NAURATA RAM KARTA OF HUF vs. CIT,LUDHIANA ETC.

ITA/1/1999HC Punjab & HaryanaPHHC01038201199924 October 2013Author: MR. JUSTICE DR. BHARAT BHUSHAN PARSOON,MR. JUSTICE RAJIVE BHALLA3 pages
AI SummaryDismissed

What were the facts?

The appellant, Naurata Ram (through LRs), challenged an order dated October 29, 1998, passed by the Income Tax Appellate Tribunal (ITAT) which dismissed his appeal for assessment year 1993-94. The dispute concerns the taxability of compensation received by the appellant. The appellant contended that compensation received in the previous year relevant to assessment year 1991-92 was disclosed and considered by the Assessing Officer (AO) for that year. Therefore, the AO lacked jurisdiction to impose tax on capital gains from this compensation in assessment year 1993-94, as it was received in an earlier period. The revenue argued that the compensation was placed in the Capital Gains Scheme, 1988, and Section 54-B of the Income Tax Act required the purchase of agricultural land within two years. Failure to do so made the amount exigible to capital gains tax in assessment year 1993-94.

What did the High Court hold?

The High Court held that no question of law, let alone a substantial question of law, arose for adjudication. It was undisputed that the appellant received Rs. 16,40,160/- as enhanced compensation and interest in the previous year relevant to 1991-92. This amount was placed in an account under the Capital Gains Scheme, 1988, postponing taxability for two years, during which Section 54-B of the Act required the purchase of agricultural land. As the appellant admittedly failed to purchase agricultural land within the prescribed period, the AO was correct in imposing capital gains tax. The orders of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal, which affirmed the AO's action, were also found to be free from error of jurisdiction or law. The High Court found no error in the imposition of tax on capital gains.

What were the issues?

1. Whether the Assessing Officer had the jurisdiction to impose tax on capital gains arising from compensation received in the previous year relevant to assessment year 1991-92, when considering the appellant's income for assessment year 1993-94? (Question of law, turning on Section 45(5)(b) of the Income Tax Act, 1961). Assessee's Contention: As capital gains are taxable in the year of receipt, and the compensation was admittedly received in the previous year relevant to assessment year 1991-92, the AO had no jurisdiction to levy tax on this gain in assessment year 1993-94. Revenue's Contention: The appellant placed the compensation amount in the Capital Gains Scheme, 1988, triggering the provisions of Section 54-B of the Act, which mandates the purchase of agricultural land within two years of receipt. Since the appellant failed to purchase agricultural land within this period, the amount became taxable as capital gains in assessment year 1993-94. Therefore, the orders of the AO, CIT(A), and ITAT were correct.

Which sections of the Income-tax Act were involved?

Section 45(5)(b),Section 54-B

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT FOR THE STATES OF PUNJAB AND HARYANA AT CHANDIGARH Date of decision: October 24, 2013. Naurata Ram Karta dead (through LRs) ... Appellant v. Commissioner of Income Tax, Ludhiana and another ... Respondent CORAM: HON'BLE MR. JUSTICE RAJIVE BHALLA HON'BLE MR. JUSTICE DR. BHARAT BHUSHAN PARSOON Present: Shri Aalok Mittal, Advocate, for the appellant. Ms. Savita Saxena, Advocate for the respondents. Rajive Bhalla

, J. (Oral): The appellant, challenges order dated 29.10.1998 passed by the Income Tax Appellate Tribunal, dismissing his appeal with respect to assessment year 1993-94. Counsel for the appellant, in essence, submits that as compensation was received in the previous year relevant to the assessment year 1991-92 was duly disclosed in the return of income and was considered by the Assessing Officer, in assessment year 1991- 92, the Assessing Officer while considering the appellant's income in assessment year 1993-94, had no juri iction to impose tax on capital gains by construing that compensation had been received in the year previous to the assessment year 1993-94. Counsel for the appellant Kad

The order continues below.

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