Punjab-Haryana High Court
Commissioner Of Income-Tax vs Dr. M.R. Sapra on 27 January, 2005
Equivalent citations: (2005)197CTR(P&H)207, [2005]276ITR41(P&H)
Author: Ajay Kumar Mittal
Bench: Ajay Kumar Mittal
JUDGMENT Ajay Kumar Mittal, J.
1. This appeal under Section 260A of the Income-tax Act, 1961 (for short "the 1961 Act"), filed at the behest of the Revenue, raises the following substantial question of law :
"Whether, on the facts and in the circumstances of the case, the honourable Income-tax Appellate Tribunal has erred in law in confirming the deletion of the impugned addition of Rs. 10,79,858 on account of interest income accrued on FDRs of the assessee even when the said interest income was free from all encumbrances and was liable to be taxed as per the provisions of the Income-tax Act, 1961 ?"
2. The assessee-respondent is a surgeon who filed his return for the assessment year 1994-95 declaring an income of Rs. 4,41,116 on January 25, 1995. The income of the assessee included the income of his minor son of Rs. 1,02,641 and agricultural income of his minor son of Rs. 1,89,000 from a private trust. The assessment in the case was completed under Section 143(3) of the 1961 Act on March 26, 1997, at an income of Rs. 21,02,940 which included Rs. 10,79,858 on account of interest accrued on fixed deposit receipts deposited in the State Bank of India, Hisar.
3. The assessee feeling aggrieved, preferred an appeal before the Commissioner of Income-tax (Appeals), Rohtak, who deleted the addition of Rs. 10,79,858 vide order dated July 1, 1998, holding that when the principal amount is itself in dispute the interest thereon cannot be free from encumbrances. The Income-tax Appellate Tribunal, Delhi Bench-F, New Delhi, dismissed the appeal of the Revenue. It is this amount of Rs. 10,79,858 which is under dispute in this appeal.
4. The brief facts for adjudicating the controversy involved in this appeal are that the land of the assessee measuring 7229.25 square yards (11 kanals 19 marlas) was acquired by the Government of Haryana vide its Gazette Notification under Section 4 of the Land Acquisition Act, 1894 (for short "1894 Act"), dated May 15, 1979, and the award was announced on June 11, 1981. The details of the amount paid by the Land Acquisition Collector as per certificate dated March 20, 1996, are as under :
Total amount Amount of TDS Balance amount paid Date of (Rs.) (Rs.) (Rs.) challan of TDS 82,09,548 5,44,531 76,65,016 27-7-1992 14,63,192 1,26,128 13,37,064 28-10-1993 19,56,665.75 1,40,661 18,16,004 23-2-1994 3,27,045 36,629 2,90,416 7-9-1994
5. The assessee deposited the amount of Rs. 76,65,016 received as fixed deposit receipts in the State Bank of India, Main Bazar, Hisar, on July 30, 1992, on which interest was earned by him which was added to the fixed deposit receipts. The details of fixed deposit receipts made and interest earned thereon are as under :
Sr. Date of FDR FDR Interest Interest Amount
No. FDR No. amount period (Rs)
(i) 30-7-92 333574/112 76,65,016 (recd. 1-4-1993 to 9,77,384
renewed on in FY 1992-93) 31-3-1994
30-7-93
(ii) 30-7-1993 618828 996452 (Inst. on 30-7-1993 to 31,695
above FDR 31-3-1994
333574/112 recd.
on 30-7-1993
which was
deposited as
FDR)
(iii) 30-10-1993 622038 2,49,113 1-11-1993 to 10,442
31-3-1994
(iv) 12-11-1993 621591 13,37,064 12-11-1993 to 56,174
31-3-1994
(v) 30-1-1994 622631/58 2,49,113 1-2-1994 to 4,163
31-3-1994
10,79,858
6. The sum of Rs. 10,79,858 had accrued as interest on the fixed deposit receipts in the State Bank of India, Hisar, during the previous year relevant to the assessment year 1994-95 the addition of which is the subject-matter of challenge in this appeal.
7. Shri Rajesh Bindal, learned counsel appearing for the Revenue, submitted that the interest of Rs. 10,79,858 had accrued to the assessee and this amount was free from encumbrances. The bank had also not provided any guarantee to the extent of interest accrued and there is no liability on the bank to deposit this amount in case the appeal of the State goes against the assessee. Counsel further contended that if this amount is not brought to tax in this year itself, then the chargeability may become barred by limitation. He submitted that the apex court decision in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 is not applicable as that was a case where the acquisition itself was under challenge but in the present case, the quantum of compensation is only under challenge.
8. Shri Akshay Bhan, learned counsel appearing for the assessee, on the other hand, submitted that the absolute ownership of the principal amount of the fixed deposit receipts itself is in dispute and, therefore, the interest received/receivable from the bank on these fixed deposit receipts cannot be treated as free from encumbrances and included in the total income. He further submitted that in case the assessee is required to return the enhanced compensation then he would also be liable to return the same along with interest thereon and, therefore, till the case is finalised, it cannot be treated as income. His further submission was that in view of the apex court decision in Hindustan Housing and Land Development Trust's case [1986] 161 ITR 524, the income could not be said to have accrued or arisen to the assessee till the right to receive the same had become final. Counsel also relied on the decision of the Gujarat High Court in CIT v. Bavla Gopalak Vividh Karyakarisahakari Mandli Ltd. [2002] 253 ITR 97 to buttress his submission.
9. We have considered the respective submissions of learned counsel for the parties and have carefully examined the same.
10. The judgment of the honourable Supreme Court in Hindustan Housing and Land Development Trust Ltd.'s case [1986] 161 ITR 524 has no application in the present case. That was a case where certain land belonging to the assessee was requisitioned and compulsorily acquired by the State. The arbitrator awarded the compensation for the period of requisition. Thereupon, the State Government preferred an appeal in the High Court. During the pendency of the appeal, the State Government deposited the amount on account of additional compensation payable under the award which the assessee was allowed to withdraw on furnishing of surety bond for refunding the amount on appeal being allowed. It was on those facts that when the matter came up before the apex court, it was held that since there was no absolute right to withdraw the amount and the entire amount was in dispute in appeal filed by the State Government, therefore, no income accrued to the assessee. The court, however, drew the distinction between cases where the right to receive payment was in dispute and also between the cases where only the quantification was in dispute.
11. The case before the Gujarat High Court in Bavla Gopalak Vividh Karyakarisahakari Mandli Ltd.'s case [2002] 253 ITR 97 related to a matter where the grant of subsidy itself was in dispute in the pending appeal. It was thereupon held that it did not form part of the income. That case fell within the ratio laid down by the apex court in Hindustan Housing's case [1986] 161 ITR 524.
12. The aforesaid judgments are not applicable to the facts of the present case. The interest amounting to Rs. 10,79,858 on the FDRs has already accrued and there was no lien or encumbrance created on this amount of interest. Moreover, the bank in the present case has also not provided any guarantee to the extent of interest accrued and thus there is no liability on the bank to deposit this amount in case the appeal of the State goes against the assessee.
13. In view of the above, the appeal is allowed and the substantial question of law is answered in the affirmative and it is held that the Tribunal had erred in law in confirming the deletion of the impugned addition of Rs. 10,79,858 on account of interest income accrued on the FDRs of the assessee.
14. There shall be no order as to costs.