9911796707
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Issues Involved:
1. Deletion of addition under the head capital gains. 2. Taxation of interest income earned by the assessee. Issue-wise Detailed Analysis: 1. Deletion of Addition under the Head Capital Gains: The Revenue challenged the deletion of an addition of Rs. 24,81,705 under the head capital gains. The facts reveal that a piece of land measuring 24.1 acres was leased to Shri Ram Singh Kabli in 1924, who sub-leased it to the assessee's late husband and son. The land was acquired by the Government in 1962, and compensation was awarded. The assessee received enhanced compensation during the relevant assessment year, which the Assessing Officer taxed under "Capital gains." The first appellate authority concurred with the assessee's submissions that the compensation was not liable to tax until the court's final decision and that the assessee's interest was only as a tenant with no cost of acquisition of the tenancy right. The learned Departmental Representative contended that section 45(5), introduced with effect from assessment year 1988-89, mandates that enhanced compensation is taxable in the year of receipt. However, the assessee's counsel argued that the enhanced compensation did not accrue as it was disputed by the Government. The Tribunal considered the rival submissions and noted that the enhanced compensation received was under dispute, and the Government's appeal against the enhancement jeopardized the finality of the amount received. The Tribunal held that until the final judicial pronouncement, the compensation could not be taxed under section 45(5). Additionally, the Tribunal noted that tenancy rights were only considered as capital assets with effect from assessment year 1995-96, and since the transfer occurred before this, no taxable capital gains arose. The Tribunal upheld the first appellate authority's decision, confirming the deletion of the addition. 2. Taxation of Interest Income Earned by the Assessee: The Assessing Officer taxed the interest income earned by the assessee under "Income from other sources," arguing that the assessee was not a licensed money lender and the loans were given to relatives, indicating no organized business activity. The first appellate authority, however, found that the assessee had been regularly engaged in money lending since assessment year 1981-82 and showed interest income as business income. The Tribunal reviewed the facts and noted that the assessee had advanced money to 51 individuals, firms, and companies, demonstrating a regular course of dealings. The Tribunal held that the absence of a money lending license did not negate the regular business activity and upheld the first appellate authority's decision to tax the interest income under "Business income." Conclusion: The Tribunal dismissed the Revenue's appeal, confirming the deletion of the addition under capital gains and the classification of interest income as business income.
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