2000 (2) TMI 190 - AT - Income Tax

Summary

Issues:
1. Assessment of capital gains for the assessment year 1992-93 based on advance received for land acquisition.
2. Assessment of interest on compensation amount for the assessment year 1992-93.

Analysis:

Issue 1: Assessment of Capital Gains
The appeal concerns the assessment of capital gains for the assessment year 1992-93 based on an advance received by the assessee for the acquisition of land. The Assessing Officer contended that the sum received was assessable as capital gains under section 45(5)(a) of the Income-tax Act. However, the CIT (Appeals) held that the compensation was actually receivable as per the award in the financial year 1992-93, thus making the capital gains assessable for the assessment year 1993-94. The Tribunal analyzed the provisions of section 45(5)(a) and noted the amendment brought by the Finance (No. 2) Act, 1991, which clarified the chargeability of initial compensation as capital gains. The Tribunal concluded that the advance received was part of the compensation, assessable for the assessment year 1992-93, and directed the Assessing Officer to consider only the advance amount for the assessment.

Issue 2: Assessment of Interest on Compensation
Regarding the assessment of interest on the compensation amount for the assessment year 1992-93, the Assessing Officer included interest on an accrual basis. However, the CIT (Appeals) held that the interest accrual was in the year ending on 31-3-1993, making it assessable for the assessment year 1993-94. The Tribunal referred to legal precedents, including the Kerala High Court and Supreme Court decisions, which established that interest on compensation accrues from the date of possession by the government. Consequently, the Tribunal reversed the decision of the CIT (Appeals) and upheld the assessment of interest on the compensation for the assessment year 1992-93 on an accrual basis.

In conclusion, the Tribunal partly allowed the appeal by the Revenue, directing the Assessing Officer to revise the assessment accordingly, considering only the advance amount for capital gains assessment for the assessment year 1992-93 and upholding the assessment of interest on the compensation for the same assessment year on an accrual basis.