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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 ..... ed the material on record. 3. On Ground No.1, the Revenue challenged the deletion of addition of Rs. 7,63,972 made by the A.O. on account of notional interest. The A.O. noted that assessee has taken unsecured loan from M/s. DLF Limited (Holding company of the assessee company) which on 31st March, 2008 were at Rs. 11.70 crores. Further, as per schedule-10 of the balance sheet, advances paid for purchase of land and plot amounting to Rs. 1,17,53,416 was shown against the name of M/s. DLF Ltd., as on 31st March, 2008 and the same amount was outstanding as on 31st March, 2007. Since the assessee had taken unsecured loans from M/s. DLF Limited and has also made advances to M/s. DLF Limited, therefore, in order to verify whether the unsecured loan taken from M/s. DLF Limited is interest bearing or interest free, an explanation of assessee was called 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 Rs. 1.17 crores advanced by the assessee-company. It was also submitted that advance of Rs. 1.17 crores was paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as advance to DLF Ltd. It is seen that these advances were for acquisition of land and same were not given out of interest bearing funds. These advances were given purely for the purpose of business i.e. for acquisition of land and cannot be termed as interest bearing advances. It is also observed that these advances are coming from earlier years and no notional interest was charged by the AO in the earlier year's assessment which have been passed u/s 143(3). Since these advances are old and not out of interest bearing funds and same have been given on account of commercial expediency, therefore, no notional interest can be charged on such business advances given in earlier years, Further, considering the concept of real income and the propositions with regard to Real Income laid down by the apex court in the 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 offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee-company has not filed copies of the petition for enhanced compensation. The assessee-company challenged the addition before Ld. CIT(A) and written submissions of the assesseecompany are reproduced in the appellate order in which the assessee-company briefly explained that the Government of Haryana vide Notification dated 08th September, 1997 and Notification dated 07th September, 1998, proposed to acquire land in Sector-26A, 27, 28, 42 and 43 at Gurgaon under Haryana Urban Development Authority at the area of village Wazirabad, Gurgaon for the purpose of developing infrastructure in Gurgaon. The Land Collector, Urban State, Haryana, Gurgaon passed Award No.17 for the year 2000-2001 for acquisition of the land. Copy of the Award was filed. Part of the land acquired vide aforecited Notification/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 Rs. 27,95,550 details of which were filed before A.O. The compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng companies amalgamated with the appellant w.e.f 01.04.1999. The compensation for acquisition of land was released by the Land Acquisition Collector vide cheque No. 303019 dated 04.12.2006 amounting to Rs. 27,95,550. It is also observed that land which was acquired by the Govt. of Haryana was owned by land owning companies which have been merged subsequently to the appellant company and cost of such land was at Rs. 1,30,30,176/- in their books of accounts as there was substantial difference between the acquisition cost awarded by the Haryana Govt. and the Market Cost of the land on which the said land was acquired. It is seen that, though the land was acquired by the Haryana Govt. during the period 1998- 2000, but the final settlement or payment of compensation was 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following judgments:- Commissioner of Income-tax v s. Ghanshyam (HUF) (2009) 315 ITR 0001. CAPITAL GAINS-COMPULSORY ACQCISITION-ENHANCEMENT OF COMPENSATION-AMOUNT BY WHICH ENHANCED- WHEN TAXABLE-LAW AFTER AMENDMENT OE SECTION 45(5) WITH EFFECT FROM APRIL 1, 1988- AMOUNT OF ENHANCEMENT IS DEEMED TO BE INCOME OF PREVIOUS YEAR IN WHICH IT IS RECEIVED-EVEN IF RECEIVED UNDER ORDERS OF COURT PENDING DECISION AND ASS ESS EE HAS TO OFFER SECURITYINCOME- TAX ACT, 1961, SS. 2(47), 45(1), (5), 155-CBDT CIRCULAR NO. 621, DATED DECEMBER 19, 1991 *-LAND ACQUISITION ACT, 1894, SS. 23(1), (IA), (2), 28, 34. *SEE (1992) 195 ITR (ST.) 154. The scheme of section 45(5) and section 155(16) of the Income- Tax Act, 1961, is this Section 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, ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 41,95,719/- related to the prior period and did not pertain to the financial year 2003-04 relevant to the assessment year 2004-05, as the assessee company was following the mercantile system of accounting and therefore, these expenses should have been claimed in the previous year. The Commissioner (Appeals) confirmed this view whereas the Tribunal reversed the order and allowed those expenses. On appeal. Held, dismissing the appeal, that even when the assessee was following the mercantile system of accounting, the explanation furnished by the assessee was that the expenses were not booked due to non-receipt of details, information thereof on lime, which was beyond the control of the assessee. It was also explained that these expenses to the tune of Rs. 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 343 (Del.). 12. On consideration of the rival submissions, we do not find any merit in the Departmental appeal. 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 assesseecompany. The compensation was released to the assesseecompany on 4th December, 2006 amounting to Rs. 27,95,550. The assessee- company has shown the cost of the land at Rs. 1,30,30,176 in the books of account. Therefore, difference was considered as loss to the assessee-company because assesseecompany 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 booked on account of difference in the cost of land which have been acquired. The assessee-company, there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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