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TMI Blog2003 (3) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... year is 1972-73. The questions referred are: "1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in admitting an additional ground raised by the assessee questioning the Commissioner of Income-tax (Appeals) finding that profits as per section 41(2) on sale of buses and other assets are properly assessable in the assessment year 1973-74? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in holding that the Commissioner of Income-tax (Appeals) findings that the profits under section 41(2) are assessable in the assessment year 1973-74 and not in the assessment year 1972-73 are only incidental findings and are not legally binding on the Assessing Officer? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law in deleting Rs. 55,21,856 being profit under section 41(2) from the total income for the assessment year 1972-73?" The assessee was running a passenger bus service and owned 346 buses, 16 other vehicles, lands, buildings, premises, spare parts, machinery, etc., all of which were acquired by the State under section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eived was in excess of the written down value. The assessee contended before the Assessing Officer that the amount received by it as compensation for the compulsory acquisition of its assets could not be regarded as part of its income. That contention was rightly rejected by the Assessing Officer who referred to the definition of the word "sold" in the Explanation (2) to section 41(4) and which definition made it abundantly clear that the transfer by way of exchange or a compulsory acquisition under any law was, for the purpose of this section, to be treated as a sale. It was also contended by the assessee that this amount can only be included for assessment in the next assessment year, as the total amount of compensation payable was determined only under the notification of September 7, 1972. The Assessing Officer held that as the money had been paid by the Government as compensation, that amount was includible in the assessment year as part of compensation for the assets acquired from the assessee, and that as to the amount that had become due to the assessee in terms of the Government Order of March 21, 1972, the same was required to be included in the assessment for the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153(3)(ii) reads thus: "Section 153. Time limit for completion of assessments and reassessments.-.... (3) The provisions of sub-sections (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of sub-section (2A) be completed at any time-... (ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263, or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act." Explanation 2 to the proviso thereunder reads thus: "Explanation 2.--Where, by an order referred to in clause (ii) of subsection (3), any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order." Thus, the legal effect of the order of the Commissioner directing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and all the balance amounts had been paid in September, 1972. Even the very order under which this amount is directed to be paid refers to the sum as part compensation and the first instalment of that compensation has been described as part of the part compensation. Learned senior standing counsel for the Revenue placing strong reliance upon the decision of the apex court in the case of CIT v. United Provinces Electric Supply Company [2000] 244 ITR 764 submitted that on the facts of this case, the amount directed to be paid to the assessee under the Government Order of March 21, 1972, is required to be regarded as amount which was due to the assessee that amount having become payable earlier on the acquisition of its assets, and that fact would suffice to bring that amount to tax in the assessment for this year even though further amount was payable to the assessee and was, in fact, paid in the subsequent assessment year. The material word" due" which requires consideration is to be found in section 41(2) of the Act:"Section 41. Profits chargeable to tax.-... (2) Where any building, machinery, plant or furniture,- (a) which is owned by the assessee; (b) in respect of whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nhancement was made has not been regarded as the year in which the amount became due. The court has thus recognised the possibility of the amount to be brought to tax under section 41(2) of the Act being so brought to tax in two different assessment years, the amount initially determined in one year and the amount of enhancement as a result of further proceedings, in a later year. The determination of the amount is a pre-condition for bringing the amount to tax. CIT v. H.S. Shivarudrappa [1993] 200 ITR 1 (Karn), was a case where the amount determined as the compensation for the acquisition of buses was statutorily required to be disbursed in instalments. The Kamataka High Court held that it is only the amount of the instalment due in the relevant previous year that was assessable, as the assessee had no right to enforce the payment of subsequent instalments even before they became due for payment. In this case, the amount payable to the assessee for the compulsory acquisition of its buses and other assets relating to the passenger transport buses, was required to be determined by way of agreement, and in the event of agreement not being reached by reference to arbitration. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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