COMMISSIONER OF INCOME TAX-II, JALANDHAR vs. ASHWANI CHOPRA

ITA/353/2011HC Punjab & HaryanaPHHC01095690201110 January 2013Author: MR. JUSTICE HEMANT GUPTA,MS. JUSTICE RITU BAHRI12 pages
AI SummaryDismissed

What were the facts?

The appeals by the Revenue challenge an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2007-08. The dispute concerns the taxability of Rs. 24 crores received by the assessee (Ashwani Chopra) as compensation during a partition of properties of M/s Hind Samachar Ltd. The partition involved two groups, Group A (headed by Smt. Sudarshan Chopra, including the assessee) and Group B (headed by Shri Vijay Kumar Chopra). After prolonged litigation, an amicable settlement was reached, where Group A retained lot-1 (Jalandhar and Ambala units) and Group B retained lot-2 (Delhi and Jaipur units), with Group A receiving Rs. 24 crores as compensation. This amount was deposited with the Company Law Board. The Assessing Officer levied long-term capital gains tax on this amount. The CIT(A) and ITAT granted relief to the assessee, holding that the distribution was not complete as the matter was sub-judice.

What did the High Court hold?

The High Court held that the payment of Rs. 24 crores to Group A was to equalize inequalities in the partition of assets of M/s Hind Samachar Ltd. Following the principle of owelty, the amount paid is deemed to be immovable property and not income exigible to tax. The Court reasoned that treating such an amount as taxable income would diminish the recipient's share by the extent of the tax, defeating the purpose of equalization. The judgments cited by the assessee, particularly regarding owelty and family arrangements not constituting a 'transfer', were found persuasive. The Court also noted that the argument regarding interest on cash did not arise from the ITAT's orders. Therefore, the question of law was answered against the Revenue and in favour of the assessee, leading to the dismissal of the appeal. The issue of interest was expressly left undecided as it did not arise from the lower authorities' orders.

What were the issues?

1. Whether the ITAT was correct in confirming the relief granted by the CIT(A) regarding the addition of Rs. 2,09,47,604/- (capital gain on compensation received)? (Question of law) 2. Whether the ITAT was correct in holding that the assessee had only an inchoate right to receive compensation until the final outcome of the Supreme Court decision? (Question of law) Assessee's arguments: The amount of compensation received is not income but represents immovable property, being a provision for 'owelty' to equalize inequalities in partition. Reliance was placed on the principle of owelty and judgments like T.S. Swaminatha Odayar v. Official Receiver of West Tanjore, CIT v. AL. Ramanathan, CIT v. Kay Arr Enterprises, CIT v. R. Nagaraja Rao, and Ziauddin Ahmed v. Commissioner of Gift-Tax. Revenue's arguments: The amount of Rs. 24 crores was deposited as compensation. Although the assessee could not use the money due to court orders, the interest on such deposit is income and liable to tax. The orders of the lower authorities were based on a misapprehension of facts and law, thus capital gain is payable on the compensation received.

Which sections of the Income-tax Act were involved?

Section 260-A

AI-generated summary — verify with the full judgment below

IN THE PUNJAB & HARYANA HIGH COURT AT CHANDIGARH Date of Decision: 10.01.2013 ITA No.353 of 2011 Commissioner of Income Tax – II, Jalandhar …Appellant Versus Ashwani Chopra …Respondent ITA No.354 of 2011 Commissioner of Income Tax – II, Jalandhar …Appellant Versus Ashwani Chopra …Respondent ITA No.355 of 2011 Commissioner of Income Tax – II, Jalandhar …Appellant Versus Arvind Chopra

…Respondent ITA No.356 of 2011 Commissioner of Income Tax – II, Jalandhar …Appellant Versus Arvind Chopra …Respondent CORAM: HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MS. JUSTICE RITU BAHRI Present: Mr. Vivek Sethi, Advocate, for the appellant.

Mr. Akshay Bhan, Advocate, for the respondent. HEMANT GUPTA, J.

This order shall dispose of afore-mentioned four appeals filed under Section 260-A of the Income Tax Act, 1961 (for short ‘the Act’) arising out of an order passed by the Learned Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in respect of Assessment Year 2007-08. However, for facility of reference the facts are taken from ITA No.354 of 2011. The Revenue has raised the following substantial questions of law: i. Whether th

The order continues below.

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