Income Tax Appellate Tribunal - Delhi
Vijay Kaushik vs Ito, Ward 38(4), New Delhi on 21 September, 2005
Equivalent citations: [2006]5SOT461(DELHI)
ORDER
N.K. Karhall, JM.
These are the appeals of the respective assessees filed against the common order dated 26-10-2004 passed by Commissioner (Appeals), New Delhi for assessment year 2001-02. The issue involved in all the three appeals are similar and the facts are also almost same with some difference in the case of the Hisar Vijay Laxmi Co-operative House Building Society Ltd. Shri Vibbore Kaushik is the legal heir of the late Shri Balraj Kaushik. Shri Vijay Kaushik is brother of Late Shri Balraj Kaushik. The Hisar Vijay Laxmi Co-operative House Building Ltd. is also controlled by the same family and Mrs. Vijay Laxmi, Secretary and wife of Shri Vijay Kaushik who himself is the Pradhan of the society. The land purchased by the society earlier belonging to Shri Vijay Kaushik and late Shri Balraj Kaushik. All these appeals have been represented by the same counsel Shri C.S. Aggarwal and these appeals argued simultaneously. Therefore, for the sake of convenience a consolidated order is passed.
2. The ground Nos. 1 to 9 being interlinked relate to order confirming the assessment wherein income of the assessee, Shri Vijay Kaushik has been computed at Rs. 74,32,404 as against income declared at Rs. 20,320. Similarlv the income has been assessed at higher figure in the case of other two assessees. Briefly stated facts are that the land located in the same place, village Dabra in Tahsil /District Hissar belonging to late Shri Balraj Kaushik and Vijay Kaushik and the Hisar Vijay Laxmi Co-operative House Building Society Ltd. were compulsorily acquired by the Haryana Urban Development Authority (HUDA) in the last quarter of 1993-94, Initial compensation was received on 16-3-1994 in assessment year 1994-95. The assessees contested the award and in September 1999 the Punjab & Haryana High Court enhanced compensation and granted solatium as well as interest. In accordance with this order the Land Acquisition Collector (LAC) made payments to all the three assessees during the period between 1-4-2000 to 31-3-2001, Taxes were also deducted on such payments. The details of payment made to the assessees by the LAC have been extracted at page 3 of the impugned order. In the case of Shri Vibhor Kaushik the return of income for assessment year 2001-02 was filed at Rs. 36,733 on 30-8-2001 and carry forward capital loss was claimed at Rs. 3,20,89,352 on the ground that when the original compensation was received in assessment year 1994-95 there was capital loss which had been carry forwarded because of which in assessment year 2001-02 also there was a capital loss. it was claimed that land acquired was 2312 Marla on which compensation received in assessment year 1994-95 was Rs. 59,89,287. The working of capital loss of Rs. 3,20,89,352 has been extracted in para 6A of the impugned order. The return for assessment year 1994-95 was claimed to have been filed on 31-3-1995, however, as per assessing officer the same was not available on record and the loss had never been determined.
3. In the case of Shri Vibhor Kaushik the return Of income of assessment year 2001-02 was filed on 31-8-2001 at Rs. 30,320 in which long-term capital loss for assessment year 1994-95 was adjusted against receipt of enhanced compensation of Rs. 70,74,280 during the year with the result that the long-term capital loss claimed during the assessment year 2000-01 was Rs. 1,01,13,270. The land acquired was 1,288 Marla. The calculation of long-term capital loss of Rs. 1,78,76,857 for assessment year 1994-95 has been extracted in para 6(b) of the impugned order. The return of income for assessment year 1994-95 was claimed to have been filed on 18-5-1995. The loss according to the assessing officer have never been determined in this case also.
4. In the case of Hisar Vijay Laxmi Co-operative House Building Ltd. the return of income for assessment year 2001-02 was filed at nilon 31-8-2001 in which the long-term capital loss of Rs. 96,62,065 was claimed on the ground that it was carried forward from assessment year 1994-95. The land acquired was four acres 2 canals & 6 Marlas. The calculation of long-term capital loss for assessment year 1994-95 has been extracted in para 6(3) of the impugned order. There was no evidence before the assessing officer that the return of income for assessment year 1994-95 was filed and in the letter dated 1-4-2003 to the assessing officer the Hisar Vijay Laxmi Co-operative House Building Society Ltd. stated that the return was filed in only with effect from 1999-2000. In the case of Hisar Vijay Laxmi Cooperative House Building Society Ltd. the land was purchased by them for Rs. 12,86,250 from late Shri Balraj Kaushik and Shri Vijay Kaushik for development of plots for residential purpose and the development work was also claimed to have started in the financial year 1991. These works were in the nature of building of roads, lanes, boundary walls and long of sewers, electricity and telephone line etc. The same land was acquired by HUDA for which the compensation had been given. The return for assessment year 1994-95 was never filed. Therefore, the question of determination of loss by the assessing officer.
5. In all the three cases, the assessing officer did not accept the claim of carry forward of loss from assessment year 1994-95 onwards for the reason that in the case of the Hisar Vijay Laxmi Co-operative House Building Ltd. no return for assessment year 1994-95 was filed and no claim of carry forward was ever made till that year. In the cases of Shri Vibhor Kaushik and Vijay Kaushik the return of income were filed late i.e., on 31-3-1995 and 18-5-1995 respectively as against due date on 30-6-1994. When the assessing officer informed to the three assessees during the course of assessment proceedings that carry forward of loss was not admissible, all the three of them changed the stand and claimed that the land acquired was agriculture land and it was situated out of municipal limit of Hissar city and, therefore, Lhe question of capital gain did not arise.
In the case of Shri Vibhor Kaushik the assessing officer mentioned at page 7 of the assessment order that instead of reply to the question as to why the claim of carry forward of capital loss should not be disallowed the, assessee tried to state that the land in question was not capital asset and therefore, there was no capital loss or capital gain. In order to support the claim that the land was situated outside the limits of the municipal of Hissar city the assessee submitted three certificates dated 8-5-2001 signed by the land officer Shri Rajiv Dutt of Municipal Council, Hissar stating that the said agriculture land acquired by HUDA in 1994 was 9 kms. away from the municipal limits of Hissar city at the time of acquisition. In the light of the fact that the assessees themselves had claimed the land to be capital assets and not an agricultural land and now they were changing the stand the assessing officer examined the certificates carefully and rejected the validity of the same on the following reasons :-
'(1) The appellants had themselves claimed carry forward of capital loss accepting that the land acquired was capital asset.
(2) The certificates dated 8-5-2001 from Sh. Ravi Dutt were available with the appellants before filing the return for assessment year 2001 -02 on 30/31-8-2001 but even then they did not claim the land to be an agricultural land.
(3) If the land was a capital asset on the date of filing of income-tax return, then there was no treed to obtain a certificate.
(4) There is no seal of the office of municipality of Hissar on the certificate and no dispatch No. is mentioned.
(5) Some fees are required to be paid for getting a certificate from the municipality but there is no evidence of payment of such fees.
(6) Sh. Ravi Dutt, the person who signed the certificate, had already retired way back in 2001.
6. The assessing officer wrote to the Tahsildar also asking him to verify the facts relating to nature of land acquired and asked him to send his reply by 26-3-2004. In the meantime the assessing officer alongwith Inspector visited the place on 18-3-2004 while in Hissar he visited the office of the Land Acquisition Collector, Municipal Council and Tehsil office. He also visited the site of bus depot of Hissar and made enquiry with Kanungo namely Shri Mahinder Singh working in the office of Collector of Hissar. He came to know that the land acquired was situated at a distance of 2 km. only from the municipal limit of Hissar city. In the case of Hisar Vijay Laxmi Co-operative House Building Society Ltd. the assessing officer obtained details of development charges of development of residential plots amounting to Rs. 82,49, 100. This information was furnished on 17-3-2000 saying that expenditure was incurred on development through engagement of petty contractors. On the basis of above mentioned facts the assessing officer concluded that land was capital asset and not agriculture land and the claim of carry forward of losses was not admissible. On the basis of this conclusion the assessing officer treated the enhanced compensation received in assessment year 2001-02 as long-term capital gain.
7. The learned Commissioner (Appeals) has observed that the representation of the assessee reiterated the stand taken by them before the assessing officer that the claim of carry forward of losses was made in assessment year 1994-95 in the case of Shri Vibhore Kaushik and Shri Vijay Kaushik. They also claimed carry forward of losses in the case of Hisar Vijay Laxmi Co-operative House Building Society Ltd. even though no return of income was filed. According to them in all the cases the land was agriculture land on the basis of certificate given by Shri Rajiv Dutt and the reply sent by the Deputy Tehsildar on 7-1-2004 to the assessing officer. The learned Commissioner (Appeals) has further mentioned that during the course of appeal proceedings they emphasized the third stand that the capital gain would not arise in this case the award of the additional /enhanced compensation had been challenged before the court and, therefore, the same is not chargeable to tax in view of the judgment of Supreme Court in CIT v. Hindustan Housing & Land Development Trust Ltd. ( 1986) 161 ITR 524 (SC) it was also argued in order to attract the provisions of section 45(5) the two conditions must be satisfied: (i) capital gain must arise from the transfer of asset by way of compulsory acquisition under any law (ii) and the compensation for such transfer is enhanced or further enhanced by Court,, Tribunal or other authority. In support of the stand that the matter was still under dispute a letter from the Advocate was filed. In respect of the report of the Income Tax Officer and Inspector on their visit to Hissar it was submitted that it did not contain the name of the person to whom the inspector met, the statement of Kanungo was recorded and no opportunity was given to counter the finding given in the report. The Commissioner (Appeals) obtained the comments of the assessing officer on the written submissions filed by these assessees. The learned Commissioner (Appeals) has dealt with all the three stands taken by the assessees namely, claim of carry forward of capital loss, nature of land and enhanced compensation being under dispute. As regards the claim of carry forward of capital loss he has mentioned that in the case of compulsory acquisition of asset, the provisions of section 45(5) are applicable. When initial compensation is received it is treated as sale consideration and accordingly capital gain is computed. It is chargeable to tax in the previous year in which such compensation or part thereof is first received. The cost of acquisition is reduced for the initial compensation. When the enhanced compensation is received it is taxable in the year of receipt and cost of acquisition of land and cost of improvement is taken as nil. The rules are applicable whenever compensation is enhanced by Court/ Tribunal/ authority. A loss cannot be carried forward unless it is determined in pursuance of return filed within the time allowed under section 139(3). In other words if an assessee fails to file the return of loss on or before the due date of furnishing return as prescribed by section 139(1) then by virtue of section 80 the short-term or long-term capital loss cannot be carried forward. The right to carry forward the capital loss will be lost if the return is not filed in time for the year in which the loss was incurred. In order to ensure that such right is not lost the loss should bo determined in pursuance of the return filed within the time-limit of section 139(1) and such loss should be notified by the assessing officer to the assessee by order in writing under section 157, section 80 is a clear mandate that it is only the loss determined in pursuance of a return filed under section 139(A) i.e., eligible for carry forward and set of. The learned Commissioner (Appeals) has concluded that the claim of carry forward of long-term capital loss at Rs. 3,20,89,352 is afterthought and for first time it was introduced in the assessment year 2001-02 by observing as under:-
'21. I have obtained photocopies of acknowledgement of returns filed in the case of Sh. Vibhore Kaushik and Sh. Vijay Kaushik from the appellants themselves. In the case of Sh. Vibhore Kaushik I notice that the acknowledgement of return for assessment year 1994-95 is not available. It has been claimed that it was filed but there is no evidence. The acknowledgement for the assessment year 1995-96 is available and I also notice that the column No. 4 of the return form ITS-2 relating to capital gains is shown at nil Similarly, column No. 7 of aggregate loss and column No. 8 relating to brought forward losses from earlier years are also blank. For the assessment years 1996-97 and 1997-98 he has given the first page of return form No. 2A and this also does not indicate brought forward capital loss has been mentioned. For the assessment year 1999-2000 also the position is same. He received enhanced compensation of Rs. 16,30,784 and Rs. 6,89,306 on the assessment years 1999-2000 and 2000-01 but even these were not shown and no loss was calculated taking these receipts into consideration. When the appellant failed to substantiate the claim of carry forward of capital loss which was not mentioned in the returns for these years, he brought to my notice copies of computation of income claimed to have been filed alongwith the returns. I do not give any credence to these computations because relevant columns in the return relating to capital gain, aggregate loss and brought forward losses have been shown either nil or have been left blank. Apart from this, the fact remains that in the first year of compensation received relating to the assessment year 1994-95, the return was not filed in time. No loss is allowable if the return is filed late and is not determined and communicated by the assessing officer in writing. Therefore, the claim of carry forward of long-term capital loss at Rs. 3,20,89,352 is an afterthought and for the first time it was introduced in the assessment year 2001-02. This conclusion will be further strengthened when I will discuss the rate adopted for arriving at the cost of land as on 1-4-1981 in the succeeding paragraphs.'
8. The learned Commissioner (Appeals) has further observed that while claiming capital loss the cost of acquisition of land as on 1-4-1981 in the case of Shri Vijav Kaushik and late Shri Balraj Kaushik has been taken by the assessee at the rate of Rs. 6,750 per marla i.e., 3.6 times higher than the purchase price in 1990 for Hissar. He has further mentioned that it is important to know that the land was in the same area adjacent to the land of Hisar Vijay Laxmi Co-operative House Building Society Ltd. and earlier building to the assessees themselves. In the case of acquisition in the year 1981 has been shown at Rs. 6,750 per marla whereas the actual cost after 10 years i.e., 1990 was Rs. 1,875 per marla. This is very strange and illegal and appears to have been done to arrive at a loss. In this regard the assessee explained that the land of Hisar Vijay Laxmi Co-operative House Building Society Ltd. was in a badly located site and the expenditure has to be incurred for improvement and development of land. He also submitted a certificate dated 8-5-2001 from Singla Property Dealer Ltd., Hissar stating that the market value of land (Khasra Nos. 245 and 261) and measuring about 1288 marla varies from Rs. 1,000 per marla, Rs. 12,500 per marla as on 1-4-1981. Average value of this land comes to Rs. 6,750 per marla. The learned Commissioner (Appeals) has observed that there is no evidenciary value of the certificate because this was never submitted earlier and only when this fact relating to inflated cost was pointed out the assessee-representative came out with the certificate. The learned Commissioner (Appeals) has further mentioned that strangely these certificates dated 8-5-2001 but even then it was never produced at any stage otherwise also property dealer in 2001 is not supposed to know the rate prevailing in the year 1981 and the rates were never ranged between Rs. 1,000 and Rs. 12,050. The best evidence for arriving at the rate is sale deed of land actually sold in the same area. In this case they have the sale price available of not only of land located in the area adjoining the land belonging to the same persons that also after 10 years after 1981. There can be no better evidence then this. If the rate as on 1-6-1990 was Rs. 1,875 per marla then 1-4-1981 it could not have been more than Rs. 1,000 per marla. At this rate there was capital in assessment year 1994-95 in the case of Vibhor Kaushik of Rs. 30,48,007. The working of the capital gains have been stated in para 25 Of the impugned order. The learned CIT(A) has further observed that this establishes that the cost as on 1-41981 was inflated beyond imagination to show capital loss, the carry forward of which is otherwise is not admissible. As regards the argument of the AR of the assessee that the land purchased by the Hisar Vijay Laxmi Co-operative House Building Society Ltd. was low lying area and as such development expenditures had to be incurred on filling of land is concerned the Commissioner (Appeals) has observed that there is no claim of expenditure on filling of land further there is no evidence of development expenditure having carried out at all as the expenses to the tune of Rs. 1 crore have been claimed to be in cash only to petty contractors. As regards the claim that the money for incurring these expenses came from 163 members of the society is concerned the learned Commissioner (Appeals) has found the same as not sustainable inasmuch as the entire Rs. 95,35,520 has been received in cash and the same has also been claimed to have been refunded to the members in cash. Thus, the claim of the development expenses was only for the purpose of inflating the cost of Rs. 999 and to arrive a capital loss.
9. As regards the claim of the assessee that it was agriculture land, the representative of the assessee submitted that the report of the assessing officer relating to his enquiry and visit to Hissar was not reliable because no statement of Kanungo was based on her say only. It was also claimed that no opportunity was given to the assessee to counter the statement. It was further submitted that there was no reason to reject the certificate issued by Shri Ravi Dutt. The assessees representative relied on the letter sent by the Deputy Tehsildar stating that at the time of acquisition the land was agriculture. The learned Commissioner (Appeals) in this regard has observed that the fact of land located within the territorial jurisdiction of municipality is one of the several factors in determining the nature of land. The most important factor is that it must be agriculture land at the time of acquisition as held in the case of TSMO Mohd. Othuman Sahib v. CIT (1957) 31 ITR 480 (Mad.). He has further mentioned that in cases of Rasiklal Chimanlal Nagori v. CWT (1965) 56 ITR 608 (Guj.) and CIT v. Siddharth J. Desai (1982)10 Taxman 1 (Guj.). Various factors relating to nature of land were identified. One of the most important common factor is that the agriculture operation must be on at the time of sale. In the light of this decision the acquired land of the assessee was analysed. He has observed that the most important indicator is land in the possession of Hisar Vijay Laxmi Co-operative House Building Society Ltd. It was purchased in 1990-91, i.e., three years before acquisition by HUDA. According to the assessee's claim only the development were started in 1991 to convert the land into residential plots. The land belonging to Shri Vijay Kaushik and Vibhor Kaushik is adjacent to House Building Society. The land of all the three assessees were acquired by the HUDA. In fact the land located in the same area and belonging to large number of persons was acquired together. There is no evidence of agriculture operation being carried out at the time of acquisition. The Commissioner (Appeals) has observed that Society had already developed residential plots and that was done three years before the date of acquisition. These factors prove beyond doubt that no agriculture operation was carried out and the land was ready for conversion into residential plots. In fact the purpose of acquisition of HUDA was this only and on the same land sectors 11-17 have been developed. The only conclusion, therefore, is that the land was not agriculture at the time of acquisition. He ' has further mentioned that the assessee also admitted the fact that there was a capital loss on the land acquired. If the land was agriculture the question of capital would not have arisen. As regards the report of assessing officer and certificate given by Shri Ravi Dutt and by Deputy Tehsildar the learned Commissioner (Appeals) has noticed that this is a fact that the assessing officer and Inspector visited the site and made enquiry local. The fact of their visits & enquiries done have never been disputed. There is no reason for them to state incorrect facts. On the contrary the certificate given by Ravi Dutt is perhaps after his retirement because this certificate is not available on the records of the municipality and the form of certificate is also usual and there is no letter number and dispatch number on the certificate. Thus, the learned Commissioner (Appeals) has held that land was agriculture land.
10. As regards the enhanced compensation whether the same is taxable in the year of receipt is concerned, the Commissioner (Appeals) has mentioned that according to the assessee's representative if the addition/ enhanced compensation has been challenged before the higher authorities, the same is not chargeable to tax in view of the judgment of the Supreme Court in the case of Hindustan Housing & Land Development Trust Ltd. (supra). Thus, he has observed that in the light of this argument it has to be seen whether enhanced compensation amount has accrued in this case. He has mentioned that the first award was given by the Additional District Judge, Hissar in 1994. After that it was enhanced in 1998. It was further enhanced in September, 1999 by the Punjab & Haryana High Court when it was settled that the interest @ 12 per cent per annum would also be paid on the enhanced amount of compensation and besides that statutory solatium (@ 30 per cent over and above the enhanced amount of compensation would be paid. It was also decided that the assessee will be entitled to interest @) 9 per cent per annum for a period of one year from the date of taking over of the possession and 15 per cent per annum on the expiry of the said period of one year till payment is made or deposited in court will be payable. The decision is, therefore, final as far as enhancement of compensation and payment of interest are concerned. There was no dispute in the assessment year 2000-01 and as per the order of the High Court the payment to the assessee was also made. The tax was also deducted on such payment. The house building society went to the extent of returning the amount to its members. So, the enhanced compensation was not only received, but it was used up also. He has further observed that the facts in the case and the case cited by the assessee are not at all similar. Thus, he has submitted that the provisions of section 45(5) are clearly attracted in this case. Thus, he has held that the land acquired in cases of all the three assessees was a capital asset. Therefore, the same is taxable in the assessment year 2001-02.
11. As regards the taxability of interest received on the compensation learned Commissioner (Appeals) has held that the court has awarded interest and whenever it is paid and details of payment of such interest are made available, the assessec will get benefit year after year spread over in the light of the judgment in the case of Smt. Ramabai v. CIT (1990) 181 ITR 400 (SC).
12. Before us learned Counsel for the assessee has submitted that during the year under consideration the assessee (Shri Vijay Kaushik) has received enhanced compensation of Rs. 70,74,280 from the assessing officer and the same was adjusted against the capital loss. The assessing officer, however, framed the assessment at an income of Rs. 74,32,404 by making an addition :-
(i) Interest received from assessing officer amounting to - Rs. 70,74,280
(ii) Interest on FDRS - Rs. 3,37,800
13. Thus, the total addition of Rs. 74,12,080 was made by the assessing officer. On appeal, the Commissioner (Appeals) has held that assessee have mainly received enhanced compensation and treated some part of interest amount as enhanced compensation thus giving part relief to the assessee. However, the appeal of the assessee was dismissed. Learned Counsel further submitted that the learned Commissioner (Appeals) failed to appreciate that the assessment has been framed on misconceived facts and law. He has argued that the learned Commissioner (Appeals) has failed to appreciate the fact that right to receive the additional/ enhanced compensation was a right which right has not been crystallized in the instant year and, as such, it could not be said that the income had accrued to the assessee. He has further submitted that the Commissioner (Appeals) has overlooked the fact that the Haryana Government as well as the assessee had filed an appeal before the Punjab & Haryana High Court against the order of the learned District Judge which is still pending. A reference in this regard has been made to pages 44-51 of paper book II. He has further argued that the learned Commissioner (Appeals) has failed to appreciate that the amount allowed be withdrawn against furnishing of bank guarantee could not be held to be of the nature of income. A reliance in this regard was made upon the decision in the cases of CIT v. Smt. Shan tavva (2004) 267 ITR 671 (Kar.), Harish Chandra v. CIT (1985) 154 ITR 478 (Delhi), Jahangir P. Wajifdar v. Income Tax Officer (2002)82 ITD 67 (Bom.).
14. Learned Counsel has also submitted that no capital could be said to have arisen as the land acquired by HUDA was not covered under the definition of 'capital asset'as defined in section 2(14) of the Income Tax Act. The said land was outside the municipal limits at the time of acquisition and being an agricultural land, the transfer of such land was exempted f rom capital gain. He has further argued that nature of the land at the time of acquisition has to be considered and not at the time when the assessment is being claimed. A reliance in this regard has been placed upon the decision of the Punjab & Haryana High Court in the case of A.R. Dahiya v. Asstt. CIT (2004) 269 ITR 542 (Punj & Har).
15. The learned Counsel further submitted that without prejudice to the above that there being a carry forward loss the same was required to be set off from the purported capital gain. fie has also argued that as a result of the enhancement of additional compensation, there had to be an element of interest, and in the absence of details of such interest it was necessary to verify the details so as to tax correct income in the correct assessment year.
16. Learned DR on the other hand has argued in support of the impugned order mainly relying upon the reasoning assigned by the Commissioner (Appeals) in the impugned order. He has pointed out that all the arguments made by the learned counsel has been thoroughly dealt with by the learned Commissioner (Appeals). Thus, he has relied upon the order passed by the Commissioner (Appeals). He has also pointed out that all the assessees have been taking inconsistent stand in the matter. Initially they took the stand that the land acquisition was capital asset and they had suffered a capital loss in the matter. However, learned DR has pointed out that had the assessee suffered a capital loss in the matter why the same was not claimed in the return filed for assessment year 1994-95. He has made reference to page 41 of the paper book. Thus, he has supported the order passed by the Commissioner (Appeals).
17. We have heard the parties and have perused the material to which our attention was drawn during the course of hearing of the appeal. As per section 45(1) of the Income Tax Act, the income under the head "Capital gain" arises on transfer of the capital asset. The expression "capital asset" has been defined in section 2(24) of the Act which specifically excludes agricultural land in India. The sub-section (iii) of section 2(14) reads as under:
'Section 2(14):
(iii) agricultural land in India, not being land situate
(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which as a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or
(b) in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette."
18. The question that arises for consideration is whether in the year of acquisition the land in question was agricultural land and, as such, did not fall within the ambit of capital asset and, therefore, the profit arising out of this acquisition was not capital gain within the meaning of section 45(1). If the answer to this question is in negative then whether the enhanced compensation received by the assessee in the year under consideration would fall within the ambit of section 45(5) or not. A perusal of section 45(1) would show that the provisions of this section are applicable to a case where a capital asset is transferred by way of compulsory acquisition and the capital asset arises thereon. In other words, if at the time of transfer the asset did not fall within the definition of 'capital asset" there is no question to treat the enhanced compensation in subsequent year as "Capital asset" under section 45(5). It is further clear from clause (a) of section 45(5) that in the first instance capital gain has to be assessed in the year in which compensation or part thereof is received. Thus, the question whether the asset is a capital asset or not has to be determined in the year in which the land is acquired or any compensation or part thereof is received. As regards the submission of the learned Counsel for the assessee that no capital gain has arisen in the matter as the land acquired by HUDA was not covered under the definition of the capital asset as the said land being situated 9 kms, from the municipal limit of Hissar at the time of acquisition and being an agricultural land is concerned, he has placed reliance upon a copy of the letter dated 8-5-2001 of one Shri Ravi Dutt, Land Officer, Municipal Council, Hissar wherein he has given his certificate that agricultural land measuring about 1,288 marla (Khasra Nos. 245 and 261) situated at Village Dabra (Hissar) belonged to Shri Vijay Kaushik. The said agricultural land acquired by HUDA in 1994 was 9 kms. away from Hissar city, District Hissar (Haryana) at the time of acquisition. The said certificate is available at page 127 of the paper book. The learned Counsel has further referred to page 36 of the paper book which is a letter of Naib Tahsildar addressed to the Income Tax Officer, with reference to its notice under section 133(6) stating that as per report of Patwari, Khasra Nos. 245 and 261, 244 and 262 and 262 and 26 belonged to the above named parties and it was agricultural land to be acquired by HUDA in the year 1994. The said agricultural land is situated about 9 Kms. away from the Municipal limit of Hissar. It is mentioned that the expression "agricultural land" is not defined either in the Constitution or in the Income Tax Act. It, therefore, must be given the meaning which it ordinarily bears in English language and as understood in the ordinary parlance. The determination of the character of a particular piece of land according to the purpose for which it is mentioned or set apart and kept used is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with agricultural purpose and user and not a mere possibility of user of the land by some possible future owner or possessor for agricultural purpose. It is not the mere potentiality, but its actual condition, intended user which has to be seen. If there is neither anything in its condition nor anything in evidence to indicate the intention of its owner or possessor so as to connect it with agricultural purpose, the land cannot be termed agricultural land. Entries in the revenue record are, however, good prima facie evidence but they are not conclusion on the point, Simply because the land is entered in the revenue record would not mean that this being used mainly for the purpose of agriculture (reference State of UP v. Nand Kumar Aggarwal 1998 AIR 473. It is mentioned that regarding the issue whether the land in question is agricultural land or not the learned Commissioner (Appeals) has pointed out that the most important indicator is the land in the possession of the Hisar Vijay Luxmi Co-operative House Building Society Ltd. It was purchased in the year 1990-91 i.e., three years before the acquisition by HUDA. The land belonging to Shri Vijay Kaushik and Shri Vibhore Kaushik was also adjacent to the land of the Hisar Vijay Luxmi Co-op. House Building Society Ltd. The land of all the three assessees was aquired together by HUDA. He pointed out that in fact land located in the same area and belonged to large number of persons were acquired. Therefore, there was no evidence of agricultural operation being carried out at the time of acquisition. The Society had also developed residential plots and that was done three years before the date of acquisition. Therefore, the facts proves beyond doubt that no agricultural operation was being carried out and the land was ready for conversion into residential plots. Thus, he has held that the land was not agricultural land at the time of acquisition. This finding has not been controverted by the assessee by bringing any material on record except he has relied upon the two letters received from the revenue as referred to above. The assessee has not brought any material on record to show that the land was classified in the revenue record as agriculture and it was subject to payment of land revenue and that the amount was actually an ordinarily used for agricultural purposes at or about relevant time nor the assessec has brought any material on record to show that. the surrounding lands are agricultural lands or they have earned the agriculture income from the said land. Thus, keeping all the facts and circumstances of the case and taking an overall view of the situation pertaining to the land we hold that the land in question was not agricultural land.
19. In the case of Harish Chandra (supra), the Delhi High Court has held thus :
"In cases of claims for determination of compensation by the court, no debt is due orwould be due until the amount of compensation is judicially determined at all stages provided in the Acquisition Act. The offer made by the Collector by his award, if not accepted by the assessee, would not rest automatically in a liability to pay enhanced compensation as claimed by the assessee. The claim made by the assessee is in respect of an inchoate right, unless the question of payment of any enhanced compensation is decided and the amount of enhanced compensation becomes determinable and payable, the amount cannot be said to arise or accrue. With the filing of the appeal by the Government against the determination of the compensation by the District Court, the amount is in jeopardy. The right to receive the enhanced compensation by the assessee is clearly unsettled. Where the assessee withdraws it on furnishing security for restitution, the withdrawal of the amount is contingent inasmuch as it is likely to be defeated by the acceptance of the appeal of the Government. The liability to pay additional or enhanced compensation is an inchoate or contingent right not creating a debt. Section 54 of the Land Acquisition Act, 1894 gives a right to the Government to have the compensation reduced in appeal to the High Court or further reduced in appeal to the Supreme Court. The enhanced compensation would thus accrue only when the court accepts and the decision becomes final. Unless finality is attached to the determination by the District Court on enhancement by the High Court, it cannot be said to accrue or be deemed to accrue."
20. The right to receive additional/ enhanced compensation is an inchoate right of the assessee as the same has not yet been crystallised in the year under consideration inasmuch as the State Government and the assessee have challenged the enhanced compensation before the High Court of Punjab and Haryana. Cop), of the order, passed by the Single Judge in the case of State of Haryana v. Vijay Kaushik (RFA No. 1810 of 2000) was available at pages 48 to 51. Thus, no income can be said to have accrued to the assessee on account of enhanced compensation during the year under consideration merely on the ground that the assessee was allowed to withdraw the enhanced compensation against furnishing of bank guarantee. Thus, we hold that the enhanced compensation cannot be brought to tax in the year under consideration since the litigation regarding the grant of enhanced compensation has not attained finality. The same principle would hold good to the interest granted on enhanced compensation as the interest of enhanced compensation is consequential to the grant of enhanced compensation. As regards the submission of the assessee that there being a carry forward loss the same was required to be set off from the purported capital gain is concerned, it is mentioned that assessee has not brought any material on record to show that any return for claim for carry forward loss was filed for assessment year 1994-95 and the same was assessed to loss. In the absence thereof we find no merit in the argument of the learned Counsel for the assessee. Hence, the same is rejected. In view of what has been discussed above we quash the impugned order passed by the Commissioner (Appeals).
21. The next ground relates to the order sustaining the chargeability of tax in respect of interest on FDR in the case of Shri Vijay Kaushik. Briefly stated, facts are that the assessing officer noted that as per certificate given by the bank a sum of Rs. 4,50,390 was paid as interest on FDR. It was explained by Shri Vijay Kaushik that the amount of interest of Rs. 4,50,399 was reflected in the next year i.e., 2002-03. However, the assessing officer noted that the bank certificate mentioned that the interest had been paid during the financial year 2001-02 for the FDRs made on 16-6-2000. On this basis, the assessing officer calculated the interest for the period from 16-6-2000 to 31-3-2001 at Rs. 3,37,800 and brought the same to tax in the assessment year 2001-02. On appeal before the Commissioner (Appeals) it was explained that the inclusion of interest on FDR was unjustified. It was submitted that the assessee had declared proportionate interest on FDR for the assessment year 2002-03 at Rs. 2,29,106 and the difference of amount only could be taxed in the assessment year 2001-02. However, the said submission of the assessee did not find favour with the Commissioner (Appeals). He has observed that the assessing officer has calculated interest for the period 16-6-2000 to 31-3-2001 correctly. The mere fact that that in the next year excess amount was declared as interest on FDR would not justify the claim that the interest of Rs. 3,37,800 accrued during the assessment year 2001-02 should be reduced by the excess amount declared in the assessment year 2002-03. He has further observed that the interest is to be taxed on accrual basis year after year. Thus, he has upheld the action of the assessing officer.
22. We, after hearing the parties find no infirmity in the impugned order passed by the Commissioner (Appeals) inasmuch as the assessing officer has correctly assessed interest income accrued on the FDR of Shri Vijay Kaushik. Hence, we uphold the order passed by the Commissioner (Appeals).
23. The next ground of appeal relates to levy of interest under sections 234A, 234B and 234C of the Act. This ground of appeal is set aside to the file of the assessing officer, who may pass a fresh order in view of the decision of the Special Bench of ITAT, Delhi, in the case of Erisson Radio System AB.
24. In the result, the appeals of the assessees are partly allowed.