1977 (10) TMI 52 - AT - Income Tax

Summary

Issues:
Assessability of interest awarded by Sub-Judge along with enhanced compensation for acquired lands; Valuation of land for computing capital gains; Allowance of basic exemption of Rs. 5,000 to each part-owner while computing capital gains.

Assessability of Interest:
The appeals involved a dispute over the assessability of interest awarded by the Sub-Judge along with enhanced compensation for lands acquired by the Government. The Sub-Judge awarded higher compensation and interest at 4% on the additional amount from the date of acquisition. The issue was whether the interest for earlier years could be taxed in the year under consideration. The ITO assessed the entire interest during the year under consideration, leading to appeals by the assessees. The AAC relied on a decision of the Andhra Pradesh High Court, upholding the ITO's action. However, the ITAT held that since the Government had appealed against the Sub-Judge's award, the interest had not finally accrued, thus excluding it from assessment for the year.

Valuation of Land for Capital Gains:
In one of the appeals, the valuation of land as on 1st Jan., 1954 was disputed for computing capital gains. The ITO valued the land at Rs. 2,000 based on a previous case, but the AAC valued it at Rs. 18,000 considering various factors. The ITAT upheld the AAC's decision, finding it fair and based on a thorough analysis. The ITAT noted that the AAC's valuation was reasonable and upheld it, rejecting the appellant's contention.

Allowance of Basic Exemption for Part-Owners:
Another issue in the appeals was the allowance of basic exemption of Rs. 5,000 to each part-owner while computing capital gains. The ITO denied the exemption, arguing it was already given to another assessee. However, the AAC allowed the exemption to each part-owner. The ITAT upheld the AAC's decision, stating that each assessee is entitled to statutory exemptions individually under the Act, leading to the dismissal of the Departmental appeal.

In conclusion, the ITAT allowed the appeals by the assessees and dismissed the Departmental appeal, emphasizing the exclusion of interest from assessment due to ongoing litigation, upholding the fair valuation of land for capital gains, and confirming the entitlement of each part-owner to the basic exemption individually.