2012 (12) TMI 218 - HC - Income Tax

Acquisition of Land - Enhanced Compensation - Interest accrued on additional compensation - held that - Assessee became entitled to the enhanced compensation and interest pursuant to the award dated 26th February, 1990 passed by the Additional District Judge, Varanasi which award has been stayed by this Court vide order dated 24th September, 1990 in appeal preferred by the Collector, Varanasi - Staying the operation of the award would mean that the assessee became entitled to nothing till the matter is finally decided by this Court - interest income could not be taxed during the assessment years in question - order of the Tribunal does not suffer from any legal infirmity - appeal fails and is dismissed.

Summary

Issues:
1. Interpretation of interest accrued on additional compensation.
2. Taxability of interest income during the assessment years in question.

Interpretation of interest accrued on additional compensation:
The case involved an appeal under Section 260-A of the Income Tax Act, 1961 against an order passed by the Income Tax Appellate Tribunal regarding the accrual of interest on additional compensation. The dispute arose from the acquisition of agricultural land by the Special Land Acquisition Officer, where the Collector awarded compensation, which was later enhanced by the Additional District Judge. The Collector filed an appeal, and the operation of the award was stayed by the Court. The assessing officer taxed the interest accrued on the enhanced compensation, but the Commissioner of Income Tax (Appeal) deleted the addition. The Tribunal upheld the deletion, stating that as the award had been stayed, no interest accrued to the assessee. The High Court agreed with this interpretation, emphasizing that the stay meant the assessee was not entitled to the enhanced compensation until the matter was finally decided by the Court. Therefore, the Tribunal's decision was deemed legally sound, and the appeal was dismissed.

Taxability of interest income during the assessment years in question:
The main issue revolved around whether the interest income accrued on the additional compensation was taxable during the relevant assessment years. The Revenue contended that since interest had accrued, it should be taxed, but the Court disagreed. The Court highlighted that the stay on the operation of the award meant the assessee was not entitled to receive the enhanced compensation or interest until the final decision by the Court. Therefore, the Tribunal's decision to not tax the interest income during the assessment years was upheld, as the assessee had not actually received or become entitled to the interest. The Court concluded that the interest income could not be taxed for the assessment years in question, and the appeal was dismissed accordingly.