2008 (2) TMI 16 - HC - Income Tax

Taxability of 50% of award (compensation) claimed under a provisional order of HC since the final decision has not been delivered by the HC, the amount had not accrued to the Assessee as income in the relevant previous year. The addition made by the Assessing Officer was accordingly deleted

Summary

Issues:
1. Assessment of income based on interim orders from the Madhya Pradesh High Court.
2. Whether the amount received by the Assessee should be considered as income liable to tax.
3. Comparison with a similar case - Hindustan Housing and Land Development Trust Ltd.
4. Interpretation of the interim orders by the Madhya Pradesh High Court.
5. Comparison with the case of K.C.P. Limited and its relevance to the current case.

Analysis:

1. The case involved the assessment of income based on interim orders from the Madhya Pradesh High Court. The Assessee had received a sum of Rs.3,28,65,728/- as per the orders, which was shown as current liabilities pending the court's decision.

2. The main issue was whether the amount received should be considered as income liable to tax. The Commissioner of Income Tax (Appeals) concluded that since the Assessee would have to return the amount if SECL succeeded in its plea, the amount did not accrue as income in the relevant year, following a Supreme Court decision.

3. The judgment referred to a similar case, Hindustan Housing, where the Supreme Court held that the right to receive compensation was inchoate until the Court accepted the claim, and the enhanced compensation would accrue only upon such acceptance.

4. The interpretation of the interim orders by the Madhya Pradesh High Court was crucial. The Court noted that the Assessee had no absolute right to receive the money, as it was obliged to return the amount if SECL succeeded in the appeal.

5. A comparison was made with the case of K.C.P. Limited, where the High Court did not impose any liability on the assessee to refund the amount received. The High Court in that case treated the amount as taxable, unlike in the present case where the Assessee was not required to refund the amount.

In conclusion, the High Court dismissed the appeal, stating that both the Commissioner of Income Tax (Appeals) and the Tribunal were correct in law in deleting the addition of Rs.3,28,65,728/- made by the Assessing Officer. The Court found no substantial question of law arising for consideration in this matter.