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TMI Blog2017 (10) TMI 930X X X X Extracts X X X X X X X X Extracts X X X X ..... on proper appreciation of the facts and material on record, correctly deleted the addition. The ground raised by the Department has no merit. Disallowance of loss on compulsory acquisition - Held that:- It is not in dispute that land belonging to the assessee-company was acquired in earlier year. The land acquired were owned by assessee-company through the group companies which were amalgamated with the assessee-company. The compensation was released to the assesseecompany on 4th December, 2006 amounting to ₹ 27,95,550. The assessee-company has shown the cost of the land at ₹ 1,30,30,176 in the books of account. Therefore, difference was considered as loss to the assessee-company because assessee-company is in the business of real estate development. The assessee-company is following the mercantile system of accounting. The assessee-company produced sufficient evidence before the Ld. CIT(A) to show that matter was considered by the legal department of the assessee-company and on the basis of the letter dated 17th April, 2007, the compensation was accounted for in the books of account in assessment year under appeal and it was offered for tax and the loss was also bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled for. The assessee submitted before A.O. that on unsecured loan given by M/s. DLF Limited to the assessee-company is subject to charging of interest @ 6.5% p.a. However, no interest was paid by M/s. DLF Limited on an amount of ₹ 1.17 crores advanced by the assessee-company. It was also submitted that advance of ₹ 1.17 crores was paid to M/s. DLF Limited in earlier years by various companies for purchase of properties as per details enclosed. These various companies had been merged with the assessee-company w.e.f. 01.04.1999. As per the terms of the agreement made between these companies and M/s. DLF Limited, there is no interest due on such advance. 4. The A.O. however, did not accept the contention of the assessee and noted that advance given to M/s. DLF Limited was outstanding from preceding assessment year and no interest have been charged and the amount given has not been utilized by M/s. DLF Limited for the purpose for which it was given. Whereas, M/s. DLF Limited had charged interest @ 6.5% p.a. therefore, same rate of interest were charged on the advance given of ₹ 1.17 crores by the assessee-company to M/s. DLF Limited and accordingly, addition of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of State Bank of Travancore Vs. ClT (I986) 158 ITR 102 SC, duly recognized and followed in various judicial rulings, that It is the income which has really accrual or arisen to the assessee that is taxable Since no income has accrued or arisen on the advances given to the DLF Ltd., for acquisition of land, I am of the considered view that the action of the Assessing officer in bringing to lax notional interest is not sustainable at all, and the appellant succeeds in this ground of appeal and gets relief of ₹ 7,63,972/-. 6. The Ld. D.R. relied upon the order of the A.O. 7 The Learned Counsel for the Assessee reiterated the submissions made before the authorities below and also relied upon the judgment of the Hon ble Delhi High Court in the case of CIT vs. DLF Universal Ltd., dated 16th April, 2015, in which on issue No.3, it was held that no notional interest could be charged. 8. On consideration of the rival submissions, we are of the view that no interference is called for in the matter. It is not in dispute that the advance in question have been given to M/s. DLF Limited in earlier years. It is also not in dispute that various companies who have advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication/Award was owned by the assessee-company through land owning companies which amalgamated with the assessee w.e.f. 01.04.1999. Copy of the details of the amalgamation were submitted. The compensation for acquisition of land was released by the Land Acquisition Collector vide cheque dated 04th December, 2006 amounting to ₹ 27,95,550 details of which were filed before A.O. The compensation received has been included in the income of the year under reference and appearing in P L account. The corresponding cost of the land acquired has been written-off at ₹ 1,30,30,176 which has been reduced from the closing stock of land as on 31st March, 2008, which resulted into loss of ₹ 1,02,34,626. It was submitted that A.O. has misdirected himself in holding that compensation was received in the year relevant to A.Y. 2001-2002 and he has overlooked the details filed before him because the compensation was released in December, 2006. It may be appreciated that once land is notified and acquired, there is always time gap between the acquisition and the release of compensation and every owner has to prove his ownership of the land for which the compensation is being paid. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s settled in December 2006 and such payments has been received by the appellant on 20.12.2006. This payment was received by way of Cheque No. 303019 of Corporation Bank of India. After receipt of the cheque, the matter was examined by the legal cell of the appellant company and thereafter details of the compensation received were forwarded to the accounts department vide its letter dated 17.04.2007. On the basis of this letter, the compensation was accounted for in the books of accounts of the appellant in the accounting year 2007-08. In support of this contention the appellant has filed copy of the balance sheet, profit and loss account of the appellant company for F.Y. 2007-08 as Annexure C to the paper book wherein the compensation received has been offered as income. The appellant has also filed working of the cost of the land which was acquired by the Govt. of Haryana, as per Annexure D to the paper book wherein the cost of land had been shown at ₹ 1,30,30,176/- in its books of accounts. Since, the matter relating to acquisition of land and receipt of the compensation was settled during the year after completing various formalities, the compensation income received w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15(5) was inserted with effect from April 1, 1988, as an overriding provision Since compensation under the Land Acquisition Act, 1894, arises and is payable in multiple stages, the Legislature stepped in and said that as and when the assessee claimant is in receipt of enhanced compensation it shall be treated as deemed income and taxed on receipt basis. Hence, the year in which enhanced compensation is received is the year of taxability Consequently, even in cases where pending appeal the court tribunal authority before which the appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation (which is in disputed, the same is liable to be taxed under section 45(5) of the Act in the year of receipt Even before the insertion of section 45(5) and section 155(16) with effect from April 1, 2001 the receipt of enhanced compensation under section 45(5) was taxable in the year of receipt and this is reinforced by insertion of clause (c). Compensation, including enhanced compensation/ consideration under the Land Acquisition Act. 1894, is based on the full value of the property on the date of the notification under section 4 of that Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also explained that these expenses to the tune of ₹ 41.95 lakhs were marginal as compared to the enormous size of the assessee- company. It was also explained that as per the accounting policy followed by the assessee. such expenses were booked in the year in which they/were settled for payment The Tribunal went into the details of each and every such expense and recorded the finding of fad that all these expenses were settled during this year It was also recorded that more than 50 per cent, of expenses could he claimed only on actual payment, as they were covered under section 43B(d) of the Income-tax Act. 1961. The assessee also informed that even in the earlier year, the assessee had shown positive income and paid tax thereon. Therefore there was no loss of revenue Had this expense been allowed in the previous year, the assessee would have paid less tax. There was no necessity to interfere with the order of the Tribunal. Commissioner of Income-tax v. Beekay Engineering Corporation [2010] 323 ITR 0252. BUSINESS EXPENDITURE YEAR IN WHICH DEDICTIBLE-- ASSESSEE DOING JOB WORK FOR ENGINEERING CORPORATION FROM DECEMBER 1988 TO JUNE I989-BILLS SUBMITTED BY CORPORAT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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