Income Tax Officer-3(4), Kanpur V. Shri Sarju Narayan, Kanpur

ITA 81/LKW/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1054 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 30-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: FINANCE NO ACT W E F OF
• Section: 45(5); 28

Judgement Text

I.T.A. NO.81/LKW/2017 ASSESSMENT YEAR:2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI T. S. KAPOOR, ACCOUNTANT MEMBER AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ITA NO.81/LKW/2017 ASSESSMENT YEAR:2011-12 INCOME TAX OFFICER-3(4), KANPUR. VS. SHRI SARJU NARAYAN, 26, SARAI MASWANPUR, KALYANPUR, KANPUR. PAN:AKQPN 3722 N (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A), KANPUR DATED 29/11/2016 RELATING TO ASSESSMENT YEAR 2011-12 TAKING THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, KANPUR HAS ERRED IN LAW AND ON FACTS THAT THE ASSESSEE HAS VIOLATED THE PROVISION OF SECTION 56(2)(VIII) OF TH E INCOME TAX ACT, INSERTED BY FINANCE (NO.2) ACT, 2009 W.E.F . 01.04.2010. 2. THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-I, KANPUR HAS ERRED IN LAW AND ON FACTS T HAT THE ASSESSEE HAS RECEIVED INTEREST ON ENHANCE COMPENSATION U/S 28 OF THE LAND ACQUISITION ACT WHI CH IS APPELLANT BY SMT. MANJU THAKUR, D.R. RESPONDENT BY S HRI SWARN SINGH, C.A. DATE OF HEARING 28/02/2018 DATE OF PRONOUNCEMENT 07 / 03 /201 8 I.T.A. NO.81/LKW/2017 ASSESSMENT YEAR:2011-12 2 NOT EXEMPTED AS PER THE PROVISION OF SECTION 56(2)( VIII) OF THE INCOME TAX ACT, INSERTED BY FINANCE (NO.2) A CT, 2009 W.E.F. 01.04.2010. 3. THAT THE ORDER DATED 29.11.2016 OF HON'BLE CIT(A ) NEEDS TO BE QUASHED AND THE ORDER DATED 30.03.2016 PASSED BY ASSESSING OFFICER BE RESTORED. 2. LEARNED D. R. AT THE OUTSET HEAVILY PLACED HER R ELIANCE ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT LEARNED CI T(A) WHILE ALLOWING RELIEF TO THE ASSESSEE HAS IGNORED THE PROVISIONS OF SECTI ON 56(2)(VIII) OF THE ACT WHICH WERE INSERTED BY FINANCE ACT (NO. 2) OF 2009 AND WHICH WERE APPLICABLE WITH EFFECT FROM 01/04/2010. IT WAS SUB MITTED THAT THE ASSESSEE HAD RECEIVED INTEREST ON ENHANCED COMPENSATION U/S 28 OF THE LAND ACQUISITION ACT WHICH WAS NOT EXEMPT AS PER THE PRO VISIONS OF SECTION 56(2)(VIII) OF THE ACT AND THEREFORE, THE ORDER OF LEARNED CIT(A) NEEDS TO BE QUASHED AND THE ORDER PASSED BY THE ASSESSING OFFIC ER NEEDS TO BE RESTORED. 3. LEARNED A. R., ON THE OTHER HAND, SUBMITTED THAT LEARNED CIT(A) HAS PASSED AN EXHAUSTIVE AND COMPREHENSIVE ORDER AFTER TAKING INTO ACCOUNT THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CI T VS. GHANSHYAM (HUF) [2009] 182 TAXMAN 368 (SC) WHEREIN HON'BLE SUPREME COURT HAS HELD THAT THE INTEREST RECEIVED BY ASSESSEE IN VIEW OF SECTIO N 28 OF LAND ACQUISITION ACT 1894 IS PART OF COMPENSATION AND THEREFORE, WAS NOT TAXABLE. LEARNED A. R. HEAVILY PLACED HIS RELIANCE ON THE ORDER OF L EARNED CIT(A) AND INVITED OUT ATTENTION TO HIS DETAILED FINDINGS. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH ROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE ASSESSEE RECEIV ED COMPENSATION AND ALSO RECEIVED INTEREST ON ENHANCED COMPENSATION WHI CH WAS PAID TO THE ASSESSEE KEEPING IN VIEW THE PROVISIONS OF SECTION 28 AND 34 OF THE LAND I.T.A. NO.81/LKW/2017 ASSESSMENT YEAR:2011-12 3 ACQUISITION ACT. THE ASSESSEE DURING THE ASSESSMEN T PROCEEDINGS HAD CLAIMED THAT CAPITAL GAIN WAS EXEMPT U/S 10(37) OF THE ACT AND THE INTEREST RECEIVED BY HIM IN TERMS OF SECTION 28 OF THE LAND ACQUISITION ACT IS IN THE NATURE OF ADDITIONAL COMPENSATION AND NOT IN THE NA TURE OF INTEREST AND IN SUPPORT OF HIS CONTENTION RELIED ON THE JUDGMENT OF HON'BLE HIMANCHAL PRADESH HIGH COURT IN THE CASE OF CIT VS. KESHWA DE VI [2012] 19 TAXMAN.COM 220 (HP) WHICH AFTER RELYING UPON THE JU DGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GHANSHYAM, HUF (SUPRA) HAS HELD THAT INTEREST RECEIVED U/S 28 OF THE LAND ACQUISITION AC T ON ENHANCED COMPENSATION IS NOT INTEREST U/S 34 BUT IS IN THE N ATURE OF COMPENSATION AND THEREFORE, WAS NOT TAXABLE AS INTEREST. THE ASSESS ING OFFICER HOWEVER, DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE THE ADDITIONS AFTER CONSIDERING THE INTEREST RECEIVED U/S 56(2)(VIII) O F THE ACT AND AFTER ALLOWING DEDUCTION U/S 57(IV) OF THE ACT. THE CIT(A) HAS QU ITE ELABORATELY DEALT WITH THE ISSUE AND AFTER RELYING ON THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF GHANSHYAM, HUF (SUPRA), HAS RIGHTLY ALLOWED THE RELIEF. FOR THE SAKE OF COMPLETENESS, THE RELEVANT FINDINGS OF LEAR NED CIT(A) ARE REPRODUCED BELOW: IN THE CASE OF COMPULSORY ACQUISITION OF PROPERTY, IN MOST CASES, AT THE INITIAL STAGE, COMPENSATION IS AWARDE D [ORIGINAL COMPENSATION], WHICH IS RECEIVED BY THE PERSON WHOS E PROPERTY IS ACQUIRED [OWNER]. IN MOST SUCH CASES, THERE IS ALWAYS A DISPUTE WITH REGARD TO THE QUANTUM OF COMPENSATION ORIGINALLY AWARDED AND THE DISPUTES REMAIN IN LITIGATION FOR A LONG TIME. IN A LARGE NU MBER OF SUCH CASES, BY AND LARGE, THE OWNERS SUCCEED AND SECURE ADDITIONAL COMPENSATION FROM THE COURTS [ENHANCED COMPENSATION ]. GENERALLY, IN MOST SUCH CASES, THE STATE CONTINUES TO LITIGATE THE QUANTUM OF ENHANCED COMPENSATION TILL THE APEX COURT AND THE ISSUES GET FINALLY RESOLVED AFTER A VERY LONG T IME. I.T.A. NO.81/LKW/2017 ASSESSMENT YEAR:2011-12 4 IN MOST CASES, ONCE THE ENHANCED COMPENSATION IS DETERMINED/APPROVED BY THE COURTS [SAY, THE HIGH CO URT], THE AMOUNT OF SUCH ENHANCED COMPENSATION IS DEPOSITED W ITH THE COURTS AND THE OWNERS ARE PERMITTED TO WITHDRAW THE SAME AGAINST SOME SECURITY [SAY, BANK GUARANTEE], OR EVE N WITHOUT ANY SECURITY, NOTWITHSTANDING THE FACT THAT THE DIS PUTES REMAIN PENDING BEFORE THE HIGHER COURTS [SAY, APEX COURT]. IN MOST SUCH CASES, THE DISPUTE WAS WITH REGARD TO THE YEAR OF TAXABILITY OF THE ENHANCED COMPENSATION WHEN SUCH D ISPUTED COMPENSATION WAS RECEIVED BY THE OWNER ON FURNISHIN G SECURITY AS THE AMOUNT RECEIVED IS LIABLE TO BE REPAID, IF, THE HIGHER COURT DECIDES THE ISSUE AGAINST THE OWNER [FULLY OR PARTLY] THE AMENDMENTS WERE MADE W.E.F. 1-4-2010 ONLY TO TAX TH E INTEREST IN THE YEAR OF RECEIPT. THESE AMENDMENTS WERE BROUGHT IN TO OVERCOME THE DI FFICULTIES CREATED BY THE DECISION OF SUPREME COURT IN THE CAS E OF RAMA BAI VS CIT, 181ITR 400(SC) WHEREIN IT WAS HELD THAT INTEREST IS TAXABLE IN DIFFERENT YEARS ON ACCRUAL BASIS. ON THE OTHER HAND, IN CASE OF GHANSHYAM HUF, THE AP EX COURT HELD THAT INTEREST U/S 28 WAS NOT THE INTEREST BUT PART OF COMPENSATION TO BE INCLUDED FOR COMPUTATION OF CAPI TAL GAINS AND FOR TAXATION U/S 45(5) OF INCOME TAX ACT. AS PE R THAT DECISION ONLY INTEREST U/S 34 IS THE INTEREST. SO, IN MY VIEW, AMENDMENTS MADE W.E.F. 01-04-2010 D O NOT CHANGE THE LEGAL POSITION REGARDING INTEREST U/S 28 I.E. INTEREST U/S 28 IS TO BE TREATED AS PART OF COMPENSATION. HON'BLE APEX COURT IN THE CASE OF GHANSHYAM (HUF) ( SUPRA), WHEREBY THE HON'BLE COURT AFTER ANALYZING VARIOUS P ROVISIONS OF THE LAND ACQUISITION ACT AS WELL AS THAT OF THE INC OME TAX ACT, OBSERVES AS UNDER: '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. 33. IT IS TO ANSWER THE ABOVE QUESTIONS THAT WE HAV E ANALYSED THE PROVISIONS OF SECTIONS 23, 23(1A), 23( 2), 28 I.T.A. NO.81/LKW/2017 ASSESSMENT YEAR:2011-12 5 AND 34 OF THE 1894 ACT. AS DISCUSSED HEREINABOVE, SECTION 23(1A) PROVIDES FOR ADDITIONAL AMOUNT. IT T AKES CARE OF INCREASE IN THE VALUE AT THE RATE OF 12 % P ER ANNUM. SIMILARLY, UNDER SECTION 23(2) OF THE 1894 A CT THERE IS A PROVISION FOR SOLATIUM WHICH ALSO REPRES ENTS PART OF ENHANCED COMPENSATION. SIMILARLY, SECTION 2 8 EMPOWERS THE COURT IN ITS DISCRETION TO AWARD INTER EST ON THE EXCESS AMOUNT OF COMPENSATION OVER AND ABOVE WH AT IS AWARDED BY THE COLLECTOR. IT INCLUDES ADDITIONAL AMOUNT UNDER SECTION 23(1A) AND SOLATIUM UNDER SECTION 23(2) OF THE SAID ACT. SECTI ON 28 OF THE 1894 ACT APPLIES ONLY IN RESPECT OF THE EXCE SS AMOUNT DETERMINED BY THE COURT AFTER REFERENCE UNDE R SECTION 18 OF THE 1894 ACT. IT DEPENDS UPON THE CLA IM, UNLIKE INTEREST UNDER SECTION 34 WHICH DEPENDS ON U NDUE DELAY IN MAKING THE AWARD. IT IS TRUE THAT 'INTERES T' IS NOT COMPENSATION. IT IS EQUALLY TRUE THAT SECTION 45(5) OF THE 1961 A CT REFERS TO COMPENSATION. BUT AS DISCUSSED HEREINABOVE, WE H AVE TO GO BY THE PROVISIONS OF THE 1894 ACT WHICH AWARD S 'INTEREST' BOTH AS AN ACCRETION IN THE VALUE OF THE LANDS ACQUIRED AND INTEREST FOR UNDUE DELAY. INTEREST UND ER SECTION 28 UNLIKE INTEREST UNDER SECTION 34 IS AN ACCRETION TO THE VALUE, HENCE IT IS A PART OF ENHAN CED COMPENSATION OR 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 UNDER SECTION 23(2) OF THE 1961 ACT FORMS PART OF ENHANCED COMPENSATION UNDER SECTION 45(5)(B) OF THE 1961 ACT. IN FACT, WHAT WE HAVE STATED HEREINABOVE IS REINFOR CED BY THE NEWLY INSERTED CLAUSE (C) IN SECTION 45(5) BY T HE FINANCE ACT, 2003 W.E.F.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 CA PITAL ASSET IS COMPUTED BY TAKING THE- I.T.A. NO.81/LKW/2017 ASSESSMENT YEAR:2011-12 6 -COMPENSATION OR CONSIDERATION REFERRED TO IN CLAUS E (A) OF SECTION 45(5) OR, AS THE CASE MAY BE, -ENHANCED COMPENSATION OR CONSIDERATION REFERRED TO IN CLAUSE (B) OF SECTION 45(5), AND SUBSEQUENTLY SUCH COMPENSATION OR CONSIDERATION IS REDUCED BY ANY COURT, TRIBUNAL OR OTHER AUTHORITY.' THE WORDING OF THE HON'BLE APEX COURT IS TOTALLY DE VOID OF ANY AMBIGUITY. IT HAS BEEN HELD IN VERY CLEAR TERM THAT INTEREST RECEIVED UNDER SECTION 28 OF THE LAND ACQUISITION A CT IS A PART OF THE COMPENSATION ITSELF. AS THE COMPENSATION OF RS 99,84,574/- IS RECEIVED A S INTEREST U/S 28 OF THE 1894 LAND ACQUISITION ACT IT IS TO BE TAXED AS PART OF COMPENSATION THE AMOUNT OF RS 19/986/- RECEIVED U/S 34 OF THE 1894 LAND ACQUISITION ACT IS TO BE TAXED AS INT EREST. APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4.1 THE ABOVE FINDINGS DO NOT CONTAIN ANY INFIRMITY AND THEREFORE, THE APPEAL OF THE REVENUE IS DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 07/03/2018) SD/. SD/. (PARTHA SARATHI CHAUDHURY) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:07/03/2018 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW