2015 (11) TMI 421 - AT - Income Tax

Interest levy u/s 234B - can the assessee be held to be in default in payment of advance tax arising from the above stated interest income? - assessee s stand claiming spread over of the enhanced compensation income - Held that - It transpires from the case law of Ghanshyam HUF 2009 (7) TMI 12 - SUPREME COURT itself that the hon ble Punjab & Haryana high court in its lead judgment reported as CIT vs. Karanbir Singh (2007 (1) TMI 167 - PUNJAB AND HARYANA HIGH COURT) had accepted spreading over by following decision of hon ble supreme court in Bikram Singh s case (1996 (9) TMI 6 - SUPREME Court). The picture that emerges is that before the hon ble apex court cleared this air of confusion as to whether the enhanced compensation is taxable by following principle of spread over or year of receipt, the assessee s case was covered by above stated decisions. We hold in these facts that the assessee s default in question was very much justifiable. He proceeded as per the law as it prevailed at the relevant time. A co-ordinate Bench of the tribunal in Intas Exports (2013 (7) TMI 926 - ITAT AHMEDABAD) considered issue of similar interest levy u/s 234B wherein the assessee had defaulted in AY 2003-04 based on amendment in section 80HHC of the Act introduced by the Finance Act, 2005 with retrospective effect from 01.04.2001. It holds that default giving rise to section 234B interest is not attributable to the concerned assessee. The Revenue does not point out any exception on facts. We follow the very decision and conclude that the present assessee could not have foreseen the hon ble apex court decision holding assessment of the enhanced compensation in the year of receipt as against that of spread over. The assessee s arguments challenging section 234B interest succeed. The impugned interest levy u/s 234B is deleted. - Decided in favour of assessee.

Issues Involved:
1. Taxability of interest on enhanced compensation.
2. Confirmation of addition of Rs. 22,93,378/- on account of interest on enhanced compensation.
3. Claim of spreading over the interest income.
4. Levy of interest under section 234B.
5. Initiation of penalty under section 271(1)(c).

Detailed Analysis:

1. Taxability of Interest on Enhanced Compensation:
The first issue concerns whether the interest awarded on enhanced compensation for the assessee's land acquired should be taxable. The appellant argued that, according to the Supreme Court's decision in CIT vs. Ghanshyam HUF (2009) 315 ITR 01 (SC), such interest should not be taxable as it is an integral part of the compensation. The Tribunal noted that the assessee had not claimed this exemption before the lower authorities but raised it for the first time before the ITAT, which is permissible as a pure question of law based on existing records.

2. Confirmation of Addition of Rs. 22,93,378/-:
The second issue challenges the CIT(A)'s decision to confirm the addition of Rs. 22,93,378/- as interest on enhanced compensation. The Tribunal referred to the Supreme Court's ruling in CIT vs. Ghanshyam HUF, which held that interest under section 28 of the Land Acquisition Act is part of enhanced compensation and taxable in the year of receipt. However, the Tribunal also noted the need to determine if this interest is exempt under section 10(37) of the Income-tax Act, which exempts income from the transfer of agricultural land under certain conditions.

3. Claim of Spreading Over the Interest Income:
The third issue pertains to the assessee's claim for spreading over the interest income across different years. The Tribunal observed that the lower authorities had rejected this claim based on the Supreme Court's decision in Ghanshyam HUF, which mandates taxing the interest on receipt basis. However, the Tribunal acknowledged that the assessee's claim was based on earlier judicial precedents allowing spreading over and required fresh adjudication by the Assessing Officer.

4. Levy of Interest Under Section 234B:
The fourth issue involves the levy of interest under section 234B for default in payment of advance tax. The Tribunal noted that the issue of taxability of enhanced compensation was remitted back to the assessing authorities. It held that the assessee's default was justifiable as it was based on prevailing law and judicial precedents at the time. The Tribunal cited a co-ordinate bench decision in Intas Exports vs. ACIT, which held that interest under section 234B is not leviable when the default is not attributable to the assessee. Consequently, the Tribunal deleted the interest levied under section 234B.

5. Initiation of Penalty Under Section 271(1)(c):
The fifth issue concerns the initiation of penalty proceedings under section 271(1)(c). The Tribunal held that this ground was premature since the matter of taxability of interest on enhanced compensation was still under adjudication. Therefore, no findings were made on this issue.

Conclusion:
The Tribunal allowed the appeal to the limited extent of deleting the interest levied under section 234B, remitted the matter of taxability of interest on enhanced compensation back to the Assessing Officer for fresh adjudication, and held the initiation of penalty proceedings under section 271(1)(c) as premature. The order was pronounced on 30th September 2015 at Ahmedabad.

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