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TMI Blog2010 (3) TMI 868X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that in respect of the compensation received by the appellant, the provisions under section 45(5)(b) of the Income-tax Act, 1961, would apply ?" Tax Appeal No. 377 of 1999 "(1) Whether, in the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the compensation received by the appellant was not exempt from charge of the Income-tax Act being agricultural income ? (2) Whether, in the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in rejecting the con- tention of the appellant that inasmuch as jagir did not have any cost, the provisions of section 45 of the Act did not apply, and, therefore, gain, if any, was not liable to be taxed ? (3) Whether, in the facts and circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the interest received by the appellant was liable to be assessed on the basis of receipt in the assessment year 1989-90 ?" 3. The appellant-assessee is a Hindu undivided family. The karta of the Hindu undivided family is the son and the heir of the deceased Maharaja Naharsinhji Fat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , holding that the appellant was entitled to a sum of Rs. 25,18,264.30 and after giving the credit for a sum of Rs.1,20,567.30, the balance amount of Rs. 23,97,697 with interest at the rate of 3 per cent. per annum from August 1, 1954, till the date of payment should be paid. The State Government challenged the award of the Gujarat Revenue Tribunal, while the appellant filed a writ petition seeking enhancement of the amount of the award. Ultimately, as per the agree- ment arrived at between the parties, the High Court modified the order of the Gujarat Revenue Tribunal in the following terms : (1) The Government of India gave up its contention regarding the principal amount of Rs. 25,18,264.30 awarded by the Gujarat Revenue Tri- bunal ; (2) The appellant gave up claim for interest beyond 20 years from August 1, 1954, i.e., up to 1974 only. Pursuant thereto, the appellant received the balance principal amount of Rs. 18,97,697 (Rs. 5 lakhs having already been received in 1985-86) with interest of Rs. 6,53,385 computed up to 1974. 5. Thus, an amount of Rs. 5 lakhs was received in the previous year relevant to the assessment year 1987-88 with interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of the Jagir Abolition Act only in relation to limited number of trees, whereas com- pensation had been granted for the first time in relation to additional number of trees apart from enhancing the rate applicable per tree and, therefore, to the extent of the number of trees for which compensation had been granted for the first time by the Gujarat Revenue Tribunal, it could not be treated as additional/enhanced compensation and would not fall within provisions of section 45(5)(b) of the Act. 8. As against that, learned counsel for the Revenue submitted that the order made by the Tribunal was just, proper and correct in law and no interference was warranted. That the amount in question had rightly been brought to tax. 9. In relation to the interest amount, it was submitted on behalf of the appellant that the issue stood concluded by a catena of judgments of the apex court which have been consistently applied and followed by this High Court. In relation to the taxability of interest, learned counsel for the respondent-Revenue was not in a position to dispute the legal position laid down by various judgments. 10. In so far as the taxability of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compen- sation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration. Explanation.-For the purposes of this sub-section,- (i) in relation to the amount referred to in clause (b), the cost of acquisition and the cost of improvement shall be taken to be nil ; (ii) the provisions of this sub-section shall apply also in a case where the transfer took place prior to the 1st day of April, 1988 ; (iii) where by reason of the death of the person who made the transfer, or for any other reason, the enhanced compensation or consideration is received by any other person, the amount referred to in clause (b) shall be deemed to be the income, chargeable to tax under the head 'Capital gains', of such other person." 12. A plain reading of the opening portion of sub-section (5) of section 45 of the Act makes it clear that this provision operates notwithstanding any- thing contained in section 45(1) of the Act. In other words, sub-section (5) of section 45 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming the scheme to tax the capital gains, but is a provision which specifically deals with bringing to tax the additional amount of compen- sation/consideration received subsequent to the point of transfer of a capital asset. In fact, the original transaction has already been subjected to operation of the provisions of section 45(1) of the Act and, therefore, there is no transfer of capital asset in the year under consideration. To obviate the contention that in the absence of any transfer of capital asset, the amount received in the subsequent year/years cannot be brought to tax, sub-section (5) of section 45 of the Act has been enacted. Similarly, the dis- putes as to year in which the additional amount should be brought to tax, and whether the year in which the transaction was originally taxed should be reopened, and whether limitation would apply for the purposes of reopening, etc., would all stand resolved by operation of sub-section (5) of section 45 of the Act. In the circumstances, once section 48 of the Act has operated when the transaction was originally brought to tax, the assessee cannot successfully contend in the year of receipt of enhanced compen- sation that section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer. The reading of the order dated September, 6/10/12, 1984, made by the Gujarat Revenue Tribunal makes it clear that the Gujarat Revenue Tribunal has proceeded to decide the appeal on the basis that the lands in dispute are waste lands. Admittedly, the said order made by the Gujarat Revenue Tribunal has attained finality, both sides, i.e., the assessee and the State Government, who challenged the same having accepted to abide by the order so made as per the agreement arrived at between the parties. Hence, the Tribunal has rightly come to the conclu- sion that the enhanced compensation cannot be treated as agricultural income. 16. To sum up, the enhanced compensation received by the assessee is not amenable to tax under the provisions of section 45(1) read with section 48 of the Act, but is taxable as per the provisions of section 45(5)(b) of the Act. The assessee is, therefore, not entitled to claim that the amount of enhanced compensation cannot be brought to tax by virtue of the cost of acquisition of the capital asset being "nil" in the light of the legislative scheme laid down in section 45(5)(b) of the Act. Nor is it possible to find any legal infirmity ..... X X X X Extracts X X X X X X X X Extracts X X X X
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