Income Tax Appellate Tribunal - Chandigarh
Amrik Singh, Chandigarh vs Ito, Chandigarh on 4 June, 2018
I N T H E I NC O M E T AX A PP E L L A T E T RI B UN A L
D I VI S I O N B E NC H , 'A' CH A NDI G A RH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER
AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
ITA No. 542/CHD/2017
Assessment Year : 2010-11
Sh. Darbara Singh, Vs. The ITO, Ward 5(4),
H.No.228,Vilalge Kajheri, Chandigarh
Sector 52,
Chandigarh
PAN No. CUBPS3108Q
&
ITA No. 543/CHD/2017
Assessment Year : 2010-11
Sh. Amrik Singh, Vs. The ITO, Ward 5(4),
H.No.228,Vilalge Kajheri, Chandigarh
Sector 52,
Chandigarh
PAN No. CTZPS6399L
(Appellant) (Respondent)
Appellant by : Sh. R.R Thakur, Advocate
Respondent by : Ms. Deepika Mohan, JCIT
Date of Hearing : 17.05.2018
Date of Pronouncement : 04.06 .2018
ORDER
Per Sanjay Garg, Judicial Member:
The present appeals have been preferred by the assessees against the separate orders dated 23.01.2017 of Commissioner of Income Tax (Appeals)-2, Chandigarh [hereinafter referred to as 'CIT(A)'].
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 2
2. Since the issues involved in both the appeals are identical, these have been heard together and are being disposed of by this common order. For the sake of convenience, the ITA No. 542/Chd/2017 is taken as a lead case for discussion.
3. The assessee in this appeal has taken the following grounds:-
1. That the Ld. CIT(A)-2 Chandigarh has wrongly confirmed the addition of 50% of amount of interest of Rs. 32,88,074/- made by the ITO without going through the facts of the case of the appellant.
2. That the Ld. CIT(A)-2 Chandigarh has failed to understand that the Fiancé Act No.2 of 2009 was inserted in October 2009 and was applicable for income from the assessment year 2011-12 and not for the assessment year 2010-11 and the income of interest received by the appellant before New insertion of section was to be assessed on accrual basis year wise. The addition is likely to be deleted.
3. The brief facts of the case are that assessee received Rs.
69,12,449/- during the relevant year as interest on enhanced compensation from Punjab Government for acquisition of land. Assessee failed to disclose the interest income in the return of income, and, therefore, the income had escaped assessment. Assessing officer initiated reassessment proceeding and notice u/s 148 was issued on 16.3.2015. The assessee filed revised return on 13.1.2016 but the same was not a valid return as no return u/s 139(1) or in response to notice issued u/s 148 was filed. As per the ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 3 provisions of section 57(iv) read with section 56(2)(viii)of the Act , Assessing officer assessed 50% of the interest received and made addition of Rs. 32,88,074/- (Rs. 34,56,224 - Rs. 1,68,250) as the assessee had shown interest of Rs. 1,68,150/- in original return filed on 15.12.2015.
4. In appeal, the assessee submitted before the CIT(A) that the land of the assessee was acquired by Chandigarh Administration and the assessee filed appeal before the Hon'ble Punjab & Haryana High Court for which the compensation was enhanced and assessee received interest on enhanced compensation of Rs. 69,21,385/- in May 2009 and TDS was deducted on the same. That out of the interest received, interest of Rs. 1,68,150/- was assessable in assessment year 2010-11 as it pertained to the period from 1.4.2009 to 10.5.2009 and assessee accordingly had shown the same in the return of income. That the interest could not be assessed in lump sum in the year in which it was received as the amendment to section 56(2)(viii) was applicable from financial year 2010- relevant to assessment year 2011-12.
However, the Ld. CIT(A) dismissed the appeal of the assessee observing as under:-
"5.3 Submissions of the appellant have been considered. There is no dispute that the appellant has received interest of Rs. 69,12,449/- on enhanced compensation as per the order of the Hon'ble Punjab & Haryana High Court. It is also not in dispute that this interest of Rs. 69,12,449/- has been received by the appellant in ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 4 financial year relevant to the assessment year. As per the amendment to section 56(2)(viii) read with section 145A(b) which is applicable from 1.4.2010, the entire interest income shall be deemed to be the income of the year in which it is received and therefore, after allowing benefit of 50% as per section 57(iv) of the Act, Assessing officer has rightly assessed the interest income in the relevant assessment year. The addition made by the Assessing officer is confirmed. Grounds of appeal No.1 & 2 are dismissed."
5. Being aggrieved by the above order of the CIT(A), the assessee has come in appeal before us.
6. The main contention of the Ld. Counsel for the assessee has been that the interest on enhanced compensation was received by the assessee at the orders of the Hon'ble High Court and that the interest pertained to the period from 15.5.2003 to 10.5.2009 and that as per the decision of the Hon'ble Supreme Court in the case of 'Rama Bai, Vs. CIT', [1990] 181 ITR 400 (SC), the interest cannot said to have been accrued on the date of the order of the court granting enhanced compensation but as having occurred year after year from the date of delivery of possession of land till the date of such order, and that such interest cannot be assessed to income tax in one lump sum in the year in which the order is made.
The Ld. counsel has further submitted that the amendments in the section 57(vi) and section 145A have been made / substituted vide Finance (No.2) Act of 2009 in the month of October 2009 w.e.f. 1.4.2009 and that the said provisions would be relevant to ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 5 assessment year 2011-12 and not for the assessment year under consideration i.e. assessment year 2010-11. He, therefore, has pleaded that since the amended provisions will apply to the next financial year, hence, the case of the assessee was covered by the decision of the Hon'ble Supreme Court in the case of 'Rama Bai Vs. CIT' (supra) and that the action of the lower authorities in taxing the interest income in the year under consideration was wrong and not justified.
7. The Ld. DR, on the other hand, has relied upon the findings of the lower authorities.
8. We have considered the rival submissions. It is pertinent to mention here that prior to amendment / substitution brought vide Finance (No.2) Act of 2009 in the provisions of section 57(iv) of the Income Tax Act, as per the decision of the Hon'ble Supreme Court in the case of 'Rama Bai Vs. CIT (supra), the interest income was required to be bifurcated for the years to which that interest income was related and that the same could not be taxed in lump sum in the year it is received or cannot be said to be accrued or to have accrued in the year in which the Court passed order directing the payment of such interest on compensation / enhanced compensation. However, vide Finance (No.2) Act of 2009, section 145A has been substituted which now reads as under:-
Method of accounting in certain cases "16.145A -. Notwithstanding anything to the contrary contained in section 145,--
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 6 ...........
(b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received."
16. Substituted by the Finance (No.2) Act, 2009 w.e.f. 1-4.2010
9. Further, section 56(2) (viii) of the Act is also relevant, which reads as under:-
Income from other sources (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :--
......
(viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A;
10. Further, the assessee is entitled to a deduction @ 50% of such income on such interest received on compensation or enhanced compensation u/s 57 (iv) which reads as under:-
Deductions.
"57. The income chargeable under the head "Income from other sources" shall be computed after making the following deductions, namely:-- ......
(iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.
11. Now, the lower authorities applying the above amended provisions for the assessment year under consideration i.e. assessment year 2010-11 have taxed the interest income on ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 7 compensation / enhanced compensation and have also given deduction @ 50% as provided u/s 57(iv) of the Act. The assessee admittedly had received the amount in question in the month of May 2009.
Now the moot question before us is as to whether the above reproduced amended provisions vide Finance (No.2) Act of 2009 w.e.f. 1.4.2010 will be applicable for the assessment year under consideration or in other words whether the interest income received by the assessee can be brought to tax as per the aforesaid provisions during the assessment year under consideration.
For this purpose, it will be relevant to refer to the relevant part of the Finance (No. 2) Act, 2009, which has been passed by the Parliament and received the ascent of the President on 9.8.2009 and has been enacted as Act No.33 of 2009. The introductory part and section of the said as is reproduced as under:-
"FINANCE (NO.2) ACT, 2009 An Act to give effect to the financial proposal of the Central Government for financial year 2009-10 BE it enacted by Parliament in Sixtieth year of the Republic of India as follows:-
Chapter I Preliminary Short title and commencement 1(1). This Act may be called for Finance (No.2), 2009 (2) Save as otherwise provided in this Act, section 2 to 84 shall be deemed to have come into force on the Ist day of April,2009"
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 8 A perusal of the above introductory part of section I relevant to the Finance Act reveals beyond doubt that the said Finance Act is to be given effect to the financial proposals of the Central Government for the financial year 2009-10 as per sub section (2) of section I of the Act, it has been provided that sections 2 to 84 of the Act shall be deemed to have come into force on the first day of April 2009. Section 145A of the Income Tax Act has been substituted by section 57 of the Finance (No. 2) Act, 2009 and in view of the above provisions, for the transactions carried out by the assessee during the financial year 2009-10, the amended provisions will apply to the assessment year 2010-11 w.e.f. 1.4.2010. The contention that the assessee had received the interest payment in the month of May 2009 whereas the Finance (No.2) Act, 2009 had received the ascent of the President in the month of August 2009 becomes irrelevant when the Act is deemed to have been applied w.e.f. 1.4.2009.
12. In view of this, we do not find any merit in the appeals of the assessee and the same are accordingly dismissed.
Order pronounced in the Open Court on 04.06.2018 Sd/- Sd/-
(B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 04.06.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR