ITO, Faridabad V. Shri Jai Bhagwan, Palwal

ITA 2901/DEL/2011

• Counselvise Citation: 290120114 RSA 2011
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-07-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RENUKA JAIN
• Assessee Lawyers: ASHWANI TANEJA
• Keywords: Capital asset
• Section: 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.2901/DEL/2011 ASSESSMENT YEAR : 2003-04 ITO, SHRI JAI BHAGWAN, L/HY OF WARD-11 (3), LATE SHRI DHANI RAM, PATIL GATE, BLOCK-1B, FARIDABAD. V. NEAR DAYANAND SCHOOL, PALW AL. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AFRPR AFRPR AFRPR AFRPR- -- -2254 2254 2254 2254- -- -M MM M APPELLANT BY : MS. RENUKA JAIN,, DR. RESPONDENT BY : SHRI ASHWANI TANEJA, ADVOCATE. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD CIT(A) DATED 23.3.2011. THE GROUNDS RAISED BY THE REVENUE AR E AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITIO N OF ` .12,18,994/- ( ` .12,33,981/- MINUS ` ./14,987/-) MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ORDERED BY THE COURT ON ENHANCED COMPENSATION FROM THE DATE OF TAKING OVER T HE POSSESSION OF THE LAND TO THE DATE OF PAYMENT OF DEPOSIT OF THE ENHANCED COMPENSATION IS IN THE NATURE OF COMPENSATIO N, WHICH AS PER FINDINGS OF THE HON'BLE APEX COURT IN THE CASE OF CIT V. GHANSHYAM (HUF) 315 ITR 1 (SC) IS TO BE TAXED IN THE YEAR OF RECEIPT. 2. THAT THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, D ELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME O F HEARING OF APPEAL. ITA NO2901/DEL/2011 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AGRICULTU RAL LAND OWNED BY SHRI DHANI RAM BEARING KHEWAT NO.953/1081 IN VIL LAGE PALWAL WAS ACQUIRED BY THE LAND ACQUISITION AUTHORITY ON 6.12.1 995 BY MAKING PAYMENTS AS COMPENSATION TO HIM AS PER RATES FIXED AT T HE TIME OF ACQUISITION OF LAND. LATER ON IN VIEW OF THE JUDGMEN T OF THE HON'BLE PUNJAB & HARYANA HIGH COURT DATED 7.10.1999 THE COM PENSATION WAS ENHANCED AND DURING THE YEAR UNDER CONSIDERATION SHR I DHANI RAM HAD RECEIVED AN AMOUNT OF ` .12,18,994/- ON 1909.2002 FROM LAND ACQUISITION AUTHORITY, UE, FARIDABAD. FROM THE ACCOU NT STATEMENT OF ENHANCED COMPENSATION OBTAINED FROM THE OFFICE OF L AND ACQUISITION COLLECTOR, THE ASSESSING OFFICER OBSERVED THAT THE AMOUN T REPRESENTED INTEREST ON ENHANCED COMPENSATION AND THEREFORE THE C ASE OF THE ASSESSEE WAS REOPENED U/S 148 AND NOTICE WAS SERVED UPON SH RI JAI BHAGWAN, L/H OF LATE SHRI DHANI RAM. SHRI JAI BHAGW AN DESPITE VARIOUS NOTICES DID NOT APPEAR AND DID NOT FILE ANY RETURN O F INCOME IN RESPONSE TO THE NOTICE. THE ASSESSING OFFICER THEREFORE C OMPUTED THE TOTAL INCOME OF THE ASSESSEE AT ` .12,33,981/- BEING ` .12,18,994/- RECEIVED FROM LAND ACQUISITION AUTHORITY AND ` .14,987/- BEING INTEREST INCOME IN HIS SAVINGS BANK ACCOUNT. 3. DISSATISFIED WITH THE ORDER, THE ASSESSEE FILED APPEAL BEFORE LD CIT(A) AND SUBMITTED VARIOUS SUBMISSIONS AGAINST THE ORDE R PASSED BY THE ASSESSING OFFICER U/S 144 OF THE ACT AND ALSO SUBMITTE D THAT THE LAND ACQUIRED REPRESENTED AGRICULTURAL LAND AND THER EFORE IS WAS NOT A CAPITAL ASSET AND ITS TRANSFER CANNOT GIVE RISE TO CAPIT AL GAIN. THE REOPENING OF THE CASE U/S 148 WAS ALSO CHALLENGED AS THE NOTICE WAS NOT SERVED ON ALL LEGAL HEIRS. RELIANCE IN THIS RESPECT WAS PLACED ON A NUMBER OF CASE LAWS. THE LD CIT(A) AFTER GOING THROUG H THE SUBMISSIONS OF THE ASSESSEE AND AFTER GOING THROUGH THE DOC UMENTS AND EVIDENCES PLACED ON RECORD AND ON THE BASIS OF VAR IOUS JUDICIAL ITA NO2901/DEL/2011 3 PRONOUNCEMENTS DELETED THE ADDITION MADE BY THE ASSESSI NG OFFICER BY HOLDING AS UNDER:- AS REGARDS INTEREST ON ENHANCED COMPENSATION, THE APPE LLANT RECEIVED INTEREST OF ` .12,18,998/- DURING THE YEAR UNDER APPEAL. THE IMPORTANT QUESTION THAT ARISES IS WHETHER THE WHOL E OF THE AMOUNT OF INTEREST OF ` .12,18,998/- IS TAXABLE IN ASSESSMENT YEAR 2003-04 ON RECEIPT BASIS (CASH SYSTEM OF ACCOUNTING) A S THE APPELLANT DID NOT FOLLOW ANY SYSTEM OF ACCOUNTING IN EARLIER YEARS, OR TAXABLE IN VARIOUS EARLIER YEARS ON ACCRUAL BASIS. THIS ISSUE HAS TO BE DECIDED IN THE LIGHT OF THE FINDING OF HON'BLE SUPREME COURT IN THE CASE OF GHANSHYAM HUF (SUPRA). IN THIS CASE, ON ANALYZING ALL THE PROVISIONS CONTAINED IN TH E LAND ACQUISITION ACT, 1894 , IT HAS BEEN HELD THAT THE PA YMENTS MADE UNDER SECTION 23, 23(1A), 23(2) AND 28 OF THAT ACT A RE IN THE NATURE OF PAYMENT OF COMPENSATION. ON THE OTHER HAND , THE PAYMENT U/S 34 PARTAKES THE CHARACTER OF INTEREST INCO ME PAID ON ACCOUNT OF LATE PAYMENT OF COMPENSATION, PAYABLE FROM THE DATE OF POSSESSION TO THE DATE OF PAYMENT OR DEPOSIT. TH EREFORE, THE INTEREST U/S 34 IS TO BE BROUGHT TO TAX UNDER THE RESIDUARY HEAD OF INCOME., THE DECISION OF HON'BLE SUPREME COU RT IN THE CASE OF RAMA BAI V. CIT 181 ITR 400 WHICH IS ON THE ISSUE OF TAXATION OF INTEREST AND WHICH HAS NOT BEEN CONSIDERED IN THE CASE OF GHANSHYAM HUF (SUPRA), IS IN THE NATURE OF BI NDING PRECEDENT. SIMILAR QUESTION ALSO CAME UP IN THE CASE O F KS KRISHNA RAO V. CIT 181 ITR 409 IN WHICH IT WAS REITE RATED BY FOLLOWING THE DECISION IN THE CASE OF RAMA BAI (SUPRA ) THAT INTEREST CANNOT BE TAXED IN A LUMP SUM ON THE DATE ON WHICH THE COURT PASSES AN ORDER FOR ENHANCEMENT OF COMPENSATION B UT IT HAS TO BE SPREAD OVER ON AN ANNUAL BASIS RIGHT FROM THE DATE OF DELIVERY OF POSSESSION TILL THE DATE OF THE ORDER OF TH E COURT ON A ITA NO2901/DEL/2011 4 TIME BASIS. IN SO FAR AS INTEREST PAYABLE U/S 28 OF THAT ACT IS CONCERNED, THE HON'BLE COURT HAS NOW HELD THAT IT I S IN THE NATURE OF COMPENSATION WHICH BECOMES TAXABLE IN THE YEAR OF RECEIPT AS PER THE AMENDED LAW. HOWEVER, IT DOES FOLLOW FROM TH E AFORESAID DECISION THAT INTEREST PAYABLE U/S 34 WHICH IS CHARGEAB LE UNDER THE RESIDUARY HEAD, CANNOT BE SAID TO ACCRUE ON THE D ATE WHEN THE COURT PASSED THE ORDER. IT MAY BE MENTIONED THAT THE DECISIONS IN THE CASE OF RAM BAI AND KS KRISHNA RAO (SU PRA) WERE RENDERED WITHOUT HAVING REGARD TO THE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEES. THEREFORE, UNDER T HESE JUDGMENTS IN RESPECT OF TAXABLE OF INTEREST, APPLY MUT ATIS MUTANDIS TO INTEREST PAID U/S 34 OF THAT LA ACT. THER E REMAINS NO DISPUTE TO THE FACT THAT THE AMOUNT OF ` .12,18,998/- RECEIVED BY THE APPELLANT WAS U/S 34 OF THE LAND ACQUISITION ACT AS IT PERTAINS TO THE PERIOD AFTER THE DATE OF POSSESSION OF LAND BY H UDA WHICH IS REQUIRED TO BE TAXED ON ACCRUAL BASIS. HOWEVER, THE LAC HAS ALLOWED INTEREST ON ENHANCED COMPENSATION FOR THE PER IOD UPTO 19.9.2001 ONLY. THEREFORE NO INTEREST HAS ACCRUED TO THE APPELLANT DURING THE YEAR UNDER APPEAL. HENCE THE A DDITION OF ` .12,18,994/- MADE BY THE ASSESSING OFFICER IS NOT LEGALL Y SUSTAINABLE IN VIEW OF THE POSITION OF LAW CLARIFIED I N THE DECISIONS OF HON'BLE APEX COURT (SUPRA). THEREFORE THE SAME IS D ELETED. THE GROUND NO.5 OF APPEAL STANDS ALLOWED. EM 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. AT THE OUTSET, THE LD DR SUBMITTED THAT THE AMOUNT RECEIVED BY THE ASSESSEE REPRESENTED INTEREST ON ENHANCED COMPENSATION AND INTEREST RELATED TO SECTION 34 OF LAND ACQUISITION ACT AND WHICH IS TAXABLE IN THE YEAR OF RECEIPT AS THE ASSESSEE WAS NOT MA INTAINING BOOKS OF ACCOUNTS AND WAS NOT FOLLOWING ANY ACCOUNTIN G POLICY AND THEREFORE THE INTEREST RECEIVED ON ENHANCED COMPENSAT ION WAS TAXABLE ITA NO2901/DEL/2011 5 IN THE YEAR OF RECEIPT ITSELF AND LD CIT(A) HAS WRONG LY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 6. THE LD AR, ON THE OTHER HAND, SUBMITTED THAT THE AMOUNT DEFINITELY REPRESENTED INTEREST ON ENHANCED COMPENSATI ON. HOWEVER, HE SUBMITTED THAT ON THE BASIS OF JUDICIAL PRONOUNCEME NTS THE INTEREST RECEIVED CANNOT BE TAXED IN THE YEAR OF RECEIPT AND RATHER IT 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 T IME BASIS. RELIANCE IN THIS RESPECT WAS PLACED ON VARIOUS CASE LAWS PLACED IN THE PAPER BOOK AT PAGES 1 TO 49 PARTICULARLY REFERENCE W AS PLACED ON THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. BHOOP ROOM DAGAR HUF & OTHERS REPORTED IN 312 ITR 15 7AND OUR ATTENTION WAS INVITED TO PAGE 43. THE LD AR FURTHER ARGUED THAT THE SAID JUDGMENT HAS FOLLOWED THE JUDGMENT OF HON'BLE SU PREME COURT IN THE CASE OF RAMA BAI (SUPRA) WHEREIN IT WAS HELD THAT INTEREST PAYABLE U/S 34 CANNOT BE SAID TO BE ACCRUED IN THE YEAR IN WH ICH THE COURT PASSES THE ORDER AND IT WAS HELD THAT SUCH INTEREST HAS T O BE SPLIT BETWEEN THE YEARS RIGHT FROM THE DATE OF DELIVERY OF POSSESSION TILL THE DATE OF ORDER OF THE COURT ON A TIME BASIS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AMOUNT RECEIVED BY THE ASSESSEE REPRESENTED INTEREST ON E NHANCED COMPENSATION AS PER PROVISIONS OF SECTION 34 OF LAND ACQ UISITION ACT. THERE IS NO DOUBT THAT INTEREST U/S 34 IS INTEREST AND I S NOT PART OF COMPENSATION AS HELD BY HON'BLE SUPREME COURT IN THE CASE OF CIT V. GHANSHYAM HUF REPORTED IN 315 ITR 1. HOWEVER, IN THI S CASE THE HON'BLE SUPREME COURT HAS NOT DEALT WITH THE YEAR OF TAXABILITY OF ACCUMULATED INTEREST U/S 34. THIS QUESTION HAS BEEN ANSWE RED BY HON'BLE SUPREME COURT IN THE CASE LAW OF RAMA BAI V. CIT 181 ITR 400 WHERE THE HON'BLE COURT HAS HELD THAT SUCH INTEREST HA S TO BE SPLIT ITA NO2901/DEL/2011 6 BETWEEN THE YEARS FROM THE DATE OF DELIVERY OF POSSESSIO N OF LAND TILL THE DATE OF ORDER. THE CASE LAW RELIED UPON BY LD A R IN THE CASE OF BHOOP RAM DAGAR DECIDED BY THE HON'BLE PUNJAB & HAR YANA HIGH COURT HAS ALSO DEALT WITH SIMILAR POSITION AND HAS FOLLO WED THE CASE LAW OF RAMA BAI AND HAS CONCLUDED AS UNDER:-0 INTEREST ON ENHANCED COMPENSATION DOES NOT ACCRUE TIL L THE ISSUE OF ENHANCED COMPENSATION IS FINALLY DECIDED AND THEREAFTER ON ATTAINING THE FINALITY OF DETERMINATION OF ENHAN CED COMPENSATION BY THE COURT, THE INTEREST ACCRUED TO TH E ASSESSEE HAS TO BE SPREAD OVER ON AN ANNUAL BASIS RIGHT FROM THE DATE OF DELIVERY OF POSSESSION TILL THE DATE OF THE ORDER OF TH E COURT ON TIME BASIS. 8. THE FACTS AND CIRCUMSTANCES OF THE SAID JUDGMENT BEI NG SAME, THE ISSUE HAS BEEN RIGHTLY DECIDED BY THE LD CIT(A). IN VIEW OF THE ABOVE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF L D CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 26TH DAY OF JULY, 2013. SD/- SD/- (RAJPAL YADAV) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.26.7.2013. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT ITA NO2901/DEL/2011 7 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 15.7.2013 DATE OF DICTATION 22.7.2013 DATE OF TYPING 23.7.2013 DATE OF ORDER SIGNED BY 26.7.2013 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 26.7.2013 & SENT TO THE BENCH CONCERNED.