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TMI Blog2009 (9) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest was liable to be taxed accordingly? 3. On the facts and circumstances of the case, whether the learned CIT(A) was right on facts and in law in holding that there is no taxability of enhanced compensation and interes1 thereon in the year under consideration disregarding the fact that the AO has rightly taxed the same amount in the year of receipt as per law the assessee being agriculturist and was not following mercantile system of accounting?" 2. Briefly, the facts relating to the issue involved in the grounds of appeal arc that the assessee received enhanced compensation of Rs. 15,71,790 and interest on enhanced commission amounting to Rs. 10,87,936, totalling to Rs. 26,59,726 on 2nd Feb., 2000 vide LAC No. 870 of 1997. As per information from Land Acquisition Officer, HUDA, Faridabad, the AO proceeded to bring these amounts to tax and initiated proceedings under s. 148. In response thereto, the assessee filed its return of income for asst. yr. 2000-01 declaring an income of Rs. 64,200. Dissatisfied with the amount of the award, the assessee filed an appeal before the District and Sessions Judge, Faridabad, who enhanced the compensation award with a phenomenal ris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO on account of the same in asst. yr. 2000-01. 7. Before us, learned Departmental Representative for the Revenue submitted that an identical issue involving identical facts recently came up for consideration before the apex Court in the case of CIT vs. Ghanshyam (HUF) (2009) 224 CTR (SC) 522 : (2009) 26 DTR (SC) 129 : (2009) 315 ITR 1 (SC) and their Lordships held that receipt of enhanced compensation/consideration on compulsory acquisition of land is to be taxed in the year of receipt subject to adjustment, if any, under s. 155(16); even in cases where pending appeal, the Court/Tribunal/authority permits the claimant to withdraw the disputed enhanced compensation against security or otherwise. the same is liable to be taxed under s. 45(5); interest under s. 28 of Land Acquisition Act, 1894, as well as additional amount under s. 23(1A) and solatium under s. 23(2) form part of enhanced compensation/consideration under s. 45(5)(b). 8. On the other hand, learned Authorised Representative for the, assessee fairly conceded that as far as the taxability of enhanced compensation in the year of receipt was concerned it was covered against the assessee as per the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nhanced compensation and interest thereon in the context of amended provisions of s. 45(5) of IT Act, whereas, in the case of Smt. Rama Bai, their Lordships have not decided the issue in the context of the amended provisions of s. 45(5) and s. l55(16) of IT Act. 11. We have considered the rival contentions of both the parties, perused the record and carefully gone through the orders of tax authorities below as well as the case law referred to by both the parties. 12. At the outset, we may mention that the learned Authorised Representative for the assessee has not disputed before us that in the instant case, the taxability of the enhanced compensation in the year of receipt stands covered by the decision of the apex Court in the case of Ghanshyam (HUF) wherein their Lordships held that even in eases where appeals arc pending before the Court/Tribunal/authority which permits the claimants to withdraw disputed enhanced compensation against security or otherwise, the same is liable to be taxed under s. 45(5) in the year of receipt. Hence to this extent, as conceded by learned Authorised Representative for the assessee, the issue stands decided against the assessee and in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of assessment on account of enhancement of compensation by different Courts often resulted in mistakes in computation of tax. Therefore, with a view to remove these difficulties, the Finance Act, 1987 inserted s. 45(5) to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. Interest under s. 28 of Land Acquisition Act, 1894, unlike interest under s. 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under s. 34. So also additional amount under s. 23(1A) and solatium under s. 23(2) form part of enhanced compensation under s. 45(5)(b). Contention that s. 45(5)(b) deals only with reworking, its object is not to convert the amount of enhanced compensation into deemed income on receipt is not sustainable. The scheme of s. 45(5) was inserted w.e.f. 1st April, 1988 as an overriding provision. As stated above, compensation under the Land Acquisition Act, 1894, arises and is payable in multiple stages which docs not happen in cases of transfers by sale etc. Hence, the legislature had to step in and say that as and when the assessee cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contended that in view of the decision of apex Court delivered in the case of Smt. Rama Bai, the interest received by the assessee on enhanced compensation under s. 28 of Land Acquisition Act, 1894 is not to be taxed in the year of receipt but it is to be taxed/assessed in different years in which it accrued from the date of delivery of possession of lands till the date of such order. We may mention here that from the observations made in the order of apex Court in the case of Ghanshyam (HUF), it is clear that the ratio of this decision applies to the facts and issue under consideration before us because while deciding this issue their Lordships have taken into consideration c1. (c) of s. 45(5) inserted w.e.f. 1st April, 2004 and s. 155(16) as well as provisions of s. 45(5)(b) of IT Act whereas the same were not taken into consideration by the Full Bench of the apex Court in the case of Smt. Rama Bai. 17. We may further mention here that while deciding this issue in the case of Ghanshyam (HUF), their Lordships have taken into consideration the introduction of s. 45(5) of 1961 Act w.e.f. 1st April, 1988 and subsequent provisions inserted as ss. 45(5)(b), 45(5)(c) and 155(16) keep ..... X X X X Extracts X X X X X X X X Extracts X X X X
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