Income Tax Appellate Tribunal - Ahmedabad
Vikrambhai Somabhai Patel, Ahmedabad vs Assessee on 6 May, 2014
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ 'सी
सी',
सी , अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" C " BENCH, AHMEDABAD
सम¢ ौी एन.एस.सैनी, लेखा सदःय एवं ौी कुल भारत, Ûयाियक सदःय ।
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER And
SHRI KUL BHARAT, JUDICIAL MEMBER
आयकर अपील सं./I.T.A. No.62/Ahd/2011
( िनधा[रण वष[ / Assessment Year : 2007-08)
Vikrambhai Somabhai बनाम/ The ITO
Patel Vs. Ward-2(3)
C/o. S L Patel & Co. Ahmedabad
Nr.Bank of Baroda
Delhi Chakla
Ahmedabad
ःथायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AEUPP 6088 H
(अपीलाथȸ /Appellant) .. (ू×यथȸ / Respondent)
अपीलाथȸ ओर से / Appellant by : Ms.Urvashi Shodhan,AR
ू×यथȸ कȧ ओर से/Respondent by : Shri Nimesh Yadav, Sr.DR
सुनवाई कȧ तारȣख / Date of Hearing : 06/05/2014
घोषणा कȧ तारȣख /Date of Pronouncement : 23/05/2014
आदे श / O R D E R
PER SHRI KUL BHARAT, JUDICIAL MEMBER :
This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XVI, Ahmedabad ('CIT(A)' for short) dated 22/10/2010 pertaining to Assessment Year (AY) 2007-
08. The Assessee has raised the following grounds of appeal:-
1. The appellant submits that that in view of the decision of the Hon'ble Supreme Court in CIT V/s Ghanshyam HUF (315 ITR 1) the interest awarded ought to have been held to be not taxable at all being merely integral part of compensation to the compulsory acquisition of land.ITA No.62/Ahd/2011
Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -2-
2. The Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.22,93,378 on account of interest awarded on enhanced compensation on acquisition of agricultural land.
3. The Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.22,93,378 in the year of appeal by following the decision of Apex Court in CIT Vs Ghanshyam HUF (315 ITR 1) which is not applicable to the facts of the case of the appellant. The CIT(A) also erred in not following the various decisions of the Supreme Court cited by the appellant claiming the spread over of the interest awarded. It be so held now and the addition made the returned income be deleted.
4. Levy of interest u/s.234B of the Act is not justified.
5. Initiation of penalty u/s.271(1)(c) of the Act is not justified.
The appellant craves to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.
2. Briefly stated facts are that the assessee had filed return of income declaring total income of Rs.39,700/- and subsequently, revised return was filed declaring income of Rs.59,934/-. The case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 29/12/2009, thereby the Assessing Officer(AO) made addition of Rs.22,93,378/- being the interest income received on additional compensation. Against this, the assessee filed an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee had submitted that the interest can be taxed on accrual basis and requested for spread over of interest. The ld.CIT(A) after considering the submissions, dismissed the assessee's appeal. Now, the assessee is in further appeal before us and has raised a ground that the interest awarded ought to have ITA No.62/Ahd/2011 Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -3- been held to be not taxable at all being merely integral part of compensation to the compulsory acquisition of land.
3. Ground Nos.1, 2 & 3 are inter-connected, therefore these grounds are decided together for the sake of convenience. At the outset, the ld.counsel for the assessee submitted that the authorities below have misinterpreted the judgement of Hon'ble Apex Court rendered in the case of CIT vs. Ghanshyam HUF reported at (2009)315 ITR 01 (SC). The ld.counsel for the assessee submitted that as per the decision of Hon'ble Supreme Court, the interest awarded on enhanced compensation is an integral part of the compensation to the compulsory acquisition of the land. The ld.counsel for the assessee submitted that the land being agricultural land, therefore such amount is not taxable.
4. On the contrary, the ld.Sr.DR supported the orders of the authorities below.
5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. During the course of hearing, a query was raised to the ld.counsel for the assessee that before the AO as well as the ld.CIT(A) the assessee had not denied the taxability of the interest and not claimed the amount as exempt u/s.10(37) of the Act. On the contrary, the prayer of the assessee was for taxing the amount on accrual basis and spread over of interest. In response to this query, the assessee has submitted a written note, which is reproduced hereinbelow:-
ITA No.62/Ahd/2011Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -4- "Brief Note Original return of income was filed on 16/08/2007 declaring total income of Rs. 39,700/-.
Revised return of income was filed on 31/03/2008 showing total income of Rs. 59, 934/-.
The appellant claimed exemption of Rs.14,57,444/- (principal amount) received as additional compensation on compulsory acquisition of agricultural land from Long Term Capital Gains Tax u/s 10 (37) of the Act in the revised return.
It was further submitted that interest of Rs.22,93,378/- on enhanced compensation for agricultural land compulsorily acquired under Land Acquisition Act be taxed on accrual basis as having accrued year after year and not on lumpsum basis in the year in which received.
Assessing Officer accepted principal amount as exempt from tax u/s 10(37) as claimed.
But taxed interest of Rs.22,93,378/- on receipt basis applying judgment of Hon'ble Supreme Court in case of CIT vs Ghanshyam (HUF) 315 ITR 1.
Ld. CIT (A) confirmed order of AO rejecting plea of the appellant to tax on accrual basis.
The appellant Form # 36 before Hon'ble ITAT raised following grounds -
1. The appellant submits that in view of the decision of the Hon'ble Supreme Court in CIT V/s Ghanshyam HUF (315 ITR 1) the interest awarded ought to have been held to be not taxable at all being merely integral part of compensation to the compulsory acquisition of land.
2. The Ld. CIT (A) erred in law and on facts in confirming the addition of Rs.22,93,378 on account of interest awarded on enhanced compensation of agricultural land.
3. The Ld. CIT (A) erred in law and on facts in confirming the addition of Rs.22,93,378 in the year of appeal by following the decision of Apex Court in CIT Vs Ghanshyam HUF (315 ITR 1) which is not applicable to the facts of the case of the case. The CIT (A) also erred in not following the various decisions of the Supreme Court cited by the appellant claiming the spread over of the interest awarded. It be so held now and addition made to the returned income be deleted.
4. Levy of interest u/s 234B is not justified.
5. Initiation of penalty u/s 271(l)(c) of the Act is not justified.ITA No.62/Ahd/2011
Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -5- Hon'ble Bench has raised a query that when the appellant never raised the claim that interest income being integral part of additional compensation on agricultural land compulsorily acquired would also be exempt since principal amount is exempt u/s 10 (37) of the Act before the lower authorities it would be appropriate to set aside the issue to the file of Id. CIT (A).
It is respectfully submitted that though the appellant claimed spread over of interest income before the lower authorities, vide ground # 1 (supra) before Hon'ble ITAT, the appellant specifically claimed that interest awarded being integral part of compensation received ought to be held as not taxable in judgment of CIT vs Ghanshyam HUF(315 ITR 1).
It is further submitted that even if it is held that challenge to the taxability of interest is a 'new ground' raised for the first time before the Hon'ble ITAT it is submitted that the same is a pure question of law which can be decided by the Hon'ble Tribunal on the basis of facts on record. The same view is taken by the Hon'ble Gujarat High Court recently in Tax appeal No. 2562 of 2009 and others vide order dated 02/04/2014 (Copy enclosed: please see page no. 30 & 31 in Para 40 & 41 reproduced below) "40. Therefore, any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine, such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claim of the assessees for deductions under section 80IB and 80HHC of the Act.
41. In the decisions that we have noted above, the Courts have considered such questions when a legal contention or a claim was based on material already on record but raised at an appellate stage. On such premise we wholeheartedly agree that the appellate authority and the Tribunal would have the power to entertain any such new ground, legal contention or claim. However, it is only the Bombay High Court in the case of Commissioner of Income-tax or Pruthvi Brokers and Shareholders P. Ltd. (supra), which has traveled a little beyond this proposition and come to the conclusion that even if facts necessary to examine such a claim are not placed on before the assessing officer and, therefore, not on record, there would be no impediment in the Commissioner (Appeals) entertaining such a claim. Such an issue does not arise in these appeals. We would, therefore, reserve our opinion on this limited aspect of the matter if and when in future the question presents before us in such form. For the present, we answer Questions (3) and (4) against the Revenue and in favour of the assessees in manner described above."
ITA No.62/Ahd/2011Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -6- With respect to the appellant claiming spread over of interest by mistake, ignorance of law or inadvertence included in his income any amount that is exempt from tax then it is permissible to bring it to the notice of the authorities to grant appropriate relief. The appellant for this proposition relies on the judgment of the Hon'ble Supreme Court in the case of CIT vs. Shelly Products and others (261 ITR 367) where Hon'ble Supreme Court observed that if an assessee by mistake or inadvertence or on account of ignorance included in his income any amount which is exempt from payment of income tax or is not income within the contemplation of law, he can likewise bring this to the notice of the Assessing Officer who, if satisfied, may grant him relief and refund the tax paid in excess, if any. Such matters can be brought to the notice of the concerned authority in case when refund is due and payable and the authority concerned on being satisfied shall grant appropriate relief.
The ratio of the judgment in Shelly Products (supra) is applied in TTA # 3403/Abd/1997 by the Hon'ble ITAT on page 23 Para 50 holding(Copy enclosed)-
"50. In the instant case, we find that assessment was not quashed by the Ld. CIT (A) and further the decision on merits of the issue of Ld. CIT (A) wherever the Department has any grievance was agitated in appeal and the same have been decided on merits. We are of the considered view that the income of the assessee is to be computed as per provisions of the law and simply because an assessee has suffered more amount on tax than what is legally due, then the Department can not assess the income at a higher figure but should assess the income at correct amount as per the provisions of law. We, therefore, do not find arty merit in this ground of appeal of the Revenue and hence, the same is dismissed. "
It is respectfully submitted that interest received on enhanced compensation being integral part of the compensation is not exigible lo tax since compensation itself is exempt from Long Term Capital Gains u/s 10(37) of the Act. It be so held now."
5.1. The ld.counsel for the assessee placed reliance on the judgement of the Hon'ble Jurisdictional High Court rendered in the case of Commissioner of Income Tax s. Mitesh Impex in Tax Appeal No.2562 of 2009 & others, order dated 02/04/2014, wherein the Hon'ble High Court vide para Nos.40 & 41 has held as under:-
"40. Therefore, any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine, such ground, contention or claim are already on record. In such a case the situation would be akin to allowing a pure question of law to be raised at any stage of the proceedings. This is ITA No.62/Ahd/2011 Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -7- precisely what has happened in the present case. The Appellate Commissioner and the Tribunal did not need to nor did they travel beyond the materials already on record, in order to examine the claim of the assessees for deductions under section 80IB and 80HHC of the Act.
41. In the decisions that we have noted above, the Courts have considered such questions when a legal contention or a claim was based on material already on record but raised at an appellate stage. On such premise we wholeheartedly agree that the appellate authority and the Tribunal would have the power to entertain any such new ground, legal contention or claim. However, it is only the Bombay High Court in the case of Commissioner of Income-tax or Pruthvi Brokers and Shareholders P. Ltd. (supra), which has traveled a little beyond this proposition and come to the conclusion that even if facts necessary to examine such a claim are not placed on before the assessing officer and, therefore, not on record, there would be no impediment in the Commissioner (Appeals) entertaining such a claim. Such an issue does not arise in these appeals. We would, therefore, reserve our opinion on this limited aspect of the matter if and when in future the question presents before us in such form. For the present, we answer Questions (3) and (4) against the Revenue and in favour of the assessees in manner described above."
5.2. In view of this binding precedent of the Hon'ble Jurisdictional High Court, the claim raised by the assessee is admitted for adjudication. The Hon'ble Apex Court in the case of CIT vs. Ghanshyam (HUF) (supra) has held as under:-
"33. It is to answer the above questions that we have analysed he provisions of sections 23, 23(1A), 23(2), 28 and 34 of the 1894 Act. As discussed hereinabove, section 23(1A) provides for additional amount. It takes care of increase in the value at the rate of 12 per cent per annum. Similarly, under section 23(2) of the 1894 Act, there is a provision for solatium which also represents part of enhanced compensation. Similarly, section 28 empowers the Court in its discretion to award interest on the excess amount of compensation over and above what is awarded by the Collector. It includes additional amount under section 23(1A) and solatium under section 23(2) of the said Act. Section 28 of the 1894 Act applies only in respect of the excess amount determined by the Court after reference under section 18 of the 1894 Act. It depends upon the claim, unlike interest under section 34 which depends o ITA No.62/Ahd/2011 Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -8- undue delay in making the award. It is true that "interest" is not compensation. It is equally true that section 45(5) of the 1961 Act, refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act, which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under section 28 unlike interest under section 34 is an accretion to the value, hence it is a part of enhanced 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 reinforced by the newly inserted clause (c) in section 45(5) by the Finance Act, 2003 with effect from 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 capital asset is computed by taking the -
- compensation or consideration referred to in clause (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."
5.3. During the course of hearing, ld.counsel for the assessee has drawn our attention towards page Nos.11 to 19, wherein the order of the ld.Civil Judge (S.D.) at Gandhinagar passed in Land Acquisition Reference Nos.839/98 to 841/98, 311/98 & 332/98 to 336/98, dated 16/02/2005 is enclosed. The ld.Court has decided the claim of enhanced compensation as under:
"ORDER The present Land Acquisition Reference Cases are hereby partly allowed.ITA No.62/Ahd/2011
Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08 -9- The opponents are directed to pay total additional Rs.178/- per Sq.Mtr. [Rupees one hundred seventy eight only] [Rs.210/- minus Rs.32 = Rs.178/-] to the applicants of all the respective cases.
The applicants are also entitled to get 30% amount under the head of Solatium and also entitled to get 9% interest for the first year and thereafter at the rate of 15% for the second year upto depositing of the awarded amount. The applicants are also entitled to get amount at 12% increase from the date of publication of the notification U/s.4 i.e. 13.08.1992 to the date of award i.e. 10.04.1995 passed by the Land Acquisition Officer as provided U/s.23(1)(A) of the Act.
Parties to bear cost of the revenue of their own.
The applicants are directed to pay the deficit court-fee if necessary.
Copy of this order be kept in each Land Reference Cases. Award be drawn accordingly.
Signed and pronounced in open Court on this 16th day of February, 2005 at Gandhinagar."
5.4. As per the aforesaid order of the ld.Court, the assessee is entitled to get 30% amount under the head of "Solatium" and also entitled to get 9% interest for the first year and thereafter at the rate of 15% for the second year upto depositing of the awarded amount. The ld.Court has also ordered for 12% increase from the date of publication of the notification u/s.4 i.e. 13.08.1992 to the date of award i.e. 10.04.1995 passed by the Land Acquisition Officer as provided U/s.23(1)(A) of the Act. As per the contention of the ld.counsel for the assessee, all these amounts form part of the compensation in the view of the judgement of Hon'ble Supreme Court in the case of CIT vs. Ghanshyam (HUF)[supra]. It is also submitted that since the case is transfer of agricultural land, ITA No.62/Ahd/2011 Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08
- 10 -
therefore, this amount is exempt u/s.10(37) of the Act and for the sake of clarity section 10(37) is reproduced hereunder:-
Section 10(37):- in the case of an assessee, being an individual or a Hindu undivided family, any income chargeable under the head "Capital gains"
arising from the transfer of agricultural land, where--
(i) such land is situate in any area referred to in item (a) or item (b) of sub-
clause (iii) of clause (14) of section 2;
(ii) such land, during the period of two years immediately preceding the date of transfer, was being used for agricultural purposes by such Hindu undivided family or individual or a parent of his;
(iii) such transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which is determined or approved by the Central Government or the Reserve Bank of India;
(iv) such income has arisen from the compensation or consideration for such transfer received by such assessee on or after the 1st day of April, 2004.
Explanation : For the purposes of this clause, the expression "compensation or consideration" includes the compensation or consideration enhanced or further enhanced by any court, tribunal or other authority;]
6. In our considered view, the authorities below ought to have given a clear finding as to how this amount would become taxable if it is forming integral part of the compensation, when transfer is of the agricultural land. Since this claim was not made before the authorities below, but arising from the material available before the AO, requires fresh adjudication by the Assessing Officer. Therefore, the claim of the assessee is restored back to the file of AO for decision afresh. The AO is directed to decide the claim of the assessee in the light of judgement of Hon'ble Apex Court rendered in the case of CIT vs. Ghanshyam HUF (supra).
ITA No.62/Ahd/2011Vikrambhai Somabhai Patel vs. ITO Asst.Year - 2007-08
- 11 -
7. Ground No.4 is against levy of interest u/s.234B of the Act which is consequential in nature.
8. Ground No.5 is against initiation of penalty u/s.271(1)(c) of the Act which is premature in nature.
9. In the result, the appeal of the Assessee is allowed for statistical purposes.
Order pronounced in Court on the date mentioned hereinabove at caption page Sd/- Sd/-
(एन.एस.सैनी) (कुल भारत)
लेखा सदःय Ûयाियक सदःय
( N.S. SAINI ) ( KUL BHARAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 23/ 05/2014
टȣ.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS
आदे श कȧ ूितिलǒप अमेǒषत/Copy
षत of the Order forwarded to :
1. अपीलाथȸ / The Appellant
2. ू×यथȸ / The Respondent.
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ(अपील) / The CIT(A)-XVI, Ahmedabad
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाईल / Guard file.
आदे शानुसार/ BY ORDER, स×याǒपत ूित //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) उप/ आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 12.5.14 (dictation-pad 12 pages attached at the end of this File)
2. Date on which the typed draft is placed before the Dictating Member ......12.5.14
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which fair order placed before Other Member............
6. Date on which the fair order comes back to the Sr.P.S./P.S.......23.5.14
7. Date on which the file goes to the Bench Clerk.....................23.5.14
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................