Andhra HC (Pre-Telangana)
Darapaneni Chenna Krishnayya (Huf) vs Commissioner Of Income-Tax on 6 February, 2007
Equivalent citations: (2007)210CTR(AP)538, [2007]291ITR98(AP)
Author: Bilal Nazki
Bench: Bilal Nazki
JUDGMENT Bilal Nazki, J.
1. The brief facts of the case are:
2. The land belonging to the assessee, a Hindu undivided family (HUF), was acquired by the Government of Andhra Pradesh in terms of the provisions of the Land Acquisition Act during 1981-82. The Land Acquisition Officer awarded compensation at the rate of Rs. 20,000 per acre. Not satisfied with the award, the assessee sought a reference and the civil court enhanced the compensation to Rs. 71,380 per acre. On appeal, the High Court enhanced the compensation to Rs. 2,83,000 per acre. By virtue of the orders of the High Court, the assessee received additional compensation amounting to Rs. 15,26,135 and interest on the additional compensation amounting to Rs. 28,58,622 on April 9, 1991, and on receiving the amounts, he invested the entire additional compensation in the UTI Capital Gains Scheme of 1983, on October 1, 1991, i.e., within six months from the date of receipt of the additional compensation and sought exemption under Section 54E of the Income-tax Act, 1961 (for short "the Act"). The Assessing Officer denied this exemption on the ground that investment in the UTI Capital Gains Scheme, 1983, was not eligible for exemption as the capital gain arose in respect of transfer of the original asset prior to March 31, 1983, when the UIT Capital Gains Scheme, 1983, was not in force. On appeal, the Commissioner of Income-tax (Appeals) upheld the disallowance made by the Assessing Officer. On further appeal, the Tribunal held that the assessee is entitled for the exemption under Section 54E of the Act.
3. Another piece of land admeasuring acs. 6.64 cents of the assessee was acquired by the Government in the year 1982-83. The Land Acquisition Officer awarded compensation at the rate of Rs. 18 per square yard. On reference, the civil court enhanced it to Rs. 68 per square yard. Aggrieved by the same, the State preferred an appeal being A.S. No. 999 of 1990 before the High Court. The High Court, pending final disposal of the appeal, granted stay of execution of the decree, on condition of the State depositing enhanced compensation, calculated at the rate of Rs. 32 per square yard, together with costs and interest. On such deposit, the claim-ant-assessee was permitted to withdraw half of the deposited amount without furnishing any security and the other half on furnishing security. By virtue of the said order, the assessee had withdrawn a sum of Rs. 41.48 lakhs in total. He claimed before the Assessing Officer that the additional compensation could not be brought to tax for the assessment year 1992-93 in which it was withdrawn as the matter was still pending before the High Court. The Assessing Officer rejected the claim of the assessee and the entire amount withdrawn by the assessee was brought to tax in the assessment year 1992-93. The first appellate authority also upheld the action of the Assessing Officer. On further appeal, the Tribunal held that 50 per cent, of the amount received by the assessee without furnishing security had to be treated as taxable income in the year in which it was withdrawn and excluded the other 50 per cent, of the amount received by the assessee, on furnishing security, from assessment in the year in which it was withdrawn.
4. Similarly, an extent of two acres of land owned by the assessee was acquired by the Government during 1992-93 and a compensation of Rs. 1,58,710 was paid to the assessee. The assessee claimed to have purchased agricultural land for Rs. 55,855 from out of the compensation amount, and accordingly claimed exemption in respect of the same under Section 54B of the Act. The said claim for exemption has been rejected by the Assessing Officer as well as the Commissioner of Income-tax (Appeals). On further appeal, the Tribunal also confirmed the rejection of the claim of the assessee by the authorities below.
5. In this factual background, on the applications being made by the Revenue and the assessee, the following three questions have been referred to this court.
1. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was correct in law in holding that the assessee was entitled to exemption under Section 54E of the Income-tax Act for investing the net consideration in the UTI Capital Gains Scheme, 1983 ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that 50 per cent, of the amount withdrawn from the High Court without furnishing security constitutes the income liable to tax for the relevant assessment year ?
3. Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that the exemption under Section 54B of the Income-tax Act is available only to an 'individual' ?
6. The first question was framed at the behest of the Revenue and the second and the third questions were framed at the behest of the assessee.
7. Question No. 1 : This question is raised at the behest of the Revenue. We fail to understand how could the finding of the Tribunal be faulted. The assessee received the amounts in 1991-92. Admittedly, the amounts were deposited by the assessee, within six months from the date of its receipt, in the UTI Capital Gains Scheme, which is one of the units as specified asset mentioned in Explanation 1(c)(ii) to Section 54E of the Act. Therefore, we agree with the view taken by the Tribunal and decide this question in favour of the assessee and against the Revenue.
8. Question No. 2 : Coming to the second question whether the Tribunal was correct in holding that 50 per cent, of the amount withdrawn from the High Court was liable to tax in the assessment year in which it was withdrawn, we do not agree with the Tribunal because when the appeal being A.S. No. 999 of 1990, was filed by the State Government before the High Court the rights of the parties had not been finally crystallised. Since there were disputes between the parties about the quantum of compensation, therefore, they were before the High Court.
9. Now, learned Counsel appearing for the Department had drawn our attention to certain paragraphs of the order of the Tribunal and submits that on the facts, the Tribunal had come to the conclusion that the Government had not disputed the claim of the assessee for receiving compensation of Rs. 50 per square yard. It had only disputed the compensation to be paid at the rate of Rs. 68 per square yard. In this connection he refers to a particular paragraph being paragraph 24 in the order of the Tribunal. The pleadings of A.S. No. 999 of 1990 are not before us. It is true that the Tribunal has stated in its order that the Government had filed the appeal and had stated in the memo of appeal that they wanted the compensation to be fixed at Rs. 50 per square yard, but at the same time, the Tribunal itself has stated:
The Government itself was not aggrieved by the compensation enhanced up to Rs. 50 per square yard. It looks as though it was disputing the compensation over and above Rs. 50 per square yard, i.e., in respect of Rs. 18 per square yard. That appears to be the reason why in the stay petition (CMP No. 2849 of 1991), the Government sought for the stay of execution of the decree in so far as it relates to the enhancement of market value beyond Rs. 50 though it resiled from that stand at a later stage.
10. So even if such a stand had been taken by the Government, the Government has resiled from that stand, which makes it abundantly clear that the disputes between the parties were with regard to enhanced compensation. By an interim order, in appeal, the High Court allowed release of 50 per cent, of compensation without security. In our view, till the matter got finally decided by the High Court, the compensation could not be assessed and it could only be assessed in the year in which the High Court finally decided the matter. This question also appears to be covered by a judgment of the Supreme Court in CIT v. Hindustan Housing and Land Development Trust Ltd. , but a distinction is sought to be drawn by learned Counsel appearing for the Revenue and a distinction had in fact been drawn by the Tribunal as well. In the case before the Supreme Court, the amount was withdrawn on the orders of the court subject to furnishing security. In the present case, the High Court had not ordered for furnishing any security for withdrawing 50 per cent, of the deposited amount. We do not think that receiving the amounts by virtue of an interim order, in a pending appeal, on furnishing security or without furnishing security would make any difference. Because the ultimate results would be the same. Had the Government succeeded in the appeal, the assessee had to pay back the amounts he had drawn. It is only in order to secure the refund that courts insist on furnishing the security. But furnishing of security is nowhere connected with the entitlement of the person who receives the amounts. Entitlement of amounts, in such cases, is only decided by the courts at the time the matter is finally settled. For these reasons, we feel that the question is covered by the Supreme Court judgment referred to above and is answered accordingly in favour of the assessee and against the Revenue.
11. Question No. 3 : The assessee wanted benefit under Section 54B of the Act, as according to the assessee the Hindu undivided family could also be an individual within the meaning of this section. But we agree with the judgment of the Madras High Court in CIT v. G.K. Devarajulu wherein it was held that in cases under Section 54B of the Act, if persons other than individuals are held to be entitled to benefit then it would lead to absurd results and then "assessee or a parent of his" would be even related to a partnership concern or a company or an Hindu undivided family. By saying "assessee" and adding to it "or a parent of his" makes it abundantly clear that the benefit under Section 54B of the Act would only be available to an individual and not to an Hindu undivided family.
12. In this case, we completely agree with the views of the Madras High Court in the aforesaid judgment and answer the question in favour of the Revenue and against the assessee.
13. Thus, questions Nos. 1 and 2 are answered in favour of the assessee and question No. 3 is answered in favour of the Revenue. The reference is answered accordingly.