Income Tax Appellate Tribunal - Delhi
Jai Bhagwan , Faridabad vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'D' NEW DELHI)
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER
AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
I.T.A. No.2901/Del/2011
Assessment year : 2003-04
ITO, Shri Jai Bhagwan, L/hy of
Ward-11 (3), Late Shri Dhani Ram, Patil Gate,
Block-1B, Faridabad. V. Near Dayanand School, Palwal.
(Appellant) (Respondent)
PAN /GIR/No.AFRPR
/GIR/No.AFRPR-
AFRPR-2254-
2254-M
Appellant by : Ms. Renuka Jain,, DR.
Respondent by : Shri Ashwani Taneja, Advocate.
ORDER
PER TS KAPOOR, AM:
This is an appeal filed by the revenue against the order of Ld CIT(A) dated 23.3.2011. The grounds raised by the revenue are as under:-
1. On the facts and in the circumstances of the case, the Ld CIT(A) has erred on facts and in law in deleting the addition of `.12,18,994/- (`.12,33,981/- minus `./14,987/-) made by the Assessing Officer on account of interest ordered by the Court on enhanced compensation from the date of taking over the possession of the land to the date of payment of deposit of the enhanced compensation is in the nature of compensation, which as per findings of the Hon'ble Apex Court in the case of CIT v.
Ghanshyam (HUF) 315 ITR 1 (SC) is to be taxed in the year of receipt.
2. That the appellant craves for the permission to add, delete or amend the grounds of appeal before or at the time of hearing of appeal.
2 ITA No2901/Del/2011
2. The brief facts of the case are that the agricultural land owned by Shri Dhani Ram bearing Khewat No.953/1081 in Village Palwal was acquired by the Land Acquisition Authority on 6.12.1995 by making payments as compensation to him as per rates fixed at the time of acquisition of land. Later on in view of the judgment of the Hon'ble Punjab & Haryana High Court dated 7.10.1999 the compensation was enhanced and during the year under consideration Shri Dhani Ram had received an amount of `.12,18,994/- on 19...09.2002 from Land Acquisition Authority, UE, Faridabad. From the account statement of enhanced compensation obtained from the Office of Land Acquisition Collector, the Assessing Officer observed that the amount represented interest on enhanced compensation and therefore the case of the assessee was reopened u/s 148 and notice was served upon Shri Jai Bhagwan, L/H of Late Shri Dhani Ram. Shri Jai Bhagwan despite various notices did not appear and did not file any return of income in response to the notice. The Assessing Officer therefore computed the total income of the assessee at `.12,33,981/- being `.12,18,994/- received from Land Acquisition Authority and `.14,987/- being interest income in his Savings Bank Account.
3. Dissatisfied with the order, the assessee filed appeal before Ld CIT(A) and submitted various submissions against the order passed by the Assessing Officer u/s 144 of the Act and also submitted that the land acquired represented agricultural land and therefore is was not a capital asset and its transfer cannot give rise to capital gain. The reopening of the case u/s 148 was also challenged as the notice was not served on all legal heirs. Reliance in this respect was placed on a number of case laws. The Ld CIT(A) after going through the submissions of the assessee and after going through the documents and evidences placed on record and on the basis of various judicial 3 ITA No2901/Del/2011 pronouncements deleted the addition made by the Assessing Officer by holding as under:-
"As regards interest on enhanced compensation, the appellant received interest of `.12,18,998/- during the year under appeal. The important question that arises is whether the whole of the amount of interest of `.12,18,998/- is taxable in assessment year 2003-04 on receipt basis (cash system of accounting) as the appellant did not follow any system of accounting in earlier years, or taxable in various earlier years on accrual basis. This issue has to be decided in the light of the finding of Hon'ble Supreme Court in the case of Ghanshyam HUF (supra). In this case, on analyzing all the provisions contained in the Land Acquisition Act, 1894 , it has been held that the payments made under section 23, 23(1A), 23(2) and 28 of that Act are in the nature of payment of compensation. On the other hand, the payment u/s 34 partakes the character of interest income paid on account of late payment of compensation, payable from the date of possession to the date of payment or deposit. Therefore, the interest u/s 34 is to be brought to tax under the residuary head of income., The decision of Hon'ble Supreme Court in the case of Rama Bai v. CIT 181 ITR 400 which is on the issue of taxation of interest and which has not been considered in the case of Ghanshyam HUF (supra), is in the nature of binding precedent. Similar question also came up in the case of KS Krishna Rao v. CIT 181 ITR 409 in which it was reiterated by following the decision in the case of Rama Bai (supra) that interest cannot be taxed in a lump sum on the date on which the court passes an order for enhancement of compensation but it has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the Court on a
4 ITA No2901/Del/2011 time basis. In so far as interest payable u/s 28 of that Act is concerned, the Hon'ble Court has now held that it is in the nature of compensation which becomes taxable in the year of receipt as per the amended law. However, it does follow from the aforesaid decision that interest payable u/s 34 which is chargeable under the residuary head, cannot be said to accrue on the date when the court passed the order. It may be mentioned that the decisions in the case of Ram Bai and KS Krishna Rao (supra) were rendered without having regard to the system of accounting followed by the assessees. Therefore, under these judgments in respect of taxable of interest, apply mutatis mutandis to interest paid u/s 34 of that LA Act. There remains no dispute to the fact that the amount of `.12,18,998/- received by the appellant was u/s 34 of the Land Acquisition Act as it pertains to the period after the date of possession of land by HUDA which is required to be taxed on accrual basis. However, the LAC has allowed interest on enhanced compensation for the period upto 19.9.2001 only. Therefore no interest has accrued to the appellant during the year under appeal. Hence the addition of `.12,18,994/- made by the Assessing Officer is not legally sustainable in view of the position of law clarified in the decisions of Hon'ble Apex Court (supra). Therefore the same is deleted. The ground No.5 of appeal stands allowed." EM
4. Aggrieved, the revenue is in appeal before us.
5. At the outset, the Ld DR submitted that the amount received by the assessee represented interest on enhanced compensation and interest related to section 34 of Land Acquisition Act and which is taxable in the year of receipt as the assessee was not maintaining books of accounts and was not following any accounting policy and therefore the interest received on enhanced compensation was taxable 5 ITA No2901/Del/2011 in the year of receipt itself and Ld CIT(A) has wrongly deleted the addition made by the Assessing Officer.
6. The Ld AR, on the other hand, submitted that the amount definitely represented interest on enhanced compensation. However, he submitted that on the basis of judicial pronouncements the interest received cannot be taxed in the year of receipt and rather it has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the Court on time basis. Reliance in this respect was placed on various case laws placed in the paper book at pages 1 to 49 particularly reference was placed on the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT v. Bhoop Room DAgar HUF & Others reported in 312 ITR 157and our attention was invited to page 43. The Ld AR further argued that the said judgment has followed the judgment of Hon'ble Supreme Court in the case of Rama Bai (supra) wherein it was held that interest payable u/s 34 cannot be said to be accrued in the year in which the court passes the order and it was held that such interest has to be split between the years right from the date of delivery of possession till the date of order of the court on a time basis.
7. We have heard the rival submissions of both the parties and have gone through the material available on record. We find that the amount received by the assessee represented interest on enhanced compensation as per provisions of section 34 of Land Acquisition Act. There is no doubt that interest u/s 34 is interest and is not part of compensation as held by Hon'ble Supreme Court in the case of CIT v. Ghanshyam HUF reported in 315 ITR 1. However, in this case the Hon'ble Supreme Court has not dealt with the year of taxability of accumulated interest u/s 34. This question has been answered by Hon'ble Supreme Court in the case law of Rama Bai v. CIT 181 ITR 400 where the Hon'ble Court has held that such interest has to be split 6 ITA No2901/Del/2011 between the years from the date of delivery of possession of land till the date of order. The case law relied upon by Ld AR in the case of Bhoop Ram Dagar decided by the Hon'ble Punjab & Haryana High Court has also dealt with similar position and has followed the case law of Rama Bai and has concluded as under:-0 "Interest on enhanced compensation does not accrue till the issue of enhanced compensation is finally decided and thereafter on attaining the finality of determination of enhanced compensation by the court, the interest accrued to the assessee has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the Court on time basis."
8. The facts and circumstances of the said judgment being same, the issue has been rightly decided by the Ld CIT(A). In view of the above, we do not see any infirmity in the order of Ld CIT(A).
9. In the result, the appeal filed by the revenue is dismissed.
10. Order pronounced in the open court on 26th day of July, 2013.
Sd/- Sd/-
(RAJPAL YADAV) (T.S. KAPOOR)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dt.26.7.2013.
HMS
Copy forwarded to:-
1. The appellant
2. The respondent
7 ITA No2901/Del/2011
3. The CIT
4. The CIT (A)-, New Delhi.
5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi. True copy.
By Order (ITAT, New Delhi).
Date of hearing 15.7.2013 Date of Dictation 22.7.2013 Date of Typing 23.7.2013 Date of order signed by 26.7.2013 both the Members & pronouncement. Date of order uploaded on net 26.7.2013 & sent to the Bench concerned.