Vishwas Vishwanath Deshmukh (HUF), Pune V. ITO, Ward 3(1), Pune

ITA 841/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8445 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 10-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Capital asset; Cost of acquisition
• Section: 244A; 234B; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 841/PN/2013 (ASSESSMENT YEAR 2005-06) VISHWAS VISHWANATH DESHMUKH (HUF) 110/7, JAYKAMAL APARTMENT, THORAT COLONY, PUNE 411004 PAN NO.AABHV9465R .. APPELLANT VS. ITO, WARD-3(1), PUNE .. RESPONDENT ITA NO. 859/PN/2013 (ASSESSMENT YEAR 2005-06) ITO, WARD-3(1), PUNE .. APPELLANT VS. VISHWAS VISHWANATH DESHMUKH (HUF) 110/7, JAYKAMAL APARTMENT, THORAT COLONY, PUNE 411004 PAN NO.AABHV9465R .. RESPONDENT ASSESSEE BY : SHRI SUNIL PATHAK REVENUE BY : SHRI A.K. MODI DATE OF HEARING : 14-10-2014 DATE OF PRONOUNCEMENT : 31-10-2014 ORDER PER R.K. PANDA, AM : THESE ARE CROSS APPEALS. THE FIRST ONE IS FILED B Y THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AN D ARE DIRECTED AGAINST THE ORDER DATED 23-11-2012 OF THE CIT(A)-II , PUNE RELATING TO ASSESSMENT YEAR 2005-06. 2 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN HUF AND FILED ITS RETURN OF INCOME ON 27-10-2009 DECLARING TAXABLE INCOME OF RS.61,10,152/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE WAS H AVING A PROPERTY AT J.M. ROAD WHICH WAS ACQUIRED BY THE APPROPRIATE AUTHORITY IN THE F.Y. 1995-96 FOR A CONSIDERATION OF RS.2,40,00, 000/-. THE ASSESSEE HAS RECEIVED THE ADVANCE OF RS.62,50,000/- IN THE F.Y. 1995-96 AGAINST HIS SHARE AND THE BALANCE AMOUNT OF RS.57,50,000/- WAS RECEIVED IN THE F.Y. 2004-05 AFTER THE ORDER OF THE HIGH COURT. THE ASSESSEE HAS NOT SHOWN THE CAPITAL GAIN IN THE F.Y. 1995-96 RELEVANT TO A.Y. 1996-97 DUE TO THE MATTER PENDING IN THE COURT. HE OBSERVED THAT THE HUF HAS COMPUTED THE CAPITAL GAIN AFTER RECEIVING THE COMPLETE BALANCE AMOUNT. THE ASSESSEE HAS COMP UTED THE CAPITAL GAIN ON SALE CONSIDERATION OF RS.2.4 CRORES AND TOTAL LONG TERM CAPITAL GAIN WAS WORKED OUT AFTER DEDUCTING TH E COST OF ACQUISITION OF RS.23,50,000/- AS ON 01-04-1981. TH E ASSESSEE HAS TAKEN THE INDEXED COST OF 480 WHICH IS APPLICABLE T O F.Y. 2004-05 AND ACCORDINGLY CALCULATED THE LONG TERM CAPITAL GA IN AT RS.59,90,898/-. ACCORDING TO THE ASSESSING OFFICER , THE TRANSFER OF CAPITAL ASSET IS THE DATE ON WHICH THE TRANSFER TOO K PLACE WHICH IS YEAR 1995-96 WHEN THE POSSESSION WAS TAKEN BY THE A PPROPRIATE AUTHORITY. HE, THEREFORE, WAS OF THE OPINION THAT THE ASSESSEE HAS WRONGLY CONSIDERED THE INDEXED COST OF ACQUISITION FOR THE YEAR 2005-06. ACCORDING TO HIM, THE ASSESSEE IS ENTITLE D TO GET THE BENEFIT OF INDEXED COST OF ACQUISITION FOR THE YEAR 1995-96. HE, 3 THEREFORE, REJECTED THE COMPUTATION OF CAPITAL GAIN MADE BY THE ASSESSEE AND DETERMINED THE CAPITAL GAIN AT RS.83,2 9,145/-, THE DETAILS OF WHICH ARE AS UNDER : SALE CONSIDERATION : 2,40,00,000/- LESS : INDEXED COST 281 ------ X 23,50,000 : 66,03,500/- 1000 -------------------- LONG TERM CAPITAL GAIN EARNED : 1,73,96,500/- ASSESSEES SHARE 50% : 86,98,250/- LESS : EXPENSES CLAIMED : 3,69,105/- -------------------- TAXABLE CAPITAL GAIN : 83,29,145/- -------------------- HE ACCORDINGLY MADE ADDITION OF RS.23,38,250/- BEIN G THE DIFFERENCE BETWEEN THE CAPITAL GAIN DETERMINED BY H IM AND THE CAPITAL GAIN DECLARED BY THE ASSESSEE (I.E. RS.83,2 9,145 RS.59,90,895). 2.1 THE ASSESSING OFFICER FURTHER NOTED THAT THE AS SESSEE, DURING THE YEAR UNDER CONSIDERATION, HAS ALSO RECEIVED INT EREST OF RS.73,53,513/- FROM THE APPROPRIATE AUTHORITY WHICH WAS NOT OFFERED FOR TAXATION ON THE GROUND THAT THE DEPARTM ENT HAS FILED AN SLP AGAINST THE ORDER OF THE HIGH COURT. HE DID NO T ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE A SSESSEE HIMSELF HAS GIVEN EFFECT TO THE HIGH COURT ORDER BY COMPUTI NG CAPITAL GAIN FOR THE YEAR UNDER CONSIDERATION. HE ACCORDINGLY M ADE ADDITION OF RS.73,53,513/- TO THE TOTAL INCOME OF THE ASSESSEE. 3. BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE ADDI TION OF RS.73,53,513/- ON ACCOUNT OF INTEREST INCOME IS NOT CORRECT SINCE THE SAME DOES NOT PARTAKE THE CHARACTER OF INCOME IN VI EW OF THE LETTER 4 DATED 30-12-2004 RECEIVED FROM THE ACIT, APPROPRIAT E AUTHORITY, AHMEDABAD. IT WAS ARGUED THAT THERE IS NO FINALITY OF INTEREST AS INCOME AS THE DEPARTMENT HAS FILED SLP BEFORE THE H ONBLE SUPREME COURT AND THEREFORE THE INCOME IS NOT CHARG EABLE TO TAX UNTIL THE DECISION OF THE SLP IS IN FAVOUR OF THE A SSESSEE. IT WAS FURTHER ARGUED THAT IN CASE THE INTEREST INCOME IS HELD AS TAXABLE THEN THE SAME SHOULD BE CHARGED IN THE YEAR OF ACCR UAL AS PER THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE AND N OT TAXED IN THE YEAR OF RECEIPT. THE DECISION OF HONBLE MADRAS HIG H COURT IN THE CASE OF CIT VS. C. VENKATAPATHY REPORTED IN 163 ITR 178 WAS RELIED UPON. 3.1 THE ASSESSEE IN A WITHOUT PREJUDICE SUBMISSION ARGUED THAT RECEIPT OF INTEREST OF RS.73,53,513/- BE TREATED AS ADDITIONAL COMPENSATION CHARGEABLE TO CAPITAL GAINS U/S.45(5) AS HELD IN THE CASE OF CIT VS. GHANSHYAM (HUF) REPORTED IN 315 ITR 1. IT WAS ALSO ARGUED THAT THE CORRECT INDEXED COST AS CLAIME D BY THE ASSESSEE BE ALLOWED IN COMPUTING THE LONG TERM CAPITAL GAIN AND SINCE THE TRANSFER OF THE ASSET HAS TAKEN PLACE IN 1995-96, T HEREFORE, THE CAPITAL GAIN CANNOT BE TAXED IN A.Y. 2005-06 U/S.14 7. 4. HOWEVER, THE LD. CIT(A) WAS NOT FULLY SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. THE ARGUMENT O F THE ASSESSEE THAT INTEREST AMOUNTING TO RS.73,53,513/- RECEIVED DOES NOT PARTAKE THE CHARACTER OF INCOME WHICH IS CHARGEABLE TO TAX WAS REJECTED BY HIM ON THE GROUND THAT THE INTEREST ACCRUED ON FDR, WHICH COMPRISED OF THE AMOUNT OF CONSIDERATION OF RS.2.40 CRORES FOR THE 5 CAPITAL ASSET WAS NEVER CONSIDERED PART OF THE COMP ENSATION. THE COURT HAD CONSIDERED IT BE SEPARATE PAYMENTS AND HA D DIRECTED TO MAKE THE PAYMENT AFTER DEDUCTING THE TAX AT SOURCE. THUS, THE ACCRUAL OF INTEREST TOOK PLACE ON THE FDR AND THE S AME ACCRUED AS A RESULT OF THE PENDING LITIGATION BETWEEN THE ASSESS EE AND THE PURCHASER OF THE PROPERTY, I.E. RASIKLAL DHARIWAL. FURTHER, THE COMPENSATION FOR THE CAPITAL ASSET HAS NOT BEEN DIS PUTED BY THE ASSESSEE. THE ACCRUAL OF INTEREST WAS PURELY ON AC COUNT OF THE FDRS. 4.1 SO FAR AS THE ARGUMENT OF THE ASSESSEE THAT THE INTEREST INCOME IS NOT CHARGEABLE TO TAX TILL THE STATUS OF THE SLP IS KNOWN AND THAT THE SAID AMOUNT BE TREATED AS ADDITIONAL COMPENSATI ON U/S.45 R.W. 269UG OF THE I.T. IS CONCERNED, HE HELD THAT THE SA ID INTEREST NEVER FORMED PART OF THE CONSIDERATION TO BE PAID FOR THE CAPITAL ASSET SOUGHT TO BE SOLD BY THE ASSESSEE. HE DISTINGUISHE D THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. GH ANSHYAM (HUF) (SUPRA) WHICH ACCORDING TO HIM WAS WITH RESPE CT TO RECEIPT OF ENHANCED COMPENSATION/CONSIDERATION ON COMPULSOR Y ACQUISITION OF LAND WHICH WAS HELD TO BE TAXED IN THE YEAR OF R ECEIPT SUBJECT TO ADJUSTMENT IF ANY U/S.155(16) EVEN IN CASES WHERE P ENDING APPEAL, THE COURT PERMITS THE CLAIMANT TO WITHDRAW THE DISP UTED ENHANCED COMPENSATION AGAINST SECURITY OR OTHERWISE WAS HELD TO BE LIABLE TO BE TAXED U/S.45(5). HOWEVER, IN THE PRESENT CASE, THE DISPUTE WAS NOT WITH RESPECT TO CONSIDERATION BETWEEN THE SELLE RS OR THE VENDORS AND THE PURCHASERS. HE OBSERVED THAT THE GUJARAT H IGH COURT NEVER 6 CONSIDERED THE INTEREST ACCRUED ON THE FDR TO BE PA RT OF COMPENSATION. HE OBSERVED THAT THE ASSESSEE HAD NO T EVEN HANDED OVER THE POSSESSION OF THE PROPERTY TO THE APPROPRI ATE AUTHORITY TILL THE DECISION OF THE HIGH COURT IN APRIL 2004. THE PENDING LITIGATION THUS WAS NEVER ON ACCOUNT OF THE COMPULS ORY ACQUISITION OF THE ASSET BY THE GOVERNMENT OR APPROPRIATE AUTHO RITY BUT THE DISPUTE REGARDING THE APPORTIONMENT OF THE AMOUNT B Y THE VENDORS AND THE PURCHASERS. 4.2 AS REGARDS THE ISSUE OF COMPUTATION OF THE CAPI TAL GAIN AND ADOPTION OF CORRECT INDEXED COST AS ADOPTED BY THE ASSESSEE IS CONCERNED, HE HELD THAT THE POSSESSION OF THE SAID PROPERTY PASSED ONTO THE APPROPRIATE AUTHORITY ONLY IN THE YEAR 200 4 AS PER THE DIRECTIONS OF HON'BLE GUJARAT HIGH COURT. ALTHOUGH THE APPROPRIATE AUTHORITY, HAD ORDERED PURCHASE OF PROPERTY ON 13.0 9.1996 HOWEVER, THE SAME WAS CHALLENGED BY THE PURCHASERS SHRI DHARIWAL & OTHERS AND BY THE VENDORS I.E. THE ASSESSEE ALONG WITH OTHERS. DURING THE PENDENCY OF THE PETITION IN THE COURT TH E PURCHASE PRICE OF RS. 2.40 CRORES RECEIVED FROM THE CENTRAL GOVT. WAS DEPOSITED IN THE BANK AS FDR AS PER COURT'S ORDER AND THE SAME W AS RENEWED PERIODICALLY TILL THE DECISION OF THE GUJARAT HIGH COURT ON 12-4- 2004. IT WAS BY THIS ORDER OF THE HIGH COURT THAT T HE POSSESSION OF THE PROPERTY WAS PASSED ON TO THE APPROPRIATE AUTHO RITY BY THE ASSESSEE AND THE REMAINING AMOUNT OF THE PURCHASE P RICE WAS ALSO PAID AND ALSO THE ACCRUED INTEREST OF RS.73,53,513/ - ON THE FDR WAS HANDED OVER TO THE ASSESSEE BY A SEPARATE ORDER BY THE HIGH COURT, 7 DATED 22.12.2004. THUS THE ASSESSEE HAD RIGHTLY TAK EN THE INDEXED COST AS OF 2004-05 AS AGAINST F.Y. 1995-96 AS THE T RANSFER OF PROPERTY TOOK PLACE ONLY DURING F.Y. 2004-05 RELEVA NT TO A.Y. 2005-06 AS AGAINST A.Y. 1995-96 TAKEN BY THE A.O. T HE ASSESSEE HAS THUS RIGHTLY OFFERED THE CAPITAL GAINS IN THE R ETURN OF INCOME FOR A.Y. 2005-06. 5. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSE SSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US WITH TH E FOLLOWING GROUNDS : GROUNDS BY ASSESSEE : 1. THE REASST. U/S 147 IS BAD IN LAW AS THE APPELLANT HAD DECLARED THE FACTUAL POSITION REGARDING INTEREST IN T HE RETURN AND ALSO BECAUSE THE INTEREST WAS NOT TAXABLE AS INCOME OF THE APPELLANT FOR THIS YEAR. 2. THE LEARNED CIT(A) OUGHT TO HAVE DELETED THE CAP ITAL GAINS ON TRANSFER OF LAND OFFERED BY THE APPELLANT IN THIS YEAR I.E. A.Y. 2005 - 06 WHEN THE A.O. HAD HELD THAT THE TRANSFER O F THE PROPERTY HAD TAKEN PLACE IN THE FINANCIAL YEAR 1995 - 96. 3. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDIT ION OF RS.73,53,513/- MADE ON ACCOUNT OF INTEREST ON DELAYED COMPENSATION PAID TO THE APPELLANT BY THE APPROPRIAT E AUTHORITY FOR ACQUISITION OF THE PROPERTY. 4. THE CIT(A) FAILED TO APPRECIATE THAT ADDITION ON ACCOUNT OF INTEREST OF RS.73,53,513/-IS NOT JUSTIFIED IN THIS YEAR FOR THE FOLLOWING REASONS - A. THE DEPT. HAD INFORMED THE APPELLANT THA T IT WAS FILING THE SLP AGAINST THE HIGH COURT ORDER GRANTING INTEREST, T HE APPELLANT'S RIGHT TO THE INTEREST DID NOT BECOME CONCRETE IN THI S YEAR AND THUS, THE INTEREST WAS NOT TAXABLE AS AN INCOME IN THIS YEAR. B. THE INTEREST WAS AN ADDITIONAL COMPENSATION GRANTED TO THE APPELLANT AND HENCE, THE SAME COULD HAVE BEEN TAXABL E IN THE F.Y. 1995 - 96 AND NOT IN THIS YEAR. C. WITHOUT PREJUDICE, THE INTEREST WAS TAXABL E OVER THE YEARS FROM F.Y. 1995 - 96 ON ACCRUAL BASIS IN THE HANDS OF T HE APPELLANT AND THE QUESTION OF TAXING THE ENTIRE INTEREST IN THI S YEAR DID NOT ARISE. 8 5. WITHOUT PREJUDICE, THE INTEREST OF RS.73,53,513/- IS TAXABLE IN A.Y. 2005-06 AS AN ADDITIONAL COMPENSATION I.E. UN DER THE HEAD 'LONG TERM CAPITAL GAINS' AND NOT AS INCOME FROM OTHE R SOURCES. 6. THE LEARNED CIT(A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B WITHOUT APPRECIATING THAT THE INTEREST OF RS. 73,53,513/- DID NOT CONSTITUTE INCOME OF THE APPELLANT FOR THIS Y EAR AS THE DEPT. ITSELF HAD INFORMED THE APPELLANT THAT IT WAS FILING SLP AGAINST THE HIGH COURT ORDER AND ACCORDINGLY, THE ASSESSEE WAS JUSTI FIED IN NOT INCLUDING THE ABOVE INCOME FOR THE PURPOSES OF COMPUT ING THE ADVANCE TAX LIABILITY. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND O R DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. GROUNDS BY REVENUE : (1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN HOLDING THAT THE TRANSFER OF PROPERTY TOOK PLACE DUR ING F.Y.2004-05 RELEVANT TO A.Y.2005-06 AND NOT A.Y. 1996-97 WHEN T HE TRANSFER OF PROPERTY ACTUALLY TOOK PLACE IN F.Y. 1995-96 AS THE ASSESSEE HAD RECEIVED ADVANCE OF RS.62,50,000/- AND POSSESSION OF PR OPERTY WAS TAKEN BY THE APPROPRIATE AUTHORITY. (2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN HOLDING THAT THE ASSESSEE HAD RIGHTLY TAKEN THE INDEX ED COST AS OF F.Y.2004-05 WHEN THE INDEXED COST SHOULD HAVE BEEN TA KEN AS OF F.Y. 1995-96 WHEN THE TRANSFER OF PROPERTY TOOK PLAC E. (3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN HOLDING THAT THE POSSESSION OF THE PROPERTY WAS PASSED ON TO THE APPROPRIATE AUTHORITY BY THE ASSESSEE VIDE ORDER OF THE GUJARAT HIGH COURT ON 12.04.2004 WITHOUT APPRECIATING THE F ACT THAT ANY PROFITS OR GAINS ARISING FROM TRANSFER OF A CAPITAL ASSET EFFECTED IN THE PREVIOUS YEAR SHALL BE CHARGEABLE TO TAX UNDER TH E HEAD CAPITAL GAINS AND TRANSFER OF CAPITAL ASSET TOOK PLACE IN F.Y. 1995-96. (4) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) E RRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE CANNOT TAKE THE BENEFIT OF LITIGATION WHICH HE & THE PURCHASERS HAD FILED BEF ORE THE HONBLE GUJARAT HIGH COURT WITH RESPECT TO THE APPORTIONMENT OF THE AMOUNTS BY VENDORS AND PURCHASERS TO STATE THAT TRANSFER TOOK PLACE IN F.Y.2004-05 AND NOT IN F.Y. 1995-96. (5) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS G ROUNDS OF APPEAL NO.1 AND 2 FOR WHICH THE LD. DEPARTMENTAL RE PRESENTATIVE HAS NO OBJECTION. ACCORDINGLY, THE ABOVE TWO GROUN DS ARE DISMISSED AS NOT PRESSED. 9 7. GROUNDS OF APPEAL NO.3 TO 5 BY THE ASSESSEE RELA TE TO TAXABILITY OF INTEREST OF RS.73,53,513/- THE LD. CO UNSEL FOR THE ASSESSEE MADE 3 FOLD ARGUMENTS. ACCORDING TO HIM S INCE THE DEPARTMENT HAS FILED AN SLP BEFORE THE HONBLE SUPR EME COURT AGAINST THE DECISION OF THE HONBLE GUJARAT HIGH CO URT, THEREFORE, THE INTEREST DID NOT ACCRUE TO THE ASSESSEE. THERE FORE, THE SAME CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE DURING THE IMPUGNED ASSESSMENT YEAR. FOR THE ABOVE PROPOSITION HE RELI ED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CI T VS. HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD., REPORTED IN 161 ITR 524 (SC) AND THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SMT. T. GIRIJA AMMAL REPOR TED IN 282 ITR 614. 7.1 THE SECOND PLANK OF ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE INTEREST SO RECEIVED SHOULD BE TAXED ON ACCRUAL BASIS. THEREFORE, THE INTEREST RECEIVABLE FOR THIS ASSESSMENT YEAR ONLY MAY BE TAXED IN THE HANDS OF THE ASSESSEE. FO R THE ABOVE PROPOSITION, HE RELIED ON THE FOLLOWING DECISIONS : 1. SMT. RAMABAI ETC. VS. CIT REPORTED IN 181 ITR 400 (SC) 2. CIT VS. L. VENKATAPATHY REPORTED IN 161 ITR 178 ( MAD.) 3. CIT VS. GHANSHYAM REPORTED IN 315 ITR 1 (SC) 4. KONKAN BUILDERS (P) LTD., VS. ITO & ANOTHER REPORT ED IN 297 ITR 39 (BOMBAY) 7.2 THE THIRD PLANK OF HIS ARGUMENT IS THAT THE INT EREST SO RECEIVED PARTAKES THE CHARACTER OF CAPITAL GAIN AND THEREFORE THE SAME SHOULD BE TAXED @20% WHICH IS THE RATE FOR TAX ING CAPITAL GAIN. SO FAR AS TAKING INDEXED COST OF ACQUISITION IN F.Y. 2004-05, 10 HE RELIED ON THE ORDER OF THE LD.CIT(A). 8. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICE R. HE SUBMITTED THAT SINCE THE ASSESSEE RECEIVED THE INTEREST DURIN G THE YEAR AS PER THE ORDER OF THE COURT, THEREFORE, IT HAS ACCRUED D URING THE YEAR AND THEREFORE THE ASSESSEE IS LIABLE TO PAY TAX ON SUCH INCOME DURING THE IMPUGNED ASSESSMENT YEAR. HE SUBMITTED THAT UNDER THE PROVISIONS OF SECTION 244A WHENEVER AN ASSESSEE RECEIVES INTER EST ON REFUNDS HE PAYS TAX ON THE SAME IN THE YEAR OF RECEIPT OF S UCH INTEREST INCOME. FOLLOWING THE SAME RATIO, THE INTEREST IN THE INSTANT CASE SHOULD ALSO BE TAXED DURING THE IMPUGNED ASSESSMENT YEAR. 8.1 SO FAR AS THE GROUNDS RAISED BY THE REVENUE CHA LLENGING THE ORDER OF THE CIT(A) IN HOLDING THAT THE TRANSFER OF THE PROPERTY TOOK PLACE DURING F.Y. 2004-05 AND THE ASSESSEE HAD RIGH TLY TAKEN THE INDEXED COST AS OF F.Y. 2004-05 HE RELIED ON THE OR DER OF THE ASSESSING OFFICER. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. GROUNDS OF APPEAL NO.3 TO 5 BY THE ASSESSEE RELATE TO THE CHARGING OF INTEREST INCOME OF RS.73,53,513/- TO TAX IN THE A.Y. 2005-06. FROM TH E VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK AS WELL AS ON PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW, WE FIND THE AS SESSEE 11 AS OWNER OF PROPERTY, ENTERED INTO AN AGREEMENT TO SALE ON 25-01- 1996 AND IN PURSUANCE THEREOF FILED FORM NO.37-I AS PER SECTION 269UC OF CHAPTER XXC OF THE I.T. ACT. THE APPROPRI ATE AUTHORITY ACTING UNDER THE PROVISIONS OF AFORESAID CHAPTER OR DERED PURCHASE OF THE PROPERTY. THE ASSESSEE CHALLENGED THE SAID ACT ION OF THE APPROPRIATE AUTHORITY. DURING THE COURSE OF PENDEN CY OF THE PETITION, THE PURCHASE PRICE, WHICH WAS RECEIVED FR OM THE CENTRAL GOVT., WAS DEPOSITED WITH A SCHEDULED BANK IN SHAPE OF FIXED DEPOSIT RECEIPT AS PER THE DIRECTION OF THE COURT. THUS, AN AMOUNT OF RS.2,40,00,000/- WHICH WAS RELEASED BY THE CENTR AL GOVT. AND DUE TO THE DISPUTE REGARDING APPORTIONMENT BETWEEN THE VENDORS AND THE PURCHASERS WAS KEPT IN FDR ON AND FROM 30-1 0-1996. THEREAFTER OVER A PERIOD OF TIME A CONSENSUS WAS AR RIVED AT BETWEEN THE PARTIES AND THE HONBLE GUJARAT HIGH COURT WITH OUT ENTERING INTO THE MERITS OF THE CASE DISPOSED OF THE PETITIO NS VIDE ITS ORDER DATED 12-04-2004 (REPORTED IN 277 ITR 363). THE CO URT IN ITS ORDER ISSUED THE FOLLOWING DIRECTIONS IN VIEW OF THE CONS ENSUS BETWEEN THE PARTIES AND ALL OF WHOM BEING AGREEABLE TO THE ORDER OF PURCHASE DATED 13-09-1996 (AS REPRODUCED IN THE ORDER OF CIT (A) AT PARA 3.7 OF HIS ORDER) : (I) THE ORDER OF PURCHASE DT 13TH SEPT., 199& STAN DS AND IT IS OPEN TO THE IT AUTHORITIES TO ACT UPON THE SAME WITHOUT ANY OBJECTION FROM ANY OF THE PARTIES. (II) THE APPROPRIATE AUTHORITY SHALL ENCASH THE FIXE D DEPOSIT OF RS.5,34,81,261 ALONG WITH THE INTEREST THEREON FROM 7TH FEB., 2004 AND TO PAY OVER SUCH AMOUNT IN THE FOLLOWING PROPOR TION: (A) 115 LAKHS WITH INTEREST ACCRUED THEREON FROM 30 TH OCT., 1996, TILL THE DATE OF ENCASHMENT OF THE AFOR ESAID FIXED DEPOSIT SHALL BE PAID TO THE VENDORSOUT OF WHICH 5 0 PER CENT 12 SHALL BE PAID TO SHIVRAM VISHWANATH DESHMUKH (VENDO R NO. 1) AND THE BALANCE 50 PER CENT SHALL BE PAID TO SHR I VISHVAS VISHWANATH DESHMUKH (VENDOR NO. 2) AS THE KARTA OF HUF CONSISTING OF HIMSELF AND HIS SON SHRI RAVINDRA VIS HVAS DESHMUKH, AFTER DEDUCTING AT SOURCE, THE TAX PAYABLE ON THE INTEREST WHICH HAS ACCRUED ON THE ORIGINAL INVESTME NT MADE ON 30TH OCT., 1996. (B) SIMILARLY, THE APPROPRIATE AUTHORITY SHALL PAY RS. 125 LAKHS WITH INTEREST ACCRUED THEREON FROM 30TH OCT., 1996 TILL THE DATE OF ENCASHMENT OF THE AFORESAID FIXED DEPOSIT TO THE PURCHASERSOUT OF THE SAID AMOUNT, 50 PER CENT OF T HE AMOUNT SHALL BE PAID TO SHRI RASIKLAL MANIKCHAND DHARIWAL, KARTA OF RASIKLAL MANIKLAL DHARIWAL HUF AND THE BALANCE 50 P ER CENT AMOUNT TO SHRI PRAKASH RASIKLAL DHARIWAL AS A MEMBE R OF RASIKLAL MANIKLAL DHARIWAL HUF. THESE PAYMENTS SHAL L ALSO BE MADE AFTER DEDUCTING AT SOURCE THE TAX PAYABLE ON TH E INTEREST WHICH HAS ACCRUED ON THE ORIGINAL INVESTMENT MADE O N 30TH OCT., 1996. (C) THE ABOVE PAYMENTS SHALL BE MADE WITHIN TWO WEE KS FROM THE DATE OF RECEIPT OF THE WRIT OF THIS COURT OR A CERTIFIED COPY OF THIS ORDER, WHICHEVER IS EARLIER. (D) THE APPROPRIATE AUTHORITY SHALL DULY CONSIDER T HE REQUEST BEING MADE ON BEHALF OF THE VENDORS AS WELL AS THE PURCHASERS THAT SINCE THE PARTIES ARE RESIDING AT PUNE, THE AF ORESAID AMOUNTS MAY BE PAID TO THE RESPECTIVE PARTIES THROU GH CHEQUES/DEMAND DRAFTS PAYABLE AT PUNE. (III) VENDORS SHRI SHIVRAM VISHWANATH DESHMUKH AND SHRI VISHVAS VISHWANATH DESHMUKH SHALL HAND OVER VACANT POSSESSI ON OF THE PROPERTY IN QUESTION TO THE AUTHORISED REPRESENTATI VE OF THE I.T. DEPARTMENT WITHIN TEN DAYS FROM TODAY AND SHRI RAVI NDRA VISHVAS DESHMUKH SHALL NOT RAISE ANY OBJECTION THERETO.' 9.1 FROM THE ABOVE FACTS, WE FIND FORCE IN THE ORDE R OF THE LD.CIT(A) THAT THE INTEREST ACCRUED ON THE FDR WHIC H COMPRISED OF THE AMOUNT OF CONSIDERATION OF RS.2.40 CRORES FOR T HE CAPITAL ASSET WAS NEVER CONSIDERED PART OF THE COMPENSATION. THE COURT ITSELF HAD CONSIDERED IT TO BE SEPARATE PAYMENT AND HAD DIRECT ED TO MAKE THE PAYMENT AFTER DEDUCTING TDS. THUS, THE ACCRUAL OF INTEREST TOOK PLACE ON THE FDR AND THE SAME ACCRUED AS A RESULT O F PENDING LITIGATION BETWEEN THE ASSESSEE AND THE PURCHASER O F THE PROPERTY. THEREFORE, THE RECEIPT OF INTEREST BY THE ASSESSEE FULLY TAKES THE 13 CHARACTER OF INCOME WHICH IS CHARGEABLE TO TAX. TH EREFORE, THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT I T SHOULD BE TAXED @20% BEING IN THE NATURE OF CAPITAL GAIN IS NOT SUS TAINABLE. 9.2 SO FAR AS THE ARGUMENT OF THE LD. COUNSEL FOR T HE ASSESSEE THAT THE INTEREST DID NOT ACCRUE TO THE ASSESSEE SI NCE THE DEPARTMENT HAS FILED AN SLP BEFORE THE HONBLE SUPREME COURT, WE FIND THE SAME ALSO DOES NOT FIND MUCH FORCE. WE FIND THE PA YMENT OF INTEREST TO THE ASSESSEE WAS SUBJECT TO THE SETTLEM ENT OF PENDING LITIGATION WHICH GOT SETTLED BY THE ORDER OF THE HI GH COURT AFTER A CONSENSUS WAS REACHED AMONG THE PARTIES WHICH ALSO INCLUDED THE ASSESSEE. THE COMPENSATION FOR THE CAPITAL ASSET A PPEARS TO HAVE NOT BEEN DISPUTED BY THE ASSESSEE. FURTHER, THE AC CRUAL OF INTEREST WAS PURELY ON ACCOUNT OF THE FDR. THE ISSUE OF COM PENSATION WAS NEVER ADJUDICATED BY THE GUJARAT HIGH COURT ON MERI TS BECAUSE OF THE CONSENSUS REACHED BETWEEN THE PARTIES. THE VAR IOUS DECISIONS RELIED ON BY LD. COUNSEL FOR THE ASSESSEE ARE DISTI NGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. T HEREFORE, THE SECOND LIMB OF ARGUMENT THAT INTEREST DID NOT ACCRU E TO THE ASSESSEE IS WITHOUT ANY MERIT. THEREFORE, THE SAID ARGUMENT BEING DEVOID OF ANY MERIT IS DISMISSED. 9.3 NOW COMING TO THE TAXABILITY OF THE INTEREST IN COME ON ACCRUAL BASIS, WE FIND SOME FORCE IN IT. ADMITTEDL Y, THE INTEREST SO RECEIVED WAS ON ACCOUNT OF ACCRUAL OF INTEREST ON T HE FDR FOR THE PERIOD FROM 30-10-96 TILL IT WAS ENCASHED DURING TH E RELEVANT ASSESSMENT YEAR. THE F.D. WAS GETTING RENEWED FROM TIME TO TIME. 14 THE INTEREST SO RECEIVED IS NOT ON ACCOUNT OF COMPE NSATION FOR DELAYED PAYMENT. THEREFORE, WE ARE OF THE CONSIDER ED OPINION THAT INTEREST RELATABLE TO THIS ASSESSMENT YEAR SHOULD B E BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE FOR THE IMPUGNED ASSES SMENT YEAR. THE ASSESSING OFFICER, HOWEVER, MAY TAKE RECOURSE TO TH E PROVISIONS OF SECTION 150 FOR BRINGING TO TAX THE REMAINING INTER EST IN THE RESPECTIVE ASSESSMENT YEARS AS PER PROVISIONS OF IN COME TAX ACT AND AS PER LAW. WE HOLD AND DIRECT ACCORDINGLY. G ROUNDS OF APPEAL 3 TO 5 ARE ACCORDINGLY PARTLY ALLOWED. 10. GROUND OF APPEAL NO.6 RELATES TO CHARGING OF IN TEREST U/S.234B, WHICH IN OUR OPINION IS MANDATORY AND CON SEQUENTIAL. THE SAME IS ACCORDINGLY DISMISSED. 11. GROUND OF APPEAL NO.7 BEING GENERAL IN NATURE I S DISMISSED. 12. SO FAR AS THE GROUND RAISED BY THE REVENUE CHAL LENGING THE ORDER OF THE CIT(A) IN HOLDING THAT THE TRANSFER TO OK PLACE DURING F.Y. 2004-05 RELEVANT TO A.Y. 2005-06 AND NOT A.Y. 1996-97 WHEN THE TRANSFER OF THE PROPERTY ACTUALLY TOOK PLACE AN D FURTHER HOLDING THAT THE ASSESSEE HAD RIGHTLY TAKEN THE INDEXED COS T AS F.Y. 2004-05 AS AGAINST F.Y. 1995-96 TAKEN BY THE ASSESSING OFFI CER, WE FIND THE LD.CIT(A) WHILE DECIDING THE ISSUE HAS OBSERVED AS UNDER : 4. THE APPELLANT IN GROUND OF APPEAL NO. 3 HAS RAISE D THE ISSUE OF COMPUTATION OF THE CAPITAL GAINS AND TO ADOPT THE CORRECT INDEXED COST AS ADOPTED BY THE APPELLANT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE APPROP RIATE AUTHORITY ACQUIRED THE PROPERTY AT: J.M. ROAD IN F. Y. 1995-96 FOR WHICH THE APPELLANT HAD RECEIVED ADVANCE OF RS. 62,5 0,000/- AND THE BALANCE AMOUNT OF RS. 57,50,000/- IN F.Y. 2004-0 5 AFTER THE ORDER OF THE HIGH COURT AND ALSO NOTED THAT THE CAPI TAL GAIN WAS NOT 15 SHOWN DURING A.Y. 1996-97 DUE TO MATTER BEING PENDIN G IN THE COURT. THE ASSESSING OFFICER ALSO NOTED THAT THE APPELLA NT WORKED OUT THE CAPITAL GAIN AFTER TAKING THE INDEXED COST O F 480 APPLICABLE TO FY 2004-05. THE ASSESSING OFFICER FURTHER NOTED THA T THE TRANSFER OF CAPITAL ASSET TOOK PLACE IN THE YEAR 1995-96 WHEN THE POSSESSION WAS TAKEN BY APPROPRIATE AUTHORITY AND, THEREFORE, T HE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD WRONGLY CONSIDERED T HE INDEXED COST OF ACQUISITION FOR THE YEAR 2005-06 WHEREAS THE I NDEXED COST OF ACQUISITION FOR 1995-96 OUGHT TO HAVE TAKEN AND THUS REJECTED THE COMPUTATION OF CAPITAL GAIN WORKED OUT BY THE APPEL LANT AND ADOPTED THE INDEXED COST AS OF 1995-96 AND THE DIFFER ENCE OF RS.23,38,250/- WAS ADDED TO THE TOTAL OF EARNING ON A CCOUNT OF LONG TERM CAPITAL GAINS, 4.1 THE FACT BROUGHT ON RECORD AND THE DECISION OF T HE GUJARAT HIGH COURT IN THE DECISIONS IN THE APPELLANT'S OWN CASE INDICATES THAT THE POSSESSION OF THE SAID PROPERTY PASSED ONTO THE APPROPRIATE AUTHORITY ONLY IN THE YEAR 2004 AS PER T HE DIRECTIONS OF HON'BLE GUJARAT HIGH COURT. THE APPROPRIATE AUTHORI TY, THOUGH HAD ORDERED PURCHASE OF PROPERTY ON 13.09.1996 WHICH WAS CHALLENGED BY THE PURCHASERS SHRI DHARIWAL & OTHERS AND BY THE VENDORS I.E. THE APPELLANT ALONG WITH OTHERS AND DURING THE PENDE NCY OF THE PETITION IN THE COURT THE PURCHASE PRICE OF RS. 2.40 CRORES RECEIVED FROM THE CENTRAL GOVT. WAS DEPOSITED IN THE BANK AS A FOR AS PER COURT'S ORDER AND WHICH WAS RENEWED PERIODICALLY TILL THE DECISION OF THE GUJARAT HIGH COURT ON 12-4-2004. IT WAS BY T HIS ORDER OF THE HIGH COURT THAT THE POSSESSION OF THE PROPERTY WAS PASSED ON TO THE APPROPRIATE AUTHORITY BY THE APPELLANT AND THE REMA INING AMOUNT OF THE PURCHASE PRICE WAS ALSO PAID AND ALSO THE ACCRUE D INTEREST OF RS. 73,53,513/- ON THE FDR WAS HANDED OVER TO THE APP ELLANT BY A SEPARATE ORDER BY THE HIGH COURT, DATED 22.12.2004. THUS THE APPELLANT HAD RIGHTLY TAKEN THE INDEXED COST AS OF 20 04-05 AS AGAINST F.Y. 1995-96 AS THE TRANSFER OF PROPERTY TOOK PLACE ONLY DURING F.Y. 2004-05 RELEVANT TO A.Y. 2005-06 AS AGAI NST A.Y. 1995- 96 TAKEN BY THE A.O. THE APPELLANT HAS THUS RIGHTLY OFFERED THE CAPITAL GAINS IN THE RETURN OF INCOME FOR A.Y. 2005- 06. 13. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT P OINT OUT ANY MISTAKE IN THE ORDER OF THE LD.CIT(A) NOR DISTINGUI SHED THE FACTS BROUGHT OUT ON RECORD BY THE LD.CIT(A). HE COULD N OT CONTROVERT THE FACTUAL FINDINGS GIVEN BY THE LD.CIT(A) ON THIS ISSUE. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE CI T(A) HOLDING THAT THE TRANSFER OF THE PROPERTY TOOK PLACE DURING F.Y. 2004-05 RELEVANT TO A.Y. 2005-06 AND THAT THE ASSESSEE HAS CORRECTLY TAKEN THE INDEXED COST AS F.Y. 2004-05. THE GROUNDS RAISED B Y THE REVENUE ARE ACCORDINGLY DISMISSED. 16 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31-10-2014. SD/- SD/- (SUSHMA CHOWLA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE DATED: 31 ST OCTOBER, 2014 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. THE CIT(A)-II, PUNE 4. THE CIT-II, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE