CIT, PANCHKULA V. MOHAN SINGH CHANDAIL VPO. RAMGARH (PANCHKULA)

ITA/952/2008

AI Insights

The case involves an appeal by the Commissioner of Income-tax against the decision of the Income Tax Appellate Tribunal, which had dismissed the revenue's appeal regarding the taxability of interest on enhanced compensation received by the assessee, Shri Mohan Singh Chandail. The interest amounting to Rs.75,71,149 was received by the assessee following the acquisition of land, and the dispute centered on the year in which this interest should be taxed. The Tribunal had decided that this interest should not be assessed in the year of receipt but in the year when the matter is finally settled. The High Court, referencing a similar case, concluded that such interest is taxable in the year of receipt under the cash system of accountancy.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 739866 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 31-01-2011
• Assessment Year: misc
• Other Referred Cases: Allied Motors (P) Ltd. Vs. CIT, The Commissioner of Income Tax, Faridabad v. Bir Singh (HUF) Ballabgarh
• Laws Referred To: Income Tax Act, 1961, Section 260A, Section 45(5)(c), Section 155(16)
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: YOGESH PUTNEY
• Keywords: Cash system of accountancy; Enhanced compensation; Interest on compensation; Taxable year of receipt
• Section: 260A; 45(5)(c); 155(16)

Judgement Text

"ITA No. 952 of 2008 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 952 of 2008 Date of Decision: 31.1.2011 The Commissioner of Income-tax ....Appellant. Versus Shri Mohan Singh Chandail ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1. This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order dated 4.7.2008 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh, in ITA No. 316/Chandi/2008 for the assessment year 2003- 04, claiming following substantial questions of law:- “1. Whether on the basis and in the circumstances of the case, the Ld. ITAT was right in dismissing the appeal of Revenue on the grounds that the interest on enhancement compensation amounting to Rs.75,71,149/-, even when actually received by the assessee, shall not be assessed in the year under appeal i.e. year of its receipt, but will be assessed as ITA No. 952 of 2008 -2- and when the matter is finally settled? 2. Whether the Hon'ble ITAT was right in holding that provisions of sections 45(5)(c) & 155(16) are not applicable with retrospective effect for the A.Y. 2003- 04 contrary to the ratio laid down by the Hon'ble Supreme Court in 224 ITR 677 in Allied Motors (P) Ltd. Vs. CIT?” 2. Put shortly, the facts necessary for adjudication as narrated in the appeal are the assessee is an individual and filed return for the assessment year 2003-04 declaring an income of Rs.10,77,501/- on 31.3.2003. The Assessing Officer vide order dated 30.12.2005 completed the assessment at 86,48,650/- by adding Rs.75,71,149/- received by the assessee on account of interest on enhanced compensation on acquisition of land. Against the said order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 23.1.2008 allowed the appeal and deleted the addition of Rs.75,71,149/-. Against the order of the CIT(A), the revenue took the matter in appeal before the Tribunal and the Tribunal vide order dated 4.7.2008 dismissed the appeal. Hence, the present appeal by the revenue. 3. We have heard learned counsel for the appellant. 4. The point that arises in this appeal is whether the interest on enhanced compensation is taxable in the hands of the assessee in the year of receipt. 5. The similar issue came up for consideration before this Court in ITA No. 209 of 2004 (The Commissioner of Income Tax, ITA No. 952 of 2008 -3- Faridabad v. Bir Singh (HUF) Ballabgarh) decided on 27.10.2010, wherein it was concluded as under:- “(a) that 'income from Business or profession' and 'income from other sources' are ascertained on the basis of system of accountancy followed by the assessee; (b) where assessee is not maintaining books of accounts by adopting any specific method, it shall be treated to be cash system of accountancy; (c) the interest under Section 34 to be awarded by the Collector partakes the characters of compensation and is taxable in the year of receipt in view of Section 45(5)(b) of the Act; and (d) under cash system of accountancy, the element of interest awarded by the Court received on enhanced amount of compensation under Section 28 of the 1894 Act falls for taxation under Section 56 as 'income from other sources' in the year of receipt.” 6. In view of the above, question No.1 is answered in favour of the revenue. Question No.2 has been rendered academic. 7. The appeal stands disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE January 31, 2011 (ADARSH KUMAR GOEL) gbs JUDGE "