Hari Kishan vs Presiding Officer, ITAT

Satish Kumar Mittal, J.—This order shall dispose of ITA Nos. 345 and 361 of 2007 which are arising from the common order dated 31-1 -2007 passed by the Income Tax Appellate Tribunal, New Delhi (hereinafter referred to as ''the Appellate Tribunal'').

These appeals have been filed by the assessees u/s 260A of the Income Tax Act against the aforesaid order dated 31-1 -2007 passed by the Appellate Tribunal, by raising the following substantial question of law:

Whether, in the facts and circumstances of the case, the learned Income Tax Appellate Tribunal is right in law in holding that the enhanced compensation received by die assessees during the pendency of dispute of compensation before the Hon''ble Courts is deemed to be income for the purpose of computation of capital gain in the year of receipt in terms of the provisions of Section 45(5) of the Income Tax Act T.

While deciding ITA No. 2568/Delhi/2003 of assessee Hari Kishan (HUF)and ITA No. 2569/Delhi/2003 of assessee Smt. Chandrawati, both for the assessment year 1998-99, it has been held by the Appellate Tribunal vide aforesaid order that the amount of enhanced compensation as received by the assessee during the pendency of the dispute before the court will be liable to be considered for the purpose of capital gains u/s 45 of the Income Tax Act, 1961 (hereinafter referred to as ''the Act'') in the year of its receipt, irrespective of the fact that the dispute has not attained finality.

In this case, the aforesaid assessees received the interim compensation during the pendency of the appeal on account of acquisition of their land during the assessment year 1998-99 amounting to Rs. 19,23,468 and12,89,026, respectively. The assessing officer taxed the capital gain on the enhanced compensation holding that the same was taxable in the year of receipt u/s 45(5) of the Act. In appeal, Commissioner (Appeals) confirmed the decision of the assessing officer. Against that order, the assessees filed appeals before the Appellate Tribunal. TheAppellate Tribunal by following the decision of the Special Bench in case Dy. CIT v. Padam Parkash (HUF) (2006) 104ITD 1 (Delhi) has held that the enhanced compensation is taxable in the year of receipt, irrespective of the fact whether any dispute was pending or not. The Appellate Tribunal has distinguished the judgment of the Hon''ble Supreme Court in case of Commissioner of Income Tax, West Bengal-II, Calcutta Vs. Hindustan Housing and Land Development Trust Ltd., while observing that in that case there was no occasion to take note of the provisions contained in Sub-section (5) of Section 45 inserted from 1-4-1988. The Appellate Tribunal has also held that Clause (c) to Sub-section (5) of Section 45 of the Act was inserted with effect from 1-4-2004 and the said amendment is of declaratory in character, therefore, it will deem to be applicable retrospectively with effect from 1-4-1988, the date on which Sub-section (5) of Section 45 was inserted in the Act.

The controversy in these appeals is exactly the same as involved in Chandi Ram v. CIT (2008) 168 Taxman 315 decided by this court wherein it has been held as under:

In the present cases, the dispute relates to the assessment years 1994-95 to 1998-99 and during that period, only Section 45(5)(b) of the Act was applicable, which has already been interpreted by this court and various other Courts, wherein it has been clearly held that Section 45(5)(&) will 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 a payment subject to the final result, it will not be an amount received as enhanced compensation as contemplated u/s 45(5)(b), but only an interim payment received subject to final decision. Since this court has already taken the view, therefore, in our opinion, the Tribunal was not justified in taking contrary view to the view taken by this court in CIT v. Karanbir Singh, Rajinder Kuti, Patiala, dated 17-1-2007 and IT Appeal No. 695 of 2005, CIT v. Prem Singh, dated 16-5-2007 by following the decision of the Karnataka High Court in the case of Chief Commissioner of Income Tax and Another Vs. Smt. Shantavva,

Counsel for the revenue is unable to controvert the aforesaid legal position and stated that the controversy involved in this case is squarely covered by the aforesaid judgment in favour of the assessee.

Consequently, both the appeals are allowed and the substantial question of law is, thus, answered in favour of the assessees and against the revenue.