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TMI Blog2008 (4) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... on cannot be taxed unless it attains finality from the higher forum in spite of the fact that the additional compensation has actually been received by the assessee and thereby deleting the addition of Rs. 13,66,172 made on account of long-term capital gain arising out of enhanced compensation received and taxed under section 45(5) of the Income-tax Act and interest of Rs. 32,45,508 received on enhanced compensation as income from other sources in the year of receipt. 3.Holding that interest relating to previous year only be charged to tax though assessee has not shown income from interest on accrual basis in his return of income, nor was he maintaining any accounts on the mercantile system." Grounds taken in C.O. No. 10/Delhi/2007 "1.That having regard to the facts and circumstances of the case, learned CIT(Appeals) has erred in law and on facts in confirming the action of learned Assessing Officer in framing the assessment on HUF whereas HUF was not chargeable to tax that too in respect of the income assessed by learned Assessing Officer. 2.That having regard to the facts and circumstances of the case, learned CIT(Appeals) has erred in law and on facts in confirming the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in C.O. No. 187/Delhi/06: "1.That having regard to the facts and circumstances of the case, learned CIT(Appeals) has erred in law and on facts in not quashing the assessment made on the appellant whereas nothing was chargeable to tax on HUF as the impugned property was the individual property having been devolved as per proviso to section 6 of Hindu Succession Act. 2.In any view of the matter and in any case, reopening of the assessment on the appellant as HUF was bad in law and against the facts and circumstances of the case. 3.That having regard to the facts and circumstances of the case, learned CIT(Appeals) has erred in law and on facts in upholding the validity of the assessment even though assessment was interfered by learned CIT. 4.That having regard to the facts and circumstances of the case, learned CIT(Appeals) has erred in law and on facts in confirming the addition of Rs. 5,25,966 being the amount of original award which could be brought to tax only in the year of the award. 5.That having regard to the facts and circumstances of the case, learned CIT(Appeals) has erred in law and on facts in not holding that interest is the taxable only on accrual basis. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital gain for the year in which transfer took place. To provide for rectification of assessment of the year in which the capital gain was originally assessed, section 155(7A) was introduced. The additional compensation was awarded in several stages by different appellate authorities. That necessitates rectification of the original assessment at each stage. This again caused great difficulty in carrying out the required rectification and in effecting the recovery of additional demand. With a view to remove these difficulties, a new sub-section (5) to section 45 was inserted which provides for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. This provision was interpreted by various High Courts as well as by this Court and it has been held that section 45(5)( b ) of the Act would be attracted only when the assessee receives the enhanced compensation in pursuance of a final award/order of a Court, Tribunal or other authority increasing the compensation. If any amount is received after stay of the award, in pursuance of any interim order, as payment subject to the final result, it will not be an amount received as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is subsequently reduced and in that situation, it was provided that the assessment of additional compensation is to be reduced in the year of reduction. We are unable to accept the reasoning given by the Special Bench of the Tribunal that clause ( c ) to sub-section (5) of section 45 of the Act inserted by Finance Act, 2003 is to be made applicable retrospectively, and taken to be introduced with effect from 1-4-1988. It has been observed that this clause was inserted to make the entire scheme workable and to supply an obvious omission in the provision. Therefore, the said clause has to be taken to be declaratory in character and is applicable with retrospective effect. In our opinion, the entire sub-section (5) of section 45 of the Act is a charging section. The said sub-section itself is a Code and contains substantive provisions. Therefore, its provisions cannot be made applicable retrospectively without any express indication. Clause ( c ) to section 45(5) was inserted by Finance Act, 2003 with effect from 1-4-2004. In the purpose clause, it was specifically stated that this amendment will taken effect from 1-4-2004 and will, accordingly, apply in relation to the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal High Court that if any amount is received after stay of the award, in pursuance of any interim order, as payment subject to final result, it will not be an amount received as compensation under section 45(5)( b ) of the Income-tax Act, 1961. This provision will be attracted only when the final decision is rendered by the appellate or other authority. While considering the applicability of section 45(5), the Hon ble High Court has also discussed in detail, the ratio laid down by Hon ble Supreme Court in the case of CIT v. Hindustan Housing Land Development Trust Ltd. [1986] 161 ITR 524. The jurisdictional High Court also observed that amendment to section 45 of the Act by inserting clause ( c ) by Finance Act, 2003 only states that the amended provisions would come into force with effect from 1-4-2004. The statute nowhere states that the said amendment were either clarificatory or declaratory. On the contrary, in the note as published in 260 ITR (statute) 166, it was clearly stated that this amendment would come into force with effect from 1-4-2004 and will be applicable on the assessment year 2004-05. Undisputed position in all these appeals are that they pertain to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Chandi Ram ( supra ), we do not go in the technical plea taken by the assessee in cross objection. With regard to addition of principal amount of compensation, which was not received during the year under consideration, there is no reason for bringing the same to tax net in the year under consideration. However, the same can be examined in the year in which the original compensation was received subject to scope of reopening of assessment, if the same is not time barred. We direct accordingly. 7. The ground taken by the assessee in I.T.A. No. 1684/Delhi/03 with regard to no notice under section 143(2) or 142 having been issued in the name of HUF states, the entire assessment framed by the Assessing Officer deserves to be quashed. As we have already decided the issue on merit in favour of the assessee by following the decision of the Hon ble jurisdictional High Court in the case of Chandi Ram ( supra ), we are not going on the technical issue raised by the assessee. Similarly, ground taken in cross objection No. 187 with regard to validity of reopening is also not decided, as we have already decided the issue on merit in favour of the assessee. 8. In the resu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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