The Assistant Commissioner of Income Tax, Pathankot V. M/s The Gurdaspur Cop-op. Sugar Mills Ltd., Gurdaspur

ITA 498/ASR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9537 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 08-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Keywords: Capital asset; Compulsory Acquisition of immovable property; Deemed to accrue or arise in india; Question of law; Cost of acquisition
• Section: 43B; 45(5); 28

Judgement Text

IN THE INCOME TAX APPELLATE TR IBUNAL AMRITSAR BENCH; AMRITSAR BEFORE SH.T.S. KAPOOR, ACCOUNTANT MEMBER AND SH.N.K.CHOUDHRY, JUDICIAL MEMBER I.T.A. NO.498(ASR)/2015 ASSESSMENT YEAR: 2011-12 ACIT, CIRCLE-VI, PATHANKOT VS. M/S. THE GURDASPUR CO-OP. SUGAR MILLS LTD., VILLAGE PANIAR, GURDASPUR. PAN:AAAAT0586H (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAHUL DHAWAN (DR) RESPONDENT BY: SH. PADAM BAHL (CA) DATE OF HEARING: 14.09.2016 DATE OF PRONOU NCEMENT:26.10.2016 ORDER PER N. K. CHOUDHRY (JM): THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-2, AMRITSAR, DATED 25.06.2015 FOR ASST. YEAR :2011-12. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. (I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A)-II, AMRITSAR HAS ERRED IN DELETING THE ADDITION OF RS.1 ,00,34,750/- MADE BY THE A.O. ON ACCOUNT OF CAPITAL GAIN ON ENTIRE LAND, WHEN THE TRANSFER IN RESPECT OF ENTIRE LAND TOOK PLACE IN THE RELEVANT Y EAR AND SECTION 45(1) APPLICABLE AND AS THE COMPENSATION IS NOT ENHANCED OR FURTHER ENHANCED, SECTION 45(5) NOT APPLICABLE. (II) WHETHER IN FACT AND LAW CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A)-II, AMRITSAR IS RIGHT IN DELETING THE ABOVE ADDITION IN VIEW OF THE SUPREME COURT JUDGMENT IN THE CASE OF M/S CIT VS GANSHAM HU F AND ALLAHABAD HIGH COURT IN THE CASE OF CIT VS IQBAL AHMED 295 IT R 444, WHICH NOT APPLICABLE WHEN INTENTION OF THE LEGISLATURE AS PER SECTION 45(5) CLEARLY STATES THAT IT IS APPLICABLE IN CASE WHERE COMPENSA TION IS ENHANCED OR FURTHER ENHANCED. (III) THE LD. CIT(A)-II, AMRITSAR HAS DELETED TH E ADDITION OF RS.64,60,137/- ON THE GROUND THAT THE RDF IS NOT COVERED U/S 43B O F THE INCOME TAX ACT, 1961. HOWEVER, THE FACT IS THAT THE RDF IS ESTABLIS HED UNDER THE ACT (RURAL I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 2 DEVELOPMENT ACT, 1987) OF THE GOVERNMENT OF PUNJAB. ACTUAL PAYMENT AS MENTIONED IN THIS SECTION IS INTENDED TO COVER PAYM ENT TO GOVERNMENT. 3. THE BRIEF FACTS OF THE CASE AS NOTED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE IS A CO-OPERATIVE SOCIETY RUNNING A SU GAR MILL AT GURDASPUR. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN SALE OF SUGAR AMOUNTING TO RS.18,92,14,700/- AS AGA INST RS.46,79,30,740/- OF LAST YEAR. SIMILARLY THE ASSES SEE HAD SHOWN SALE OF MOLASSES AMOUNTING TO RS.15,36,31,77/- AS AGAINST R S.3,06,52,556/- OF LAST YEAR. THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING LOSS OF RS.10,66,23,627/- ON 28.09.2011. THE CASE WAS SELEC TED FOR SCRUTINY THROUGH CASS. NOTICE U/S 143(2) WAS ISSUED TO THE A SSESSEE ON 01.08.2012 AND SERVED UPON ASSESSEE ON 01.08.2013. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD SHOWN LONG TER M CAPITAL GAIN ON SALE OF LAND BY WAY OF COMPULSORY ACQUISITION BY TH E GOVERNMENT FOR NATIONAL HIGHWAYS AUTHORITY OF INDIA, THE LAND MEAS URING 259 MARLAS AND 56 MARLAS RESPECTIVELY FROM DISTILLERY UNIT AND EFFLUENT PLANT. 3.1 THE ASSESSING OFFICER CAME TO THE CONCLUSION A S THE TRANSFER OF THE LAND HAS BEEN COMPLETED, THEREFORE, THE ASSESSEE WA S REQUIRED TO DECLARE LONG TERM CAPITAL GAIN ON THE FULL TRANSACTION VALU E EVEN THOUGH THE PAYMENT IN RESPECT OF REMAINING LAND HAD NOT BEEN R ECEIVED TILL THE END OF THE PREVIOUS YEAR AND FINALLY THE ASSESSING OFFI CER DETERMINED THE LIABILITY AS UNDER. SALE PRICE OF 66 MARLAS @ 83500/- PER MARLA RS.55, 11,000/- SALE PRICE OF 56 MARLAS @ 83500/- PER MARLA RS.46, 76,000/- TOTAL SALE PRICE RS.1,01,87,000/- COST PRICE OF 66 MARLA @ 181.50/- PER MARLA= 11979X 711 = RS.85.171/- I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 3 100 COST PRICE OF 66 MARLA @ 2527.10/-PER MARLA=141517X 711 = RS.67,079/- 100 TOTAL COST PRICE RS.1,52,250/- LONG TERM CAPITAL GAIN RS.1,00,34,750/- 3.2 ON THE SECOND ASPECT WITH REGARD TO THE DECLARI NG OF THE ASSESSEE INTEREST PAID TO THE PUNJAB GOVT. TO THE TUNE OF RS .64,60,137/-. THIS AMOUNT WAS DEBITED IN THE P&L ACCOUNT AND THE QUERY REGARDING THE INTEREST PAYABLE WAS RAISED VIDE ORDER SHEET DATED 24 TH OCT., 2013 AND IT WAS ASKED AS TO WHY THE INTEREST PAYABLE NOT BE DIS ALLOWED U/S 43B OF THE I.T. ACT, 1961. 3.3 THE ASSESSEE REPLIED THAT THE PUNJAB GOVT. IS N OT PUBLIC FINANCIAL INSTITUTION AND, THUS, SEC.43B IS NOT ATTRACTED IN THIS CASE. 4. FEELING AGGRIEVED BY THE ORDER OF ASSESSING OFFI CER, THE ASSESSEE PREFERRED THE APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) ALLOWED THE APPEAL OF ASSESSEE BY OBSERVING AS UNDER: .5. I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSIONS OF THE APPELLANT AND THE GROUNDS OF APP EAL ARE DISPOSED OFF HERE UNDER:- 1. GROUND OF APPEAL NO 1 AND 2 ARE AGAINST THE ADDI TION OF RS.1,00,34,750/- ON ACCOUNT OF LONG TERM CAPITAL GA IN. THE ASSESSEE IS A CO-OPERATIVE SOCIETY RUNNING A SUGAR MILL AT G URDASPUR. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAVE SHOW N LONG TERM CAPITAL GAIN ON SALE OF LAND BY WAY OF COMPULSORY A CQUISITION BY THE GOVERNMENT FOR NATIONAL HIGHWAYS AUTHORITY OF INDIA , THE LAND MEASURING 259 MARLAS AND 56 MARLAS RESPECTIVELY FRO M DISTILLERY UNIT AND EFFULENT PLANT. HOWEVER THE ASSESSEE HAD R ECEIVED PAYMENT IN RESPECT OF 193 MARLAS ONLY OUT OF 259 MA RLAS, AND ACCORDINGLY DECLARED LONG TERM CAPITAL GAIN IN RESP ECT OF 193 MARIA ONLY. THE AO HELD THAT AS THE TRANSFER OF LAND HAS BEEN C OMPLETED THEREFORE THE ASSESSEE WAS REQUIRED TO DECLARED LON G TERM CAPITAL GAIN ON THE FULL TRANSACTION EVEN THOUGH THE PAYMEN T IN RESPECT OF REMAINING LAND HAD NOT BEEN RECEIVED TILL THE END O F THE PREVIOUS I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 4 YEAR. THE AO OBSERVED THAT AS PER SECTION 45, THE I NCOME IS TO BE CHARGED UNDER THE HEAD CAPITAL GAINS ON ANY PROFIT ON TRANSFER OF CAPITAL ASSETS AND SHALL BE DEEMED TO INCOME OF THE PREVIOUS YEAR IN WHICH TRANSFER TOOK PLACE AND THEREFORE THE YEAR OF TRANSFER IS CRUCIAL YEAR AND NOT THE TIME OF RECEIPT OF CONSIDE RATION OR THE FINALITY OF CERTAIN ACTS AND OBLIGATIONS ENSHRINED IN THE SALE AGREEMENT. THE LAND HAD BEEN HANDED OVER IRREVOCABL Y TO THE NATIONAL HIGHWAYS AUTHORITY OF INDIA FOR THE WIDENI NG OF ROAD. THE TRANSACTION WAS THUS COMPLETE FOR THE PURPOSE OF LE VY OF CAPITAL GAIN TAXES. THE AO RELIED ON THE DECISION OF CIT VS VK J ALANI BASH A 256 ITR 282 (MAD) WHERE THE HONBLE COURT AFTER ANALYZI NG THE PROVISION OF SECTION 2(47)(V) HAD HELD THAT ONCE POSSESSION E VEN FOR A PART OF THE PROPERTY WAS HANDED OVER, THEN FOR THE PURPOSE OF SECTION 2(47)(V) R/W SECTION 45 OF THE ACT, THE TRANSFER WA S COMPLETE. HE ALSO RELIED ON THE DECISION OF CHATURBHUJ DWARIKA D AS KAPADIA VS CIT 260 ITR 491 (BOMBAY). ACCORDINGLY, THE AO HELD THAT THE ASSESSEE WAS REQUIRED TO DECLARE THE CAPITAL GAINS ON THE WHOLE OF LAND ACQUIRED BY NATIONAL HIGHWAYS AUTHORITY OF IND IA. ACCORDINGLY, THE AO CALCULATED THE CAPITAL GAIN ON THE BALANCE LAND OF 66 MARLSA AND 56 MARLAS AND MADE THE ADDITION OF RS.1,00,34,750/- ON ACCOUNT OF LONG TERM CAPITAL GA IN. IN THE WRITTEN SUBMISSIONS FILED IN APPEAL PROCEEDI NGS APPELLANT OBJECTED THE AO MAKING ADDITION OF RS.1,0 0,34,750/- ON ACCOUNT OF LONG TERM CAPITAL GAINS ON THE LAND ACQU IRED BY THE GOVT. FOR NHAI FOR WHICH THE PAYMENT HAD NOT BEEN RECEIVE D BY THE ASSESSEE. HE STATED THAT THE ASSESSEE HAD RECEIVED PAYMENT ONLY IN RESPECT OF 193 MARLAS OUT OF 259 MARLAS AT RS.1, 61,15,550/-. THE APPELLANT POINTED OUT THAT THOUGH THE ACQUISITION O F LAND HAD BEEN COMPLETED IN RESPECT OF THE ENTIRE 259 MARLAS AND 5 6 MARLAS BUT THE ASSESSEE WAS UNDER OBLIGATION AND HAD OFFERED CAPIT AL GAIN ONLY IN RESPECT OF LAND FOR WHICH THE PAYMENT HAD BEEN RECE IVED. HE POINTED OUT THAT SECTION 45(5) OF THE ACT CLEARLY P ROVIDES THAT WHERE THE LAND OF THE ASSESSEE IS COMPULSORY ACQUIRED AND THE COMPENSATION IS RECEIVED, THE SAME WOULD BE BROUGHT TO CAPITAL GAIN TAX IN THE YEAR IN WHICH THE COMPENSATION OR PART T HEREOF IS ACTUALLY RECEIVED. THE SECTION 45(5) WAS INSERTED W.E.F 01.0 4.1988. THAT IT HAD OVER RIDING EFFECT AND IS A DEEMING PROVISION A ND THE LEGISLATURE HAS PROVIDED THAT THE COMPENSATION RECEIVED ON THE COMPULSORY ACQUISITION OF CAPITAL ASSETS WOULD BE ASSESSED IN THE YEAR OF RECEIPT ONLY. THE APPELLANT RELIED UPON THE DECISIO N OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS IQBAL AH MED REPORTED IN 295 ITR 444. I AM IN AGREEMENT WITH THE APPELLANT THAT IN VIEW O F THE PROVISIONS OF THE SECTION 45(5) OF THE INCOME TAX A CT WHERE THE LAND OF THE ASSESSEE IS COMPULSORY ACQUIRED AND COMPENSA TION IS RECEIVED, THE SAME SHALL BE BROUGHT TO CAPITAL GAIN TAX IN THE YEAR IN WHICH THE COMPENSATION OR PART THEREOF IS ACTUALLY RECEIVED. THE AO HAS OVERLOOKED THE PROVISIONS OF SECTION 45(5) OF T HE ACT, WHICH WAS INSERTED W.E.F 01.04.1988. IN VIEW OF SECTION 45(5) (A) OF THE ACT, THE CAPITAL GAIN COMPUTED WITH RESPECT TO THE COMPENSAT ION AWARDED IN THE FIRST INSTANCE SHALL BE CHARGEABLE TO INCOME UN DER HEAD CAPITAL I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 5 GAIN OF THE PREVIOUS YEAR IN WHICH SUCH COMPENSATIO N OR PART THEREOF OR SUCH CONSIDERATION OR PART THEREOF WAS F IRST RECEIVED. IN ACCORDANCE WITH THE PROVISION OF SECTION 45(5)(B), OF THE ACT THE AMOUNT BY WHICH THE COMPENSATION OR CONSIDERATION I S ENHANCED OR FURTHER ENHANCED BY THE COURT, THE TRIBUNAL OR ANY OTHER AUTHORITY SHALL BE DEEMED TO BE THE INCOME CHARGEABLE UNDER H EAD CAPITAL GAINS OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT IS RECEIVED BY THE ASSESSEE. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF C IT VS GHANSHAM (HUF) HAD HELD AS UNDER: - UNDER SECTION 45(1), PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR IS TAKE N TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLA CE AND SUCH PROFITS ARE CHARGEABLE TO TAX UNDER THE HEAD CAPIT AL GAINS. HOWEVER, IT WAS NOTICED THAT IN CASES WHERE CAPITAL GAINS ACCRUED OR AROSE BY WAY OF COMPULSORY ACQUISITION, THE ADDI TIONAL COMPENSATION STOOD AWARDED IN SEVERAL STAGES BY DIF FERENT APPELLATE AUTHORITIES WHICH NECESSITATED RECTIFICAT ION OF THE ORIGINAL ASSESSMENT AT EACH STAGE. TO PROVIDE FOR RECTIFICAT ION OF THE ASSESSMENT OF THE YEAR IN WHICH CAPITAL GAINS WAS O RIGINALLY ASSESSED, SECTION 155(7A) WAS ALSO INTRODUCED. HOWE VER, SINCE ADDITIONAL COMPENSATION UNDER THE LAND ACQUISITION ACT, 1894 WAS AWARDED IN SEVERAL STAGES MULTIPLE RECTIFICATIONS H AD TO BE MADE TO THE ORIGINAL ASSESSMENT WHICH CAUSE GREAT DIFFICULT Y IN CARRYING OUT THE REQUIRED RECTIFICATION AND IN EFFECTING THE REC OVERY OF ADDITIONAL DEMAND. IT WAS ALSO NOTICED THAT REPEATED RECTIFICA TIONS OF ASSESSMENT ON ACCOUNT OF ENHANCEMENT OF COMPENSATIO N BY DIFFERENT COURTS OFTEN RESULTED IN MISTAKES IN COMP UTATION OF TAX. THEREFORE, WITH A VIEW TO REMOVE THESE DIFFICULTIES , THE FINANCE ACT, 1987 INSERTED SECTION 45(5) TO PROVIDE FOR TAXATION OF ADDITIONAL COMPENSATION IN THE YEAR OF RECEIPT INSTEAD OF IN T HE YEAR OF TRANSFER OF THE CAPITAL ASSET'. IN VIEW OF THE AFORESAID DECISION OF HONBLE SUPREM E COURT OF INDIA THE AO WAS NOT JUSTIFIED IN COMPUTING THE LON G TERM CAPITAL GAIN IN RESPECT OF THE BALANCE LAND OF 66 M ARLAS AND 56 MARLAS BY WAY OF COMPULSORY ACQUISITION BY THE G OVT. FOR NHAI, IN RESPECT OF ALL WHICH THE PAYMENT OF COMPEN SATION HAD NOT BEEN RECEIVED BY THE APPELLANT TILL THE END OF THE PREVIOUS YEAR UNDER CONSIDERATION. ACCORDINGLY THE ADDITION OF RS.1,00,34,750/- AS IN LONG TERM CAPITAL GAIN WA S NOT JUSTIFIED AND IS DELETED. 2. GROUND OF APPEAL NO. 3 IS AGAINST THE ADDITIO N OF RS.64,60,137/- U/S 43B ON ACCOUNT OF INTEREST PAYAB LE BY ASSESSEE TO PUNJAB GOVERNMENT ON ACCOUNT OF RDF LOAN. DURING THE ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASS ESSEE HAD SHOWN INTEREST TO PUNJAB GOVERNMENT PAYABLE RS.64,6 0,137/- AND WAS DEBITED IN P & L ACCOUNT. BEFORE THE ASSESSING OFFICER THE CONTENTION OF THE ASSESEE WAS THAT PUNJAB GOVT. IS NOT A PUBLIC I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 6 FINANCIAL INSTITUTION AND THUS SECTION 43B IS NOT A TTRACTED IN THIS CASE. THE AO HOWEVER OBSERVED THAT FROM THE NATURE OF RDF IT IS A GOVT. BODY. THAT RDF IS CONSTITUTED UNDER PUNJAB RU RAL DEVELOPMENT ACT, 1987. THAT THE INCOME OF PUNJAB RU RAL DEVELOPMENT BOARD UNDER WHICH IT FUNCTION IS FROM R URAL DEVELOPMENT FEE LEVIED ON SALE/PURCHASE OF AGRICULT URAL PRODUCE IN NOTIFIED AREAS. THUS IT IS A FUND CREATED OUT OF TA XES/FEES LEVIED BY THE GOVT. THUS THE AO HELD THAT RDF IS A PUBLIC FIN ANCIAL INSTITUTION AND ACCORDINGLY DISALLOW THE INTEREST PAYMENT OF RS . 6,46,137/- U/S 43B. IN THE WRITTEN SUBMISSIONS THE APPELLANT POINTED OU T THAT THE ISSUED HAS BEEN SETTLED IN FAVOUR OF ASSESSEE BY TH E HON'BLE ITAT, AMRITSAR BENCH IN ITA NO. 474/ASR/2014 IN ASSESSMEN T YEAR 2010-11 IN THE CASE OF THE APPELLANT ITSELF VIDE OR DER DATED 19.02.2015, AND THE COPY OF ORDER WAS ENCLOSED. IN THE CITED DECISION THE HONBLE ITAT HAD HELD THAT RDF CANNOT BE CONSIDERED AS PUBLIC FINANCIAL INSTITUTION AND ACCORDINGLY SEC TION 43B(D) AND SECTION 43B(E) ARE NOT APPLICABLE. SINCE THE ISSUE IS ALREADY DECIDED IN FAVOUR OF THE APPELLANT IN ITS OWN CASE FOR AY 2010-11, BY THE HO NBLE ITAT, AMRITSAR FOLLOWING THE SAME DECISION THE ADDI TION OF RS. 64,60,137/- U/S 43B ON ACCOUNT OF INTEREST PAYA BLE TO RDF IS DELETED. 5. FEELING AGGRIEVED BY THE ORDER OF LD. CIT(A), TH E REVENUE FILED THE INSTANT APPEAL BEFORE US WHICH IS UNDER CONSIDERATI ON. 6. AT THE OUTSET, THE LD. DR SUPPORTED THE ORDER OF ASSESSING OFFICER AND CONTENDED THAT ADDITION OF RS.1,00,34,750/- MAD E BY THE A.O ON ACCOUNT OF CAPITAL GAIN ON ENTIRE LAND WILL BE APPL ICABLE WHEN THE TRANSFER IN RESPECT OF ENTIRE LAND TOOK PLACE IN TH E RELEVANT YEAR AND SECTION 45(1) IS ONLY APPLICABLE TO THE CASES WHERE THE COMPENSATION IS ENHANCED OR FURTHER ENHANCED. THE LD. DR FURTHER SU BMITTED THAT DELETING THE ABOVE ADDITION IN VIEW OF THE SUPREME COURT JUDGMENT IN THE CASE OF CIT VS. GANSHAM (HUF) AND ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. IQBAL AHMED 295 ITR 444 , IS NOT APPLICABLE BECAUSE INTENTION I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 7 OF THE LEGISLATURE AS PER SECTION 45(5) CLEARLY STA TES THAT IT IS APPLICABLE IN THAT CASE ONLY WHERE COMPENSATION IS ENHANCED OR FU RTHER ENHANCED. 6.1 IT WAS FURTHER ARGUED BY THE LD. DR THAT THE DE LETION OF ADDITION OF RS.64,60,137/- BY THE CIT(A) ON THE GROUND THAT THE RDF IS NOT COVERED U/S 43B OF THE INCOME TAX ACT, 1961 IS FACTUALLY N OT CORRECT BECAUSE THE RDF IS ESTABLISHED UNDER THE ACT (RURAL DEVELOPMENT ACT, 1987) OF THE GOVT. OF PUNJAB AND ACTUAL PAYMENT AS MENTIONED IN THIS SECTION IS INTENDED TO COVER PAYMENT TO GOVERNMENT. 7 THE LD. DR ALSO RELIED UPON THE FOLLOWING JUDGMEN TS OF THE HONBLE SUPREME COURT AND THE HONBLE HIGH COURTS. FOR THE SAKE OF BREVITY AND CONVENIENCE THE CRUX/CONCLUSION OF THE JUDGMENTS AR E REPRODUCED HEREIN BELOW. (I) CIT, FARIDABAD VS. GHANSHYAM (HUF), (SUPREME COURT). 16. THE QUESTION WHICH ARISES FOR DETERMINATION IS- WHY WAS SECTION 45(5) INSERTED BY THE FINANCE ACT,1987, W.E.F. 1.4.88 UND ER SECTION 45(1), PROFIT OR GAINS ARISING FROM THE TRANSFER OF A CAPI TAL ASSET EFFECTED IN THE PREVIOUS YEAR IS TAKEN TO BE THE INCOME OF THE PREV IOUS YEAR IN WHICH THE TRANSFER TOOK PLACE AND SUCH PROFITS ARE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS. HOWEVER, IT WAS NOTICED THAT IN CA SES WHERE CAPITAL GAINS ACCRUED OR AROSE BY WAY OF COMPULSORY ACQUISITION, THE ADDITIONAL COMPENSATION STOOD AWARDED IN SEVERAL STAGES BY DIF FERENT APPELLATE AUTHORITIES WHICH NECESSITATED RECTIFICATION OF THE ORIGINAL ASSESSMENT AT EACH STAGE. TO PROVIDE FOR RECTIFICATION OF THE ASS ESSMENT OF THE YEAR IN WHICH CAPITAL GAINS WAS ORIGINALLY ASSESSED, SECTIO N 155(7A) WAS ALSO INTRODUCED. HOWEVER, AS STATED ABOVE, SINCE ADDITIO NAL COMPENSATION UNDER THE LAND ACQUISITION ACT, 1894 WAS AWARDED IN SEVERAL STAGES MULTIPLE RECTIFICATIONS HAD TO BE MADE TO THE ORIGI NAL ASSESSMENT WHICH CAUSE GREAT DIFFICULTY IN CARRYING OUT THE REQUIRED RECTIFICATION AND IN EFFECTING THE RECOVERY OF ADDITIONAL DEMAND. IT WAS ALSO NOTICED THAT REPEATED RECTIFICATIONS OF ASSESSMENT ON ACCOUNT OF ENHANCEMENT OF COMPENSATION BY DIFFERENT COURTS OFTEN RESULTED IN MISTAKES IN COMPUTATION OF TAX. THEREFORE, WITH A VIEW TO REMOV E THESE DIFFICULTIES, THE FINANCE ACT 1987 INSERTED SECTION 45(5) TO PROV IDE FOR TAXATION OF ADDITIONAL COMPENSATION IN THE YEAR OF RECEIPT INST EAD OF IN THE YEAR OF TRANSFER OF THE CAPITAL ASSET. ACCORDINGLY, ADDITIO NAL COMPENSATION IS TREATED AS 'DEEMED INCOME' IN THE HANDS OF THE RECI PIENT EVEN IF THE I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 8 ACTUAL RECIPIENT HAPPENS TO BE A PERSON DIFFERENT F ROM THE ORIGINAL TRANSFEROR BY REASON OF DEATH, ETC. FOR THIS PURPOSE, THE COST OF ACQUISITION IN THE HA NDS OF THE RECEIVER OF THE ADDITIONAL COMPENSATION IS DEEMED TO BE NIL. HO WEVER, THE COMPENSATION AWARDED IN THE FIRST INSTANCE WOULD CO NTINUE TO BE CHARGEABLE AS INCOME UNDER THE HEAD 'CAPITAL GAINS' , IN THE PREVIOUS YEAR IN WHICH TRANSFER TOOK PLACE. AT THIS STAGE, I T MAY BE NOTED, THAT, SECTION 45(1) STOOD FURTHER AMENDED (W.E.F.1.4.91) SO AS TO INCLUDE REFERENCE TO SECTION L 4H AND SECTION 45(5)(A) WHICH, AS STATED ABOVE, STOOD AMENDED (W.E.F.1.4.88). THE SCOPE AND EFFECT OF THE ABOVE AMENDMENTS MADE IN SECTION 45, AS ALSO INSERTION OF SECTION. 54H, BY FINANCE ACT 1991, HAS BEEN ELABORATED IN THE FOLLOW ING PORTION OF THE DEPARTMENTAL CIRCULAR NO.621 DATED 19.12.91: 'STREAMLINING THE PROVISIONS RELATING TO EXEMPTION FOR ROLL- OVER OF CAPITAL GAINS- CAPITAL GAINS ARE DEEMED TO BE INCOME OF THE PREVIO US YEAR IN WHICH THE TRANSFER GIVING RISE TO THE GAINS TAKES P LACE EXCEPT WHERE OTHERWISE PROVIDED. ACCORDING IN THE CASE OF COMPULSORY ACQUISITION OF ASSETS, THE CAPITAL GAINS INCLUDED I N THE COMPENSATION, AS ORIGINALLY AWARDED, IS CHARGED TO TAX IN THE YEAR IN WHICH THE TRANSFER BY WAY OF COMPULSORY ACQUISIT ION TAKES PLACE, BUT ADDITIONAL COMPENSATION IS BROUGHT TO TA X ONLY IN THE YEAR IN WHICH IT IS RECEIVED. IT HAS BEEN BROUGHT TO THE NOTICE OF THE GOVERNMENT THAT IN CASE OF COMPULSORY ACQUISITION OF ASSETS, AT TIMES THERE IS A CONSIDERABLE GAP BETWEEN THE DATES OF ACQUISITION AND PAYMENT OF COMPENSATION. THE RESULT IS THAT THE EXISTING PROVI SIONS OF CAPITAL GAINS TAXATION OPERATE HARSHLY INASMUCH AS THE AFFE CTED PERSONS ARE UNABLE TO AVAIL OF THE EXEMPTION FOR ROLL- OVER OF CAPITAL GAINS, WITHIN THE SPECIFIED TIME PERIOD THROUGH INVESTMENT IN SPECIFIED ASSETS. SECTION 45 OF THE INCOME-TAX ACT HAS, THEREFORE, BE EN AMENDED TO PROVIDE THAT CAPITAL GAINS ARISING FROM THE TRANSFE R OF THE CAPITAL ASSET BY WAY OF COMPULSORY ACQUISITION UNDER ANY LA W SHALL BE CHARGED TO TAX IN THE PREVIOUS YEAR IN WHICH THE CO MPENSATION IS FIRST RECEIVED. THIS AMENDMENT TAKES EFFECT RETROSPECTIVELY FROM 1 ST APRIL, 1988. FURTHER, A NEW SECTION 54H HAS BEEN INSERTED IN THE INCOME-TAX ACT, TO PROVIDE THAT IN CASES WHERE COMPENSATION IN RESPECT OF ANY ASSET ACQUIRED COMPULSORILY IS RECEIVED AFTER THE D ATE OF SUCH TRANSFER, THE PERIOD FOR INVESTMENT IN SPECIFIED AS SETS SHALL BE RECKONED FROM THE DATE OF RECEIPT OF SUCH COMPENSAT ION. HOWEVER, WHERE THE COMPENSATION WAS FIRST RECEIVED BEFORE 1S T APRIL, 1991, AND THE PERIOD FOR MAKING INVESTMENT IN ANY SPECIFI ED ASSET HAS EXPIRED BEFORE 1ST OCTOBER, 1991, SUCH PERIOD SHALL STAND EXTENDED UP TO 31ST DECEMBER, 1991. I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 9 THIS AMENDMENT TAKES EFFECT FROM THE 1ST DAY OF OCT OBER, 1991.' 17. THE IMPORTANT POINT TO BE NOTED IS THAT IN THE CASE OF COMPULSORY ACQUISITION OF AN ASSET, THE CAPITAL GAI NS IN THE COMPENSATION, AS ORIGINALLY AWARDED, IS CHARGED TO TAX IN THE YEAR IN WHICH THE TRANSFER BY WAY OF COMPULSORY ACQUISIT ION TAKES PLACED, BUT ADDITIONAL COMPENSATION IS BROUGHT TO T AX ONLY IN THE YEAR IN WHICH IT IS RECEIVED. CIT-VIII, NEW DELHI VS. GULAB SUNDRI BAPNA (DELHI H IGH COURT) 10. THE AFORESAID SECTION WAS INTERPRETED BY THE SU PREME COURT IN CIT VS. GHANSHYAM (HUF) [2009] 315 ITR 1 (SC),2009 TIOL -94-SC-IT AND IT WAS HELD THAT THE PROFITS AND GAINS FROM TRANSFER O F A CAPITAL ASSET BY COMPULSORY ACQUISITION WAS CHARGEABLE UNDER THE HEA D 'CAPITAL GAINS'. SECTION 45(5) WAS ENACTED AS IT WAS NOTICED THAT IN CASE OF COMPULSORY ACQUISITION, ADDITIONAL COMPENSATION WAS/IS AWARDED AT SEVERAL STAGES BY DIFFERENT AUTHORITIES. THIS HAD NECESSITATED MULTIP LE RECTIFICATIONS IN THE ORIGINAL ASSESSMENT ORDER CAUSING GREAT ADMINISTRAT IVE DIFFICULTY AND PROBLEM IN COLLECTION OF THE ADDITIONAL DEMAND. WIT H A VIEW TO REMOVE THESE DIFFICULTIES, BY FINANCE ACT, 1987, SECTION 4 5(5) WAS ENACTED TO PROVIDE FOR TAXATION OF ADDITIONAL COMPENSATION AS DEEMED INCOME IN THE YEAR OF RECEIPT IN THE HANDS OF THE RECIPIENT. THE SECTION ALSO STIPULATED THAT THE 269 COST OF ACQUISITION' IN THE HANDS OF T HE RECEIVER OF THE ADDITIONAL COMPENSATION WOULD BE DEEMED TO BE NIL A ND THIS WOULD NOT AFFECT THE COMPENSATION ALREADY TAXED AT THE FIRST INSTANCE IN THE EARLIER PREVIOUS YEAR WHEN THE TRANSFER OF CAPITAL ASSET TO OK PLACE. THUS, IN CASE OF COMPULSORY ACQUISITION OF ASSETS, CAPITAL GAIN W AS/IS CHARGED ON THE COMPENSATION ORIGINALLY AWARDED IN THE YEAR OF TRAN SFER, AND THE ADDITIONAL COMPENSATION WAS/IS DEEMED TO BE TAXABLE INCOME AND WAS/IS TAXED IN THE YEAR IN WHICH IT WAS/IS RECEIVED AND, IT WAS/IS NOT TAXED IN THE YEAR OF TRANSFER OF THE CAPITAL ASSET. EARLIER DECISION OF THE SUPREME COURT IN CIT VS. HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD. [1986] 161 ITR 524 (SC), 2002-TIOL-540-SC-IT WAS HELD TO BE INAPPLICABLE AFTER ENACTMENT OF SECTION 45(5) OF THE ACT. IN LIG HT OF THE AFORESAID DECISION, IT HAS TO BE HELD THAT THE ADDITIONAL COM PENSATION RECEIVED WOULD BE TAXABLE IN THE PRESENT ASSESSMENT YEAR, I. E. 1988-89. THEREFORE, DECISION OF THE TRIBUNAL TO THE CONTRARY CANNOT BE SUSTAINED AND HAS TO BE SET ASIDE. CIT, PUNE VS. MR. PURSHOTTAM B KHUTALE & ORS. (BOMB AY HIGH COURT) 4). NOW IN THE PRESENT CASE, THE ASSESSEES RECEIV ED THE COMPENSATION DURING THE ACCOUNTING PERIOD RELEVANT TO ASSESSMENT YEAR 1989- 1990. PARLIAMENT INTRODUCED THE PROVISIONS OF SECTION 45( 5) OF THE INCOME TAX ACT, 1961 BY THE FINANCE ACT OF 1987 WITH EFFECT FR OM 1 APRIL, 1988. PRIOR TO THE INSERTION OF THE PROVISIONS OF SECTION 45(5) , THE SUPREME COURT HAD HELD IN ITS JUDGMENT IN COMMISSIONER OF INCOME-TAX, WEST BENGAL-II V/S. HINDUSTAN HOUSING AND LAND DEVELOPMENT (TRUST LIMIT ED (1986) 161 ITR 524 = ( 2002-ITOL-540-SC-IT) ) THAT THERE IS A DISTINCTION BETWEEN CASES WHERE THE RIGHT TO RECEIVE PAYMENT IS IN DISPUTE AN D WHERE IT IS NOT A I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 10 QUESTION OF MERELY QUANTIFYING THE AMOUNT TO BE REC EIVED, AND CASES WHERE THE RIGHT TO RECEIVE PAYMENT IS ADMITTED AND ON ONLY THE QUANTIFICATION REMAINS TO BE CARRIED OUT. SUBSEQUEN T TO THE INTRODUCTION OF SECTION 45(5), THE SUPREME COURT HAS NOW SETTLED THE CONTROVERSY IN ITS DECISION IN COMMISSIONER OF INCOME- TAX V/S. GHANSHYAM (HUF) (2 009) 315 ITR 1 = (2009-ITOL-84-SC-IT)) . EXPLAINING THE EFFECT OF THE PROVISIONS OF SECTION 45(5), THE SUPREME COURT HELD AS FOLLOWS : 'THE SCHEME OF SECTION 45(5) OF THE 1961 ACT WAS IN SERTED WITH EFFECT FROM APRIL 1, 1988, AS AN OVERRIDING PROVISI ON. AS STATED ABOVE, COMPENSATION UNDER THE L.A. ACT, 1894, ARISE S AND IS PAYABLE IN MULTIPLE STAGES WHICH DOES NOT HAPPEN IN CASES OF TRANSFERS BY SALE, ETC. HENCE, THE LEGISLATURE HAD TO STEP IN AND SAY THAT AS AND WHERE THE ASSESSEE-CLAIMANT IS IN RECEI PT OF ENHANCED COMPENSATION IT SHALL BE TREATED AS 'DEEMED INCOME' AND TAXED ON RECEIPT BASIS. OUR ABOVE UNDERSTANDING IS SUPPORTED BY INSERTION OF CLAUSE (C) IN SECTION 45(5) WITH EFFECT FROM APRIL 1, 2004, AND SECTION 155(16) WHICH REFERS TO A SITUATION OF A SUBSEQUENT REDUCTION BY THE COURT, TRIBUNAL OR OTHER AUTHORITY AND RECOMPUTATIO N/AMENDMENT OF THE ASSESSMENT ORDER. SECTION 45(5 READ AS A WHOLE [INCLUDING CLAUSE (C)] NOT ONLY DEALS WITH REWORKING AS URGED ON BEHALF OF THE ASSESSEE BUT ALSO WITH THE CHANGE IN THE FULL VALUE OF THE CONSIDERATION (COMPUTATION) AND SINCE THE ENHANCED COMPENSATION/CONSIDERATION (INCLUDING INTERES UNDER SECTION 28 OF THE 1894 ACT) BECOMES PAYABLE/PAID UNDER THE 1894 A CT A DIFFERENT STAGES, THE RECEIPT OF SUCH ENHANCED COMPENSATION/C ONSIDERATION IS TO B TAXED IN THE YEAR OF RECEIPT SUBJECT TO ADJUST MENT, IF ANY, UNDER SECTION 155(16) OF THE 1961 ACT, LATER ON. HENCE, T HE YEAR IN WHICH ENHANCED COMPENSATION IS RECEIVED IS THE YEAR OF TA XABILITY. 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. THIS IS THE SCHEME OF SECTION 45(5) AND SECTION 155(16) OF THE 1961 ACT. 5. CONSEQUENTLY, WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPITAL ASSET, BEING A TRANSFER BY WAY OF A COMPULS ORY ACQUISITION AND THE COMPENSATION IS ENHANCED IN STAGES BY\ ANY COURT/TRIBUNAL/AUTHORITY : (I) THE CAPITAL GAIN COMPUTED WITH REFERENCE TO THE COMPENSATION AWARDED IN THE FIRST INSTANCE, WOULD BE CHARGEABLE AS INCOME UNDER THE HEAD OF 'CAPITAL GAINS' OF THE PREVIOUS Y EAR IN WHICH SUCH COMPENSATION OR PART THEREOF, WAS FIRST RECEIV ED ; AND (II) THE AMOUNT BY WHICH THE COMPENSATION OR CONSID ERATION IS ENHANCED OR FURTHER ENHANCED BY THE COURT, TRIBUNAL OR AUTHORITY, IS DEEMED TO BE THE INCOME CHARGEABLE UNDER THE HEA D OF 'CAPITAL GAINS' OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT IS RECEIVED BY THE ASSESSEE ; 6) MOREOVER, THE AMENDMENT TO THE PROVISIONS OF SEC TION 45(5)(C) WHICH IS INSERTED WITH EFFECT FROM 1 APRIL, 2004, BY THE FIN ANCE ACT OF 2003 TAKES CARE OF A SITUATION WHERE SUBSEQUENTLY SUCH COMPEN SATION OR I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 11 CONSIDERATION IS REDUCED BY ANY COURT, TRIBUNAL OR AUTHORITY, IN WHICH EVENT SUCH COMPENSATION SHALL BE RECOMPUTED BY TAKI NG THE COMPENSATION OR CONSIDERATION SO REDUCED TO THE FUL L VALUE OF THE CONSIDERATION. CORRESPONDINGLY, THERE WAS ALSO AN A MENDMENT BY THE INTRODUCTION OF THE PROVISIONS OF SECTION 155 (16) BY THE FINANCE ACT OF 2003. 7) IN VIEW OF THE DECISION OF THE SUPREME COURT IN GHANSHYAM (HUF) (SUPRA) THE QUESTION OF LAW RENDERED WOULD HAVE TO BE RESOL VED IN TERMS THEREOF. 8. THE LD. DR RELIED UPON THE AFORESAID JUDGMENTS A ND VEHEMENTLY ARGUED THAT THE ASSESSEE WAS UNDER OBLIGATION TO DI SCLOSE THE ENTIRE CAPITAL GAIN ON WHOLE OF THE LAND ACQUIRED BY NHAI IRRESPECTIVE OF THE ACTUAL PAYMENT/RECEIPT THEREOF, AND THE AMENDMENT O F SEC.45(5)(B) IS NOT APPLICABLE TO THE UNPAID COMPENSATION AS THE SE CTION IS VERY CLEAR WHICH SAYS THAT THE AMOUNT BY WHICH COMPENSATION OR CONSIDERATION IS ENHANCED OR FURTHER ENHANCED BY THE COURT, TRIBUNAL OR AUTHORITY SHALL BE DEEMED TO BE INCOME CHARGEABLE UNDER THE HEAD C APITAL GAIN OF THE PREVIOUS YEAR ONLY. 9. ON THE CONTRARY, THE LD. AR SUBMITTED THAT THE L D. CIT(A) PASSED REASONED ORDER WHILE ANALYZING THE FACTS AND CIRCUM STANCES OF THE CASE AND ALSO CONSIDERING THE EFFECT OF SEC.45(1) AS WEL L AS FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. GHANSHAYAM (HUF) CORRECTLY DELETED THE ADDITION OF RS.1,00,34,750/- AS THE SAME WAS NOT JUSTIFIED AS A LONG TERM CAPITAL G AIN BECAUSE IN RESPECT OF BALANCE LAND OF 66 MARLAS AND 56 MARLAS BY WAY OF COMPULSORY ACQUISITION BY THE GOVT. FOR NHAI COMPENSATION HAV E NOT BEEN RECEIVED BY THE ASSESSEE TILL THE END OF THE PREVIOUS YEAR U NDER CONSIDERATION. I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 12 10. WE HAVE GONE THOROUGH THE FACTS AND CIRCUMSTANC ES OF THE CASE, SUBMISSIONS AS WELL AS CASES RELIED UPON BY THE RIV AL PARTIES, WE FEEL IT APPROPRIATE TO REPRODUCE SEC.45(5) OF THE I.T. ACT, FOR THE SAKE OF BREVITY AND CONVENIENCE. 45-CAPITAL GAINS (5) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTI ON (1), WHERE THE CAPITAL GAIN ARISES FROM THE TRANSFER OF A CAPI TAL ASSET, BEING A TRANSFER BY WAY OF COMPULSORY ACQUISITION UNDER ANY LAW, OR A TRANSFER THE CONSIDERATION FOR WHICH WAS DETERMINED OR APPROVED BY THE CENTRAL GOVERNMENT OR THE RESERVE BANK OF IN DIA, AND THE COMPENSATION OR THE CONSIDERATION FOR SUCH TRANSFER IS ENHANCED OR FURTHER ENHANCED BY ANY COURT, TRIBUNAL OR OTHER AU THORITY, THE CAPITAL GAIN SHALL BE DEALT WITH IN THE FOLLOWING M ANNER, NAMELY:- (A) THE CAPITAL GAIN COMPUTED WITH REFERENCE TO THE COMPENSATION AWARDED IN THE FIRST INSTANCE OR, AS THE CASE MAY B E, THE CONSIDERATION DETERMINED OR APPROVED IN THE FIRST I NSTANCE BY THE CENTRAL GOVERNMENT OR THE RESERVE BANK OF INDIA SHA LL BE CHARGEABLE AS [INCOME UNDER THE HEAD CAPITAL GAINS OF THE PREVIOUS YEAR IN WHICH SUCH COMPENSATION OR PART TH EREOF, OR SUCH CONSIDERATION OR PART THEREOF, WAS FIRST RECEIVED]; AND (B) THE AMOUNT BY WHICH THE COMPENSATION OR CONSIDE RATION IS ENHANCED OR FURTHER ENHANCED BY THE COURT, TRIBUNAL OR OTHER AUTHORITY SHALL BE DEEMED TO BE INCOME, CHARGEABLE UNDER THE HEAD 'CAPITAL GAINS OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT IS RECEIVED BY THE ASSESSEE; (C) WHERE IN THE ASSESSMENT FOR ANY YEAR, THE CAPIT AL GAIN ARISING FROM THE TRANSFER OF A CAPITAL ASSET IS COMPUTED BY TAKING T HE COMPENSATION OR CONSIDERATION REFERRED TO IN CLAUSE (A) OR, A THE CASE MAY BE, ENHANCED COMPENSATION OR CONSIDERATION REFERRED TO IN CLAUSE (B), AND SUBSEQUENTLY SUCH COMPENSATION OR CONSIDERATION IS REDUCED BY ANY COURT, TRIBUNAL OR OTHER AUTHORITY, SUCH ASSESSED C APITAL GAIN OF THAT YEAR SHALL BE RECOMPUTED BY TAKING THE COMPENSATION OR CONSIDERATION AS SO REDUCED BY SUCH COURT, TRIBUNAL OR OTHER AUTHORI TY TO BE THE FULL VALUE OF THE CONSIDERATION. EXPLANATION.-FOR THE PURPOSES OF THIS SUB-SECTION,- (I) IN RELATION TO THE AMOUNT REFERRED TO IN CLAUSE (B ), THE COST OF ACQUISITION AND THE COST OF IMPROVEMENT SHALL BE TA KEN TO BE NIL; (II) THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY ALS O IN A CASE WHERE THE TRANSFER TOOK PLACE PRIOR TO THE 1ST DAY OF APR IL, 1988; (III) WHERE BY REASON OF THE DEATH OF THE PERSON WHO MAD E THE TRANSFER, OR FOR ANY OTHER REASON, THE ENHANCED COM PENSATION OR I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 13 CONSIDERATION IS RECEIVED BY ANY OTHER PERSON, THE AMOUNT REFERRED TO IN CLAUSE (B) SHALL BE DEEMED TO BE THE INCOME, CHARGEABLE TO TAX UNDER THE HEAD 'CAPITAL GAINS', OF SUCH OTHER PERSON.' 10.1 FROM THE CONTENTS OF SEC.45(5)(A), IT IS CL EAR THAT THE CAPITAL GAIN COMPUTED WITH REFERENCE TO THE COMPENSATION AWARDED IN THE FIRST INSTANCE SHALL BE CHARGEABLE TO INCOME UNDER THE HE AD CAPITAL GAINS OF THE PREVIOUS YEAR IN WHICH SUCH COMPENSATION OR PAR T THEREOF, OR SUCH CONSIDERATION OR PART THEREOF, WAS FIRST RECEIVED. FURTHER, IN ACCORDANCE WITH SEC.45(5)(B) OF THE ACT, THE AMOUNT BY WHICH C OMPENSATION OR CONSIDERATION IS ENHANCED OR FURTHER ENHANCED BY TH E COURT, TRIBUNAL OR OTHER AUTHORITY SHALL BE DEEMED TO BE INCOME CHARGE ABLE UNDER THE HEAD CAPITAL GAINS OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT IS RECEIVED BY THE ASSESSEE. FURTHER THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF CIT VS. GHANSHYAM (HUF) HELD AS UNDER: UNDER SECTION 45(1), PROFITS OR GAINS ARISING FROM THE TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR IS TAKEN TO BE THE INCOME OF THE PREVIOUS YEAR IN WHICH THE TRANSFER TOOK PLACE AND SUCH PROF ITS ARE CHARGEABLE TO TAX UNDER THE HEAD CAPITAL GAINS'. HOWEVER, IT WAS NOTICED THAT IN CASES WHERE CAPITAL GAINS ACCRUED OR AROSE BY WAY OF COMP ULSORY ACQUISITION, THE ADDITIONAL COMPENSATION STOOD AWARDED IN SEVERA L STAGES BY DIFFERENT APPELLATE AUTHORITIES WHICH NECESSITATED RECTIFICAT ION OF THE ORIGINAL ASSESSMENT AT EACH STAGE. TO PROVIDE FOR RECTIFICAT ION OF THE ASSESSMENT OF THE YEAR IN WHICH CAPITAL GAINS WAS ORIGINALLY ASSESSED, SECTION 155(7A) WAS ALSO INTRODUCED. HOWEVER, SINCE ADDITIONAL COMP ENSATION UNDER THE LAND ACQUISITION ACT, 1894 WAS AWARDED IN SEVERAL STAGES MULTIPLE RECTIFICATIONS HAD TO BE MADE TO THE ORIGINAL ASSES SMENT WHICH CAUSE GREAT DIFFICULTY IN CARRYING OUT THE REQUIRED RECTIFICATI ON AND IN EFFECTING THE RECOVERY OF ADDITIONAL DEMAND. IT WAS ALSO NOTICED THAT REPEATED RECTIFICATIONS OF ASSESSMENT ON ACCOUNT OF ENHANCEM ENT OF COMPENSATION BY DIFFERENT COURTS OFTEN RESULTED IN MISTAKES IN C OMPUTATION OF TAX. THEREFORE, WITH A VIEW TO REMOVE THESE DIFFICULTIES , THE FINANCE ACT, 1987 INSERTED SECTION 45(5) TO PROVIDE FOR TAXATION OF A DDITIONAL COMPENSATION IN THE YEAR OF RECEIPT INSTEAD OF IN THE YEAR OF TRANS FER OF THE CAPITAL ASSET. I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 14 IN VIEW OF THE AFORESAID JUDGMENT OF THE H ONBLE SUPREME COURT, THE CONTENTION OF THE LD. DR HAVING NO FORCE TO BE ACTED UPON THAT THE PROVISIONS AND CASES QUO ENHANCEMENT OF THE COMPENS ATION OR CONSIDERATION ONLY AND SHALL NOT BE APPLICABLE TO T HE UNPAID COMPENSATION. 10.2 BY CONSIDERING THE FACTUAL POSITION AS WELL AS LAWS SETTLED BY THE APEX COURT AND THE JURISDICTIONAL HIGH COURT, AS TH E ACTUAL FULL PAYMENT HAS NOT BEEN RECEIVED BY THE ASSESSEE WHICH IS SUBJ ECT TO FURTHER REALIZATION, THEREFORE CANNOT BE DECLARED AS LONG T ERM CAPITAL GAIN IN ENTIRETY UNTIL AND UNLESS REALIZATION OF THE SAME. EVEN OTHERWISE, THE CASES CITED BY LD. DR ALSO SUPPORTS THE CASE OF THE ASSESSEE. HENCE, WE ARE OF THE CONSIDERED VIEW, THAT THE ACTUAL PAYMENT WHICH HAS BEEN RECEIVED CAN ONLY BE SUBJECT TO LONG TERM CAPITAL G AIN. ACCORDINGLY, WE DO NOT FIND GROUND OR REASON TO INTERFERE WITH THE ORD ER PASSED BY THE LD. CIT(A) IN THIS ASPECT. HENCE, GROUND NOS.1 & 2 OF T HE REVENUE STANDS DISMISSED. 10.3 ON THE THIRD GROUND OF ADDITION OF RS.64,60,13 7/- U/S.43B ON ACCOUNT OF INTEREST PAYABLE BY THE ASSESSEE TO PUNJ AB GOVT. ON ACCOUNT OF RDF LOAN. IT WAS SUBMITTED BY THE LD. AR THAT TH E SAME ISSUE HAS BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE HONBLE IT AT, AMRITSAR BENCH IN ITA NO.474(ASR)/2014 IN ASST. YEAR:2010-11 IN THE A SSESSEE CASE ITSELF VIDE ORDER DATED 19.02.2015. IT WAS FURTHER SUBMITT ED BY THE LD. AR THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 15 INCOME TAX-II, AMRITSAR VS. M/S GURDASPUR CO-OPERAT IVE SUGAR MILLS LTD., PANIAR GURDASPUR, IN ITA NO.266 OF 2015, UPHELD THE DECISION OF THE HONBLE ITAT BENCH IN ITA NO.474(ASR)/2014, FOR ASS T. YEAR: 2010-11 IN ITA NO.266 OF 2015 BY OBSERVING AS UNDER: 8. FURTHER, WHILE DELETING THE ADDITION OF RS.6 8,18,000/- ON ACCOUNT OF INTEREST CLAIMED BY THE ASSESSEE ON GOVERNMENT LOAN AND RDF LOAN GIVEN BY THE PUNJAB GOVERNMENT TO THE COOPERATIVE S UGAR MILLS, THE CIT(A) HELD THAT THE ASSESSING OFFICER HAD NOT PROV ED ANYWHERE AS TO HOW RDF IS A PUBLIC FINANCIAL INSTITUTION COVERED UNDER SECTION 43B(A) OR 43B(E) OF THE ACT AND IN VIEW OF THE CLEAR LIST PUB LISHED BY THE GOVERNMENT OF PUBLIC FINANCIAL INSTITUTIONS, RDF LO AN RECEIVED FROM THE PUNJAB GOVERNMENT COULD NOT BE CONSIDERED AS PUBLIC FINANCIAL INSTITUTION. THAT BEING SO, SECTION 438 OF THE ACT WAS NOT APPLICABLE. IT WAS UPHELD BY THE TRIBUNAL AS UNDER:-' 8.1. AS REGARDS GROUND NO.2 WITH REGARD TO DELETIO N OF ADDITION OF RS.68,18,000/- ON ACCOUNT OF INTEREST CLAIMED BY TH E ASSESSEE ON GOVT. LOAN AND RDF LOAN GIVEN BY THE PUNJAB GOVERNMENT TO CO-OPERATIVE SUGAR MILLS, IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT SUCH LOAN DOES NOT FALL UNDER SECTION 43B(D) OR SECTION 43B(E). TH E PROVISION OF SECTION 43B(D) APPLIES TO PUBLIC FINANCIAL INSTITUTIONS OR STATE FINANCIAL CORPORATION OR STATE INDUSTRIAL DEVELOPMENT CORPORA TION. SUCH PUBLIC FINANCIAL INSTITUTIONS ARE HELD BY THE GOVERNMENT A ND WITH REGARD TO SECTION 436(E), THE SAME COVERS LOAN TAKEN FROM SCH EDULED BANKS. THEREFORE, IN VIEW OF THE FINDINGS GIVEN BY THE AO HIMSELF THAT RDF IS A GOVT. BODY, CONSTITUTED UNDER PUNJAB RURAL DEVELOPM ENT ACT, 1987, AND IN THE ABSENCE OF ANYTHING ON RECORD BY THE AO THAT HOW RDF IS A PUBLIC FINANCIAL INSTITUTIONS, WE FIND NO INFIRMITY IN THE ORDER OF THE ID. CIT(A) THAT THE SAID RDF CANNOT BE CONSIDERED AS A PUBLIC FINANCIAL INSTITUTION AND ACCORDINGLY SECTION 438(D) & SECTION 43B(E) ARE NOT APPLICABLE. THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, WE FIND NO INFIRMITY IN THE ORDER OF THE ID CIT(A), WHO HAS RI GHTLY DELETED THE ADDITION SO MADE BY THE AO. THUS, GROUND NO.2 OF THE REVENUE IS DISMISSED. 9. NO INFIRMITY OR ILLEGALITY COULD BE POINTED OUT BY THE LEARNED COUNSEL FOR THE REVENUE SO AS TO CALL FOR INTERFERE NCE BY THIS COURT . 10.4 WITH REGARD TO GROUND NO.3, AS THE JURISDIC TIONAL HIGH COURT PASSED THE ORDER IN ITA NO. 266 OF 2015, BY UPHOLDING THE ORDER PASSED BY THE ITAT, AMRITSAR BENCH, IN THE CASE OF ASSESSEE ITSELF, IN ITA NO.474(ASR)/2014, FOR ASST. YEAR: 2010-11, THEREFORE, RESPECTFULLY FOLLOW ING THE DECISIONS OF THE I TA NO.498(ASR)/2016 AS ST. YEAR: 2011-12 16 JURISDICTIONAL HIGH COURT, WE FEEL IT APPROPRIATE T O DISMISS THE GROUND NO.3. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26. 10. 2016. SD/- SD/- (T. S. KAPOOR) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED:26.10.2016. /PK/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER