2010 (12) TMI 548 - AT - Income Tax

Addition - Capital gain - interest on enhanced compensation - Interest paid on the excess amount under s. 28 of the Land Acquisition Act 1894 depends upon a claim made by the person whose land is acquired whereas interest under s. 34 is for delay in making payment; it postulates award of interest at 9 per cent per annum from the date of taking possession only until it is paid or deposited - in the case of CIT us. Hindustan Housing and Land Development Trust Ltd. (1986) 58 CTR (SC) 179 (1986) 161 ITR 524 (SC) with reference to the provision under s. 155(15) providing for refund of excess tax and after this provision it was found no reason for postponing the liability for the amount received by the assessee - Since the amount of enhanced compensation and interest thereupon is held to be assessable in the asst. yr. 2002-03 in which it is received the same amount shall not be again included in the other assessment year on protective basis - Decided in favour of the assessee by way of remand to AO

Summary

Issues:
- Taxability of enhanced compensation and interest received
- Assessment of compensation and interest in the relevant assessment years

Analysis:
1. Taxability of Enhanced Compensation and Interest Received:
The main issue in this case revolved around the taxability of enhanced compensation and interest received by the assessee. The Revenue contended that the compensation and interest should be taxed in the year of receipt, regardless of any pending litigation. The Hon'ble High Court remanded the matter to the Tribunal for fresh consideration in light of the Supreme Court's judgment in the case of CIT vs. Ghanshyam (HUF), where it was held that enhanced compensation is liable to be taxed in the year of receipt. The Tribunal, after considering the facts, held that the AO was justified in assessing the enhanced compensation and interest in the year they were received.

2. Assessment of Compensation and Interest in Relevant Assessment Years:
The Tribunal reviewed the assessment order passed by the AO, where it was noted that the assessee had not offered the entire compensation and interest received to tax in the relevant assessment years. The AO had assessed the total income at Rs. 3,75,99,800, including compensation and interest under different heads. The CIT(A) had deleted the additions based on the decision of the Hon'ble Punjab and Haryana High Court in the case of CIT vs. Prem Singh, which stated that compensation and interest cannot be assessed until finality is attained. However, the Tribunal, following the Supreme Court's judgment in the case of Ghanshyam (HUF), held that the additional compensation and interest should be assessed in the year of receipt.

3. Conclusion:
The Tribunal allowed all four appeals filed by the Revenue and directed the AO to assess the enhanced compensation and interest received by the assessee in the year of receipt, i.e., the assessment year 2002-03. The Tribunal clarified that the same amount should not be included in other assessment years on a protective basis. The matter was remanded back to the AO for the actual working of the compensation amount and interest received, as per the findings of the Tribunal based on the Supreme Court's judgment.

This detailed analysis highlights the key issues of taxability and assessment of compensation and interest in the relevant assessment years as discussed and decided by the Tribunal in this case.