGE 10 OF 15 AND SUBSEQUENTLY SUCH COMPENSATION OR CONSIDERATION IS REDUCED BY ANY COURT, TRIBUNAL OR OTHER AUTHORITY. 34. IN SUCH A SITUATION, SUCH ASSESSED CAPITAL G AIN OF THAT YEAR SHALL BE RECOMPUTED BY TAKING THE COMPENSATION OR CONSIDE RATION AS SO REDUCED BY SUCH COURT, TRIBUNAL OR OTHER AUTHORITY TO BE THE F ULL VALUE OF THE CONSIDERATION. FOR GIVING EFFECT TO SUCH RE-COMPUT ATION, THE PROVISIONS OF THE NEWLY INSERTED (WITH EFFECT FROM 1.4.2004) SECT ION 155 (16) BY THE FINANCE ACT, 2003 (32 OF 2003), HAVE BEEN ENACTED. 35. IT WAS URGED ON BEHALF OF THE ASSESSEE THAT SECTION 45(5) (B) OF THE 1961 ACT DEALS ONLY WITH RE-WORKING, ITS OBJECT IS NOT TO CONVERT THE AMOUNT OF ENHANCED COMPENSATION INTO DEEMED INCOME ON RECEIPT. WE FIND NO MERIT IN THIS ARGUMENT. THE SCHEME OF SECTION 4 5(5) OF THE 1961 ACT WAS INSERTED WITH EFFECT FROM 1.4.1988 AS AN OVERRIDING PROVISION. AS STATED ABOVE, COMPENSATION UNDER THE LA ACT 1894, ARISES A ND IS PAYABLE 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 COMPENSATION, IT SHALL BE TREATED AS DEEMED INCOME AND TAXED ON RECEIPT BASIS. OUR ABO VE UNDERSTANDING IS SUPPORTED BY INSERTION OF 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 THE COURT, TRIBUNAL OR OTHER AUTHORITY AND RE-COMPU TATION/AMENDMENT OF THE ASSESSMENT ORDER. SECTION 45(5) READ AS A WHOLE (I NCLUDING CLAUSE C) NOT ONLY DEALS WITH RE-WORKING AS URGED ON BEHALF OF TH E ASSESSEE BUT ALSO WITH THE CHANGE IN THE FULL VALUE OF THE CONSIDERATION ( COMPUTATION) AND SINCE THE ENHANCED COMPENSATION/CONSIDERATION (INCLUDING INTE REST UNDER SECTION 28 OF THE 1894 ACT) BECOMES PAYABLE/PAID UNDER 1894 ACT A T DIFFERENT STAGES, THE RECEIPT OF SUCH ENHANCED COMPENSATION/CONSIDERATION IS TO BE TAXED IN THE YEAR OF RECEIPT SUBJECT TO ADJUSTMENT, IF ANY, UNDE R SECTION 155(16) OF THE 1961 ACT, LATER ON. HENCE, THE YEAR IN WHICH ENHAN CED COMPENSATION IS RECEIVED IS THE YEAR OF TAXABILITY. CONSEQUENTLY, EVEN IN CASES WHERE PENDING APPEAL, THE COURT/TRIBUNAL/AUTHORITY BEFORE WHICH A PPEAL IS PENDING, PERMITS THE CLAIMANT TO WITHDRAW AGAINST SECURITY O R OTHERWISE THE ENHANCED COMPENSATION (WHICH IS IN DISPUTE), THE SAME IS LIA BLE TO BE TAXED UNDER SECTION 45(5) OF THE 1961 ACT. WE MAY CLARIFY THAT EVEN BEFORE THE INSERTION OF SECTION 45(5) (C) AND SECTION 155(16) WITH EFFEC T FROM 1.4.2004, THE RECEIPT OF ENHANCED COMPENSATION UNDER SECTION 45(5)(B) WAS TAXABLE IN THE YEAR OF RECEIPT WHICH IS ONLY REINFORCED BY INSERTION OF CL AUSE (C) BECAUSE THE RIGHT TO RECEIVE PAYMENT UNDER THE 1894 ACT IS NOT IN DOU BT. 5.3. IT IS PERTINENT TO MENTION HERE TH AT WHILE COMING TO THE ABOVE CONCLUSION, THE HONBLE COURT HAD DULY TAKEN NOTE O F ITS EARLIER JUDGMENT IN ITA NO.1048/BANG/2012 PAGE 11 OF 15 CIT V. HINDUSTAN HOUSING & LAND DEVELOPMENT TRUST L TD (1986) 161 ITR 524 (SC) AND DISTINGUISHED THE SAME. 5.4 LIKEWISE, THE ITAT, DELHI BENCH A HAS, IN T HE 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 THAT THE ADDITIONAL C OMPENSATION RECEIVED BY THE ASSESSEE IS TO BE ASSESSED IN THE YEAR IN WHICH IT IS RECEIVED. THE SUPREME COURT ALSO HELD THAT INTEREST ON ENHANCED C OMPENSATION UNDER SECTION 28 OF THE LAND ACQUISITION ACT, 1894, WILL FORM PART OF THE ENHANCED VALUE OF THE LAND. WHILE SECTION 34 OF THAT ACT WI LL BE CONSTRUED AS INTEREST SIMPLICITER FOR DELAY IN PAYMENT SO THAT IT WOULD B E GOVERNED BY LAW RELATING TO ASSESSMENT OF INTEREST ON SUCH DELAY BEING ON AC CRUAL BASIS. IN THE INSTANT CASE, THE ASSESSEE HAD RECEIVED INTEREST ON ENHANCE D VALUE OF LAND AND IT WAS COVERED BY SECTION 28 OF THE LAND ACQUISITION ACT, AND, THEREFORE, INTEREST AMOUNT WAS ALSO TO BE ASSESSED IN THE ASSESSMENT YE AR 2002-03 IN WHICH THE AMOUNT HAD BEEN RECEIVED. IT WAS, THEREFORE, HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN ASSESSING THE AMOUNT OF ENHANCED C OMPENSATION ALONG WITH INTEREST THEREUPON IN THE YEAR IN WHICH IT WAS RECE IVED 5.5. FURTHER, WE WOULD LIKE TO REFER TO THE OBSERVATION OF THE CIT (A) THAT THE JUDGMENT OF THE HONBLE SUPREME COURT IN G HANSHYAMS CASE IS DISTINGUISHABLE ON THE PREMISE THAT IN THE SUPREME COURT CASE THE ENHANCED COMPENSATION AND THE INTEREST RECEIVED BY ASSESSEE WAS IN DISPUTE AND IS PENDING BEFORE THE COURT AND THE ASS ESSEE HAS RECEIVED THE AMOUNT AGAINST THE SECURITY FURNISHING UP TO THE SA TISFACTION OF THE EXECUTING COURT [SOURCE: PAGE 9 OF CIT (A)S ORDER]. HOWEVER, THE HONBLE SUPREME COURT HAD EXPLICITLY CLARIFIED THAT 35. .. CONSEQUENTLY, EVEN IN CASES WHERE PENDING APPEAL, THE COURT/TRIBU NAL/AUTHORITY BEFORE ITA NO.1048/BANG/2012 PAGE 12 OF 15 WHICH APPEAL IS PENDING, PERMITS THE CLAIMANT TO WI THDRAW AGAINST SECURITY OR OTHERWISE THE ENHANCED COMPENSATION (WHICH IS IN DISPUTE), THE SAME IS LIABLE TO BE TAXED UNDER SECTION 45(5) OF THE 1961 ACT. THUS, THE JUDGMENT OF THE HONBLE APEX COURT IS DIR ECTLY ON THE POINT AND IS NOT DISTINGUISHABLE AS CLAIMED BY THE CIT (A). 5.6. WITH REGARD TO THE ASSESSEES ARGUMENT T HAT THE HONBLE SUPREME COURTS VERDICT IN RAMA BAI S CASE WAS DELIVERED BY A THREE MEMBER JUDGES BENCH WHEREAS THE VERDICT IN GHANSHYAM S CASE WAS PRONOUNCED ONLY BY A TWO MEMBER JUDGES BENCH AND, THUS, THE T WO JUDGES BENCH WAS BOUND TO FOLLOW THE DECISION OF THREE JUDGES B ENCH; 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 WAS NOT CONSIDERED BY THE HONBLE S UPREME COURT (SINCE THAT CASE PERTAINED TO A.Y. 1968-69); WHEN THE QUE STION OF ACCRUAL 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 MEMBER S BENCH WAS BOUND TO FOLLOW THE DECISION OF THE THREE MEMBERS BENCH DOE S NOT FIT IN, IN THE INSTANT CASE, AS ARGUED BY THE ASSESSEE. 5.7. TAKING INTO ACCOUNT ALL THE FACTS AND CIRCU MSTANCES OF THE ISSUE AS ANALYSED IN THE FOREGOING PARAGRAPHS AND ALSO IN CO NFORMITY WITH (I) THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF GHANSHYAM (HUF) AND (II) THE FINDINGS OF THE HONBLE DELHI BENCH OF THE ITA T IN THE CASE OF AJAY SHARMA (SUPRA); WE ARE OF THE VIEW THAT THE CIT (A) WAS NOT JUSTIFIED IN ITA NO.1048/BANG/2012 PAGE 13 OF 15 ALLOWING THE ASSESSEES APPEAL. IN SUBSTANCE, THE REVENUES APPEAL IS ALLOWED. 6. BEFORE PARTING WITH, WE WOULD LIKE T O DEAL WITH THE ISSUES RAISED BY THE LEARNED AR DURING THE COURSE OF HEARING AS U NDER: (I) THE AO HAD NEITHER FURNISHED NOR COMMUNICATED THE 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 ASSES SEE HAD NOT OBJECTED TO THE RE-OPENING OF THE ASSESSMENT DURING THE COUR SE OF RE-ASSESSMENT PROCEEDINGS AND, THEREFORE, THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (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 REVENU E IN ITS APPEALS UNDER CONSIDERATION IS ONLY THE ASSESSING OF THE INTEREST RECEIVED DURING THE AY 2006-07 . MOREOVER, THE ASSESSEE HAS NOT VENTURED TO FILE I TS CROSS OBJECTION BEFORE THIS BENCH AGAINST THE AOS ALLEGE D STAND IN COMPUTING THE CAPITAL GAINS ON PROTECTIVE BASIS. IT IS PERTI NENT TO MENTION HERE THAT THE ISSUE UNDER CONSIDERATION IS, WHETHER THE INT EREST RECEIVED IS TO BE ASSESSED ON ACCRUAL OR ON RECEIPT BASIS? HOWEVER, ON A PERUSAL OF THE ASSESSMENT ORDER UNDER DISPUTE, IT IS OBSERVED THAT THE AO HAD RIGHTLY ITA NO.1048/BANG/2012 PAGE 14 OF 15 ASSESSED THE INTEREST ON RECEIPT BASIS. FOR APPREC IATION OF FACTS, THE RELEVANT PORTION OF THE AOS OBSERVATION IS EXTRACT ED AS UNDER: 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 AND IN TEREST ON ACCRUAL BASIS, THE SAID RETURNS WILL BE ASSESSED ON A PROTE CTIVE MEASURE. THUS, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE CAPITAL GAINS ADDITIONAL COMPENSATION IS ASSESSED ON 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. 2,00,000/- [BEING 50% OF TOTAL INTEREST AMOUNT OF RS.4,00,000/- SINCE BALANCE 50% SHARE ATTRIBUTABLE TO MOHANLAL ASAWA & BROTHERS (HU F)] ON RECEIPT BASIS FOR THE YEAR UNDER CONSIDERATION I.E., 2006-0 7. [SOURCE: PAGE 11 OF THE ASST. ORDER FOR AY 2006-07] THEREFORE, THE ASSESSEES CLAIM ON THIS COUNT IS NO T VALID AND, ACCORDINGLY, THE ISSUE OF CAPITAL GAINS COMPUTED ON PROTECTIVE BASIS IS NOT ADJUDICATED. 7. IN THE RESULT, THE REVENUES APPEAL FOR THE ASSE SSMENT YEAR 2006-07 IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JANUARY, 2014 . SD/- SD/- ( JASON P. BOAZ ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 17 TH JANUARY, 2014 . /D S/ ITA NO.1048/BANG/2012 PAGE 15 OF 15 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR / SENIOR PRIVATE SECRETARY ITAT, BANGALORE.