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TMI Blog2009 (11) TMI 491X X X X Extracts X X X X X X X X Extracts X X X X ..... es and one Narayan Ramdayal Lathi, who is an advocate by profession, had purchased certain agricultural lands during the period 1992 to 1998. The said lands were acquired immediately thereafter by the State Government. The assessees received compensation/enhanced compensation towards the acquisition of the said lands during the assess- ment years 2000-01, 2001-02 and 2002-03. The assessees had filed their returns for the said assessment years. Noticing that the assessees, apart from their regular business/professional activities, had jointly purchased agricultural lands involving 13 transactions and out of the said 13 trans- actions, nine lands bearing Gut Nos. 700, 717, 845, 69, 700, 19/1/A, 1218/1/ 2, 29 and 30, were under consideration for acquisition at the time of pur- chase of land and subsequent to purchase, within a short span of time, the said lands were acquired and that they had received compensation, as well as, enhanced compensation under the Land Acquisition Act, 1894, the assessments were reopened under section 147 of the Income-tax Act, 1961 (for short, hereinafter referred to as "the said Act") after issuing notices under section 148 to the assessees. 4. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held that the enhanced com- pensation was liable to be taxed. In so far as the finding of the Commis- sioner of Income-tax (Appeals), regarding interest on enhanced compen- sation being not liable to be taxed, the Tribunal held that the interest was to be assessed on accrual basis from year to year. The Tribunal upheld the view of the Commissioner of Income-tax (Appeals), to the extent, that the interest was liable to be taxed only on reaching its finality. The Tribunal also upheld that the interest has to be assessed under the head "Income from other sources". Being aggrieved by this order, both the assessees, so also, the Revenue have preferred the present appeals. 8. We have heard Mr. M. K. Kulkarni and Mr. A. B. Kale, learned counsel appearing on behalf of the respective appellants/respondents, viz., asses- sees, and Mr. Alok Sharma, learned Assistant Solicitor General, appearing for the respective appellants/respondents, viz., the Revenue, at length. 9. Mr. M. K. Kulkarni, learned counsel, leading the arguments on behalf of the assessees, submits that in view of section 2, sub-section (14)(iii), clauses (a) and (b) of the said Act, since the lands in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The next submission of Mr. M. K. Kulkarni, learned counsel appearing on behalf of assessees, is that the provisions of section 234B of the said Act applies to situation where there is default in the payment of advance tax. He submits that the said provision only applies when the assessee is liable to pay advance tax in that year and if he has failed to do so. In the sub- mission of the learned counsel, firstly, no tax was payable on the com- pensation so received and, secondly, since the assessees could not estimate as to how much compensation was to be received by them, they could not have paid the advance tax. In support of his submission, in this respect, he relies on the judgment of the Delhi High Court in the case of CIT v. Anand Prakash [2009] 316 ITR 141 (Delhi). 13. Mr. A. B. Kale, learned counsel appearing for the assessee, namely, Narayan Ramdayal Lathi, submits that the notices were issued to the assessees under section 148 of the said Act after their returns for the relevant years were accepted and, as such, it was beyond the scope of sec- tion 147 of the said Act. He submits that the grounds, which are available for invoking the jurisdiction under section 147, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) As to whether the assessees were liable to be assessed for the profits earned by them on account of the compensation received by them for acquisition of agricultural lands by terming the same to be `adventure in the nature of trade', as defined under section 2(13) of the said Act ? (2) As to whether the assessment proceedings could be reopened under section 147 of the said Act by issuing a notice under section 148 of the said Act, if no notice is issued to the assessee within a period of 12 months from the end of the month in which the return is filed, in view of the provisions of section 143(2) of the said Act ? (3) As to whether the interest, as provided under section 234B of the said Act, was liable to be levied in the facts of the present case ? (4) As to whether the interest is liable to be taxed only on reach- ing its finality ? and (5) As to whether the interest on enhanced compensation is to be assessed under the `income from other sources' when such enhanced compensation has been taxed as business income under section 28 of the Income-tax Act, 1961 ?" Question No. 1 16. For deciding the first question, it will be necessary to ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Such a conclusion is no doubt based upon the primary evidentiary facts, but its ultimate form is deter- mined by the application of relevant legal principles. The need to apply the relevant legal principles tends to confer upon the final con- clusion its character of a legal conclusion and that is why it is regarded as a conclusion on a question of mixed law and fact. In dealing with findings on questions of mixed law and fact the High Court would no doubt have to accept the findings of the Tribunal on the primary questions of fact ; but it is open to the High Court to examine whether the Tribunal had applied the relevant legal princi- ples correctly or not ; and in that sense, the scope of enquiry and the extent of the jurisdiction of the High Court in dealing with such points is the same as in dealing with pure points of law." 17. The said position of law has been reiterated by the apex court in the case of Saroj Kumar Mazumdar v. CIT [1959] 37 ITR 242 and in the case of Janki Ram Bahadur Ram v. CIT [1965] 57 ITR 21 (SC). 18. After considering all the leading judgments on the point, the apex court in the case of G. Venkataswami Naidu and Co. v. CIT [1959] 35 ITR 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the acquisition of the open plots could involve any pride of possession to the purchaser. It is really not one transaction of purchase and resale. It is a series of four transactions undertaken by the appellant in pursuance of a scheme and it was after the appellant had consolidated its holding that at a convenient time it sold the lands to the Janardana Mills in two lots. When the Tribunal found that, as the managing agent of the mills, the appellant was in a position to influence the mills to purchase its properties its view cannot be challenged as unreasonable. If the pro- perty had been purchased by the appellant as a matter of investment it would have tried either to cultivate the land, or to build on it ; but the appellant did neither and just allowed the property to remain unutilised except for the net rent of Rs. 80 per annum which it received from the house on one of the plots. The reason given by the appellant for the purchase of the properties by the mills has been rejected by the Tribunal ; and so when the mills purchased the pro- perties it is not shown that the sale was occasioned by any special necessity at the time. In the circumstances of the case, the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst step taken by the appellant in execution of a well-considered plan to acquire open plots near the mills. The apex court, from the conduct of the appellant, found that the plots, in question, were purchased by the appellant with the sole intention to sell them to the mills at a profit. 20. In this background, let us examine the observations of the Tribunal while affirming the findings of the Assessing Officer and the Commis- sioner of Income-tax (Appeals), that the transactions, which are the subject-matter of the proceedings, amounted to "adventure in the nature of trade". The Tribunal has found thus : "21. We have also examined the meaning of the term `adventure in the nature of trade' mentioned in section 2(13) of the Act. It has now been defined in the Income-tax Act. As far as the dictionary meaning of the word `adventure' is concerned, it implies a pecuniary risk, a ven- ture, a commercial enterprise. The work `venture' in its turn is defined as a commercial activity in which there is a risk of loss as well as a chance of gain. During the course of hearing before us, this question has also been cropped up whether the impugned activity had fallen under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeals was in this direction only. 22. In a nutshell, on the basis of the detailed discussion made here- inabove, the conclusion can be drawn that the entire activity of this appellant was within the domain the adventure in nature of trade. We are aware that by profession an advocate, but he has also entered into an activity which can be held to be incident to the business activity. His act prior to the acquisition was definitely assailed with the profit motive. He was aware at the time of purchase that the land in ques- tion was within the acquisition proceedings, hence it cannot be held as an investment for a long period. The land in question could never be a pride of possession since it was about to be acquired by the Government. The land in question was not going to be held, least to say, for a long time but even for some time because the acquisition proceedings were in succession. Even it cannot be said to be a pur- chase for aesthetic possession. What is important for our considera- tion, it is distinctive character, total effect of the intention of this appellant at the time of purchase, all the relevant factors as also surrounding circumstances so as to finally determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r acquisition by the Government. It is to be noted that the transactions were not only pertaining to the Jalgaon District but also Aurangabad District, at a far away distance from the place of residence of the assessees. We do not find any perversity in the finding of fact recorded by the Assessing Officer and confirmed by the Commissioner of Income- tax (Appeals) and the Income-tax Appellate Tribunal, that the transactions were "adventure in the nature of trade". 22. Now, let us deal with the contention of the assessees, that in view of provisions of section 2, sub-section (14)(iii), clauses (a) and (b) of the said Act, the agricultural lands were excluded from the definition of "capital asset" and, as such, no tax was payable on the compensation received on account of the acquisition of the said lands. From the material on record, it is manifest that the lands purchased by the assessees were not purchased with an intention to hold it as a "capital asset" but were purchased with the knowledge that the said lands are being acquired with the sole inten- tion of earning huge profit on account of their acquisition. If the lands were not purchased with the intention of holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n such period, not being less than thirty days, as may be specified in the notice, a return in the pres- cribed form and verified in the prescribed manner setting forth the net wealth in respect of which such person is assessable as on the valu- ation date mentioned in the notice, along with such other particulars as may be required by the notice, and may proceed to assess or reassess such net wealth and also any other net wealth chargeable to tax in respect of which such person is assessable, which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section for the assessment year con- cerned (hereafter in this section referred to as the relevant assessment year) and the provisions of this Act shall, so far as may be apply as if the return were a return required to be furnished under section 14 : Provided that where an assessment under sub-section (3) of sec- tion 16 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any net wealth chargeable to tax has escaped assessment for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed ; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 : Provided that in a case- (a) where a return has been furnished during the period com- mencing on the 1st day of October, 1991, and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the pro- viso to sub-section (2) of section 143, as it stood immediately before the amendment of the said sub-section by the Finance (No. 2) Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub- section (2) of section 153, every su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of the present case, the learned counsel appearing for the assessees has relied on the judgment of the Delhi High Court, in the case of CIT v. Anand Prakash [2009] 316 ITR 141 (Delhi), to contend that since the assessee had not withheld any money belonging to the Government and the interest payable on account of enhanced compensation was unknown to the assessee on the date of completion of assessment, there- fore, the assessee could not have included the interest received on the enhanced compensation in the assessment year while estimating his income for the purposes of calculation of advance tax for the relevant years. 28. The scope of section 234B and section 234C of the Income-tax Act, 1961, came up for consideration before the Division Bench of this court, in the case of CIT v. Kotak Mahindra Finance Ltd. [2004] 265 ITR 119. It would be relevant to refer to paragraph 7 of the said judgment, which reads thus (page 124) : "Section 234B and section 234C fall under Chapter XVII of the Income-tax Act which deals with collection and recovery. Chapter XVII-F deals with interest chargeable in certain cases. Section 234B along with section 234A and section 234C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That, such com- panies have to compare the total income computed under the normal provisions of the Income-tax Act with the book profits computed under Chapter VI of the Companies Act. That, the accounts of the company under Schedule VI cannot be prepared before the end of the previous year whereas, section 207 of the Income-tax Act provides for estimation of the `current income' at the end of the previous year. That, section 207 contemplates estimation of current income by the end of the financial year and on that estimation the assessee is required to pay advance tax. According to the assessee, therefore, interest cannot be levied on account of short payment of advance tax in cases of companies falling under section 115J. We do not find any merit in this argument. The difficulty faced by the assessee in the matter of computation cannot defeat the liability for payment of advance tax. Under section 207 of the Income-tax Act, advance tax is payable during any financial year in respect of the `current income'. The words `current income' are very crucial. The words `current income' refer to computation of total income under the provisions of the Income-tax Act including section 115J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... difficulty faced by the assessee in the matter of computation cannot defeat the liability for payment of advance tax. It has been held that under section 207 of the Income-tax Act, 1961, advance tax is payable during any finan- cial year in respect of the "current income". In the said case, the court has clearly negated the contention of the assessee, that merely because the curtain raises in the cases of companies falling under section 115J after March 31, cannot be a ground for the assessee-company not to pay interest under section 234B and section 234C. Since we have already upheld that the profit earned by the assessee on receipt of the compensation is an income chargeable to income-tax under the head "Profit from business", holding the transaction to be "adventure in the nature of trade", in view of the judgment of the Division Bench, cited supra, mere difficulty faced by the assessee in the matter of computation cannot defeat the liability for payment of advance tax. In view of the judgment of a Division Bench of this court, we are unable to agree with the view taken by the Division Bench of the Delhi High Court, in the case of CIT v. Anand Prakash [2009] 316 ITR 141. We acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be taxed under section 45(5) of the 1961 Act. This is the scheme of section 45(5) and section 155(16) of the 1961 Act. We may clarify that even before the insertion of section 45(5)(c) and section 155(16) with effect from April 1, 2004, the receipt of enhanced compensation under section 45(5)(b) was taxable in the year of receipt which is only reinforced by the insertion of clause (c) because the right to receive payment under the 1894 Act is not in doubt. It is important to note that compensation, including enhanced compensation/consideration under the 1894 Act, is based on the full value of property as on date of notification under section 4 of that Act. When the court/tribunal directs payment of enhanced compensation under section 23(1A), or section 23(2) or under section 28 of the 1894 Act, it is on the basis that award of the Collector or the court, under reference, has not compensated the owner for the full value of the property as on date of notification." 34. In the aforesaid judgment, the apex court has also held that the interest under section 28 is a part of enhanced value of the land which is not the case in the matter of payment of interest under section 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce we have already held that the compensation received on account of acquisition of the lands, in question, was a business income taxable under section 28 of the Income-tax Act, 1961, we find that the Income-tax Appellate Tribunal has erred in treating the interest as "income from other sources". 37. We accordingly answer the issues as under : (1) We uphold the concurrent finding of the authorities, that the transactions, in question, were "adventure in the nature of trade" and as such, chargeable to income-tax under the head "Profits and gains of busi- ness or profession". (2) Since in view of the amendment to section 148 by the Finance Act, 2006, the notices issued to the assessees under sub-section (2) of section 143 of the Income-tax Act, 1961, after the expiry of 12 months, specified in the proviso to sub-section (2) of section 143, where returns have been fur- nished during the period commencing from the 1st day of October, 1991, and ending on September 30, 2005, have been saved, no error could be found in the opening of the reassessment proceedings under section 147 of the Income-tax Act. (3) The interest, as provided under section 234B of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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