Income Tax Appellate Tribunal - Mumbai
Jehangir P. Vazifdar vs Income-Tax Officer on 24 April, 1992
Equivalent citations: [1992]42ITD67(MUM)
ORDER
R.D. Agrawala, Judicial Member
1. This is an appeal by the assessee, by status an individual challenging the exigibility of a sum of Rs. 32,21,741 received by him as additional compensation and another sum of Rs. 21,03,687 being interest thereon in the accounting period relevant to the assessment year 1989-90.
2. We have heard the learned representatives of both the sides at length.
3. On facts, certain agricultural lands belonging to the assessee and located at Igadpuri was acquired by notification dated 19-6-1981 and 25-9-1981. In all an amount of Rs. 2,60,299.90 was awarded by way of compensation by the Special Land Acquisition Officer vide order dated 26th May, 1982. Being aggrieved, the assessee preferred an appeal whereupon the learned Joint District Judge, Nasik awarded, vide its order of 21st April, 1988, enhanced compensation of Rs. 32,21,741.80 together with 9% interest which words out to Rs. 53,25,428.12 payable to him as per the District Court's order. The assessee made compliance of this direction and withdrew a sum of Rs. 26,62,714.06 during the assessment year 1989-90.
4. The Assessing Officer while completing the assessment for the assessment year 1989-90 added to the assessee's income the entire sum of Rs. 53,25,428 by order dated 25-3-1991, which was sustained by the CIT (Appeals) during the first appeal. Eventually, in pursuance of a settlement dated 6-11-1990 outside the Court arrived at between the assessee and M/s. Mahindra & Mahindra Ltd., for whose benefit the acquisition had taken place, the latter agreeing to pay to the assessee the compensation determined by the District Court, it was decided to withdraw the appeals pending before the High Court. This settlement was given effect to by the Hon'ble High Court of Bombay vide its order dated 28-10-1991, copy available at pages 55 to 57 of the paper book in consequence of which the dispute got set at rest and the assessee finally withdrew the remainder of the compensation awarded to them, i.e., a sum of Rs. 26,62,714.06, and equal amount representing the first 50% already withdrawn by them as per the High Court's order dated 15-10-1988 referred to supra.
5. The dispute before us as is evident is as to whether the amount of compensation finally received by the assessee together with interest, aggregating Rs. 53,25,428.12 was rightly taxed by the Revenue authorities during the assessment year 1989-90 or not.
6. The assessee's case as put forth by his learned counsel is that since the two appeals, one filed by the assessee and the other by the State were pending adjudication before the High Court, both sides aggrieved and dissatisfied with the amount of compensation awarded by the learned Joint District Judge, Nasik, it cannot be said that the additional compensation had accrued to the assessee and that being so there was no question of its taxability during 1989-90. Elaborating, it was submitted that the Revenue authorities overlooked the vital fact that because of the pendency of the two appeals the grant of additional compensation was in a fluid state, not settled finally and that the Hon'ble High Court could have taken any view of the matter and even restored the compensation figure originally awarded by the Land Acquisition Officer. That being so, withdrawal of 50% of the additional compensation awarded by the District Court as per the High Court's order, it was pointed out, did not confer any absolute right in the assessee to receive it.
7. Reliance was mainly placed by the assessee on a decision of the Apex Court in the case of CIT v. Hindustan Housing & Land Development Trust Ltd. [1986] 161 ITR 524.
8. Opposing, the learned departmental representative contended that the appeal preferred by the assessee was more or less of a formal nature and the matter having been finally determined by the Learned District Judge and the assessee withdrawing 50% of the compensation in terms of the High Court's order went a long way to suggest that the amount of additional compensation stood 'paid' to the assessee and, therefore, the action of the Revenue authorities in taxing the same during 1989-90 was just and legal. Stress was laid on clause (b) of Sub-section (5) of Section 45 of the Income-tax Act, 1961 /the entire Sub-section inserted by the Finance Act, 1987 with effect from 1 -4-1988 to canvass that the enhanced compensation shall be chargeable under the head 'capital gains' in the previous year in which such amount is received by the assessee. It was also submitted that the ratio of the Apex Court in the case of Hindustan Housing & Land Development Trust Ltd. {supra) was not applicable to the facts of the present case.
9. We have carefully gone through the record and taken into consideration the submissions made by either side. Insofar as the facts of the case are concerned, there is incidentally no dispute between the parties. On these facts which have been detailed out in the foregoing paragraphs, the question for adjudication is as to whether the amount of enhanced compensation amounting to Rs. 53,25,428.12 awarded by the learned Joint District Judge, Nasik could be said to have been received by the assessee in terms of clause (b) of Sub-section (5) of Section 45 of the Act. This provision runs as under :--
45. (5) Notwithstanding anything contained in Sub-section (1), where the capital gain arises from the transfer of capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any Court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely :--
(a) ** ** **
(b) the amount by which the compensation or consideration is enhanced or further enhanced by the Court, Tribunal or other authority shall be deemed to be income chargeable under the head 'Capital gains' of the previous year in which such amount is received by the assessee.
While as per the assessee since there was not absolute right vested in him to receive the additional compensation which even took place only when the issue was finally determined by the High Court vide its order dated 20-10-1991, the receipt by them of a sum of Rs. 26,62,714.06 being 50 per cent of the enhanced sum in terms of the High Court's order on his furnishing a bank guarantee, much less the whole of the amount, did not amount to a 'receipt' within the meaning of clause (b) of Section 45(5) of the Act, as per the stand of the Revenue the whole of the amount dehors it a actual payment of only 50 per cent to the assessee became payable and receivable by the assessee on its award by the Distt. Court of Nasik and, therefore, rightly taxed in that year.
10. The Departmental Representative laid special stress on the following observations made by the Apex Court in Hindustan Housing & Land Development Trust Ltd.'s case (supra) which also appeared in the head notes :--
There is a clear distinction between cases such as the present one, where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles.
11. On considering the issue and going through the law laid down by the summit court carefully we find ourselves unable to agree with the stand taken by the Revenue. In the case before us, it cannot be gainsaid that the dispute between the assessee and the land acquisition officer was a real one and substantial in nature, contested and agitated before the High Court. Insofar as the figures go to show against the grant of a compensation of Rs. 2,60,299.90, the effect of an enhanced compensation came to a figure of Rs. 53,25,428.12. Both in the wisdom of the assessee as well as the State, the enhanced compensation was not in order. Certainly the rate at which the additional compensation was awardable to the assessee was in a flux and this question could be adjudicated upon by the High Court of Bombay in any legal manner, their Lordships pleased. It was in this context that although the assessee was permitted to withdraw 50 per cent of the decretal amount such withdrawal was not unconditional and the same was only subject of furnishing a bank guarantee of the equivalent amount to the satisfaction of the court. Indisputably, if the appeal preferred by the State had gone in its favour in full, the whole of this amount became refundable immediately and payable by the assessee and/or his guarantor, viz., a nationalised Bank. No doubt that the assessee could have also got more compensation by the High Court's order but this possibility will not detract us from saying that the issue of the adjudication of additional compensation pending before the High Court was both substantial and real and the liberty granted to the assessee to withdraw 50 per cent of the decretal amount did not confer upon them an absolute right to receive the same at that stage. This is also supported from the claim of the State of Maharashtra laid in appeal before the High Court, available at pages 39 to 42 of the paper book wherein 20 grounds have been taken, many of them substantial and so the grounds raised by the assessee, as many as 23, available at pages 43 to 47 of the paper book. It also appears relevant to reproduce below the interim order passed by the Hon'ble High Court of Bombay on 15-10-1988 :
Int. stay of execution of award decree subject to appellant depositing 50 per cent of the decretal amount within six weeks hereof. Respondent at liberty to withdraw on Bank Guarantee to the satisfaction of the Registrar of the High Court.
12. This being the state of things could it be said that the assessee 'received' the sum of Rs. 26,62,714.06 unshadowed much less the entire amount of Rs. 53,25,428 ? Our answer to it on a careful consideration of the facts and law is in the negative.
13. We will now deal with the observations of the Supreme Court in Hindustan Housing & Land Development Trust Ltd.' s case (supra) extracted in para 10 by us on which strong reliance has been placed on behalf of the Revenue.
14. As is evident, the Court has divided the cases of present nature into two broad heads. The first classification is where the right to receive payment is in dispute and not a question alone about the quantification of the amount to be received. The other head is of cases where the right to receive payment is admitted and the quantification of the amount alone is left to be determined in accordance with the settled or accepted principles. Let us see as to in which head/category the facts of the present case fall.
15. Before we reach the classification, it appears necessary to give the facts of the Hindustan Housing & Land Development Trust Ltd.'s case (supra) broadly. In this case, on compulsory acquisition of certain land, an award for a sum of Rs. 24,97,249 was granted to the assessee. On appeal, the arbitrator fixed a compensation at Rs. 30,10,873. Thereupon the State Govt. preferred an appeal to the High Court. Pending appeal a sum of Rs. 7,36,691 being the additional amount payable under the award was deposited by the State Govt. in Court and the assessee permitted to withdraw the same on furnishing a Bond. The question arose as to whether this additional sum of Rs. 7,24,914 could be taxed as assessee's income in the year in which it became payable to them pursuant to the arbitrator's award. The Tribunal answered in favour of the assessee and so the High Court.
16. The Supreme Court on the basis of the above facts took the view that no doubt the enhanced amount of compensation became payable to the assessee pursuant to the arbitrator's award on 29-7-1955 the entire amount was in dispute in the appeal filed by the Govt. This dispute was recorded by the Court as real and substantial because the assessee was not permitted to withdraw the amount deposited by the State Govt. without furnishing a Bond. Their Lordships observed, "there was no absolute right to receive the amount at that stage. If the appeals were allowed in its entirety the right to payment of enhanced compensation would have fallen altogether. The extra amount of compensation of Rs. 7,24,914 was not income arising or accruing to the respondent during the previous year relevant to assessment year 1956-57."
17. It is in this context that the Supreme Court made the observations extracted in para 10 of our order. If we compare the facts of the case in hand with those of the Supreme Court's case succinctly given hereinbefore, we are afraid, we are unable to find out any material or substantial difference. In both the cases enhanced amount of compensation or its part was permitted to be withdrawn at the High Court's level subject to furnishing of a bond. In fact, the assessee's case is better on two counts. Firstly in the assessee's case only half of the enhanced compensation was allowed to be withdrawn as against the full amount in Hindustan Housing & Land Development Trust Ltd.' s case (supra) and secondly, in the assessee's case not only the State Govt. but the assessee also preferred an appeal, as against only the State Govt. preferring an appeal in Hindustan Housing & Land Development Trust Ltd.'s case (supra). Thus, the latter distinction in the facts of the two cases would mean and goes to show that in Hindustan Housing & Land Development Trust Ltd.' s case (supra) at least the assessee was satisfied with the enhanced compensation unlike in the case before us wherein he too preferred an appeal. By drawing these distinctions we want to reiterate that the dispute in the present case was very real and substantial, in effect a little more than what was in Hindustan Housing & Land Development Trust Ltd.' s case (supra). Clearly these facts will make the assessee's case to fall in the category of cases where the right to receive compensation is in dispute and it is not a question of merely quantifying the amount to be received, as pointed out by the Supreme Court. In facts, the right to receive the entire amount of enhancement compensation was in serious dispute and jeopardy on account of the State Govt.'s preferring an appeal and contesting it before the High Court. If only the assessee had preferred an appeal and not the State Govt., perhaps it could be said that the grant of additional compensation had become final at least to the extent that the same would not be reduced in appeal by the High Court if not enhanced.
18. We may also point out about the type of cases which the Supreme Court was referring to in the later part of its observation in the extracted portion of the Court's order at para 10 of our order. Their Lordships have observed that the facts of the Hindustan Housing & Land Development Trust Ltd.' s case (supra) which are on pari materia with the case before us must be distinguished from the facts of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) where "the liability to sales, tax arose immediately on a dealer affecting sales. which were subject to sales tax and what remained to be done was a mere quantification of that liability."
19. We are, therefore, of opinion that the amount of additional compensation cannot be said to have become payable to the assessee on its grant by the Distt. Court's order. The words 'previous year in which such amount is received by the assessee' appearing in clause (b) of Sub-section (5) of Section 45 clearly mean the assessment year in which such amount is received by the assessee unclouded and unshadowed. Till such time the appeal filed by the State Govt. was not decided, the dispute raised by the Govt. real and substantial, there was no absolute right available to the assessee to withdraw the sum half of which was in fact permitted to be withdrawn as per the High Court's order but only on furnishing a Bank guarantee to the satisfaction of the Court's Registrar.
20. We may also point out that insofar as the exigibility of the original amount of compensation to tax is concerned, the same has been treated differently by the Legislature. Clause (a) of Sub-section (5) of Section 45 runs as under :--
The capital gain computed with reference to the compensation awarded in the first instance or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as 'income under the head "Capital gains" of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received.' As is evident here the word used is not 'received'. They are 'first received'. As against this, the word used in clause (b) of Sub-section (5) of Section 45 is 'received' alone. There is a reason and a valid one for the use of these two different words at two places. Against the grant of original compensation on a land being acquired, no appeal is provided by the State against the award of the land acquisition officer or the land acquisition collector or by whatever other name the first such authority is known. Only the person whose land is acquired can file an appeal. It would mean that as far as the original compensation is concerned, this will certainly be received/become receivable by the affected party, whether it does or does not prefer any appeal. If it does prefer an appeal it could be enhanced but under no circumstances it could be reduced. Therefore, this original compensation becomes final. But as already stated above, the additional compensation is on a totally different footing. Here both the assessee as well as the Govt. have got an equal right to agitate its award before the High Court. The High Court may upheld the grant of additional compensation, reduce, increase or disapprove the same in its entirety in which event the assessee may not get even a single pie over and above the original compensation. It is in this context that the Legislature appears to have used the word 'received' in clause (b) of Sub-section (5) of Section 45 of the IT Act. So 'received' would mean when it has become finally receivable or the same is received unconditionally.
21. We arc, therefore, of the view that on the facts and in the circumstances of the case the assessee is right in claiming that the sum of Rs. 53,25,428.12 was not payable to them despite the District Court's order dated 21-4-1988 and the withdrawal of half of this amount as per the High Court's order had also no impact on the nature of the receipt as the issue of granting additional compensation was in serious jeopardy due to the State Government's filing an appeal before the High Court. That the amount of additional compensation became payable and got paid to them within the meaning of Section 45(5)(b) only vide High Court's order dated 28-10-1991 when the issue was finally determined as per a settlement, accepted and concluded by the High Court's order of the same date, available at pages 55 to 57 of the paper book. It is only as per this order that the Bank guarantee filed by the assessee at the time of the withdrawal of 50 per cent of the additional compensation stood discharged. In this view of the matter the amount of compensation would become taxable for the purpose of the capital gains only during the assessment year in which 28-10-1991 falls and not assessment year 1989-90 during which it has been taxed by the Revenue authorities.
22. Before we depart, we may also make a passing reference to the additional ground taken by the assessee, available at page 92 of the paper book. The assessee wanted to raise the following additional grounds before us :--
(i) The land under acquisition is an agricultural land and, therefore, it is not a capital asset and hence, the capital gains computed by the Income-tax Officer are required to be deleted.
(ii) The land under acquisition is not within the limits of Igatpuri Municipality and even though it is within 8 K.M. from the local limits of the Igatpuri Municipality, the Central Government has not notified the land under acquisition in its Notification No. SO 77(E), dated 6-2-1973 and, therefore, it is an agricultural land.
23. A serious dispute arose as to whether the assessee could take such additional grounds at this stage before us or not particularly in view of the ratio of the Bombay High Court decision in the case of Ugar Sugar Works Ltd. v. CIT [1983] 141 ITR 326 as per which an issue which does not arise out of order of the Commissioner's appeal cannot beagitated by an assessee before the Tribunal. The assessee's learned counsel, however, strongly contended that it was not correct to say as the issue was raised by the assessee before the CIT(A) who though did not dwell on the issue. In support of their contention reliance was also placed by the assessee on certain decisions, both of this Tribunal and High Courts, but in view of the fact that we are allowing the assessee's appeal on merits as a result of which the amount of additional compensation taxed by the Revenue during the assessment year 1989-90 is not found to be so taxable during the year under consideration before us, the question as to whether the assessee is entitled to take additional grounds before us or not becomes merely academic and is rather rendered nugatory and we will not like to burden the record.
24. In the result, the appeal is allowed.