CIT, PANCHKULA vs. MOHAN SINGH CHANDAIL VPO. RAMGARH (PANCHKULA)

ITA/952/2008HC Punjab & HaryanaPHHC01080996200831 January 2011Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL3 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, an individual, filed a return for assessment year 2003-04 declaring an income of Rs. 10,77,501/-. The Assessing Officer (AO) assessed the income at Rs. 86,48,650/-, adding Rs. 75,71,149/- received by the assessee as interest on enhanced compensation for land acquisition. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the addition. The revenue appealed to the Income Tax Appellate Tribunal (ITAT), which dismissed the revenue's appeal. The revenue then filed an appeal before the High Court of Punjab and Haryana against the ITAT's order.

What did the High Court hold?

The High Court addressed the first substantial question of law, which concerned the taxability of interest on enhanced compensation in the year of receipt. The Court referred to its own prior decision in ITA No. 209 of 2004 (CIT, Faridabad v. Bir Singh (HUF) Ballabgarh), decided on 27.10.2010. In that case, it was held that income from business or profession and income from other sources are ascertained based on the assessee's accounting system, and if no specific method is adopted, the cash system is presumed. It was further concluded that interest awarded under Section 34 of the Act partakes the character of compensation and is taxable in the year of receipt under Section 45(5)(b). Under the cash system, such interest received on enhanced compensation falls for taxation under Section 56 as 'income from other sources' in the year of receipt. Consequently, the High Court answered the first question in favour of the revenue. The second question, regarding the retrospective applicability of Sections 45(5)(c) and 155(16), was rendered academic in light of the decision on the first issue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in dismissing the revenue's appeal by holding that interest on enhanced compensation amounting to Rs. 75,71,149/-, even when actually received by the assessee, shall not be assessed in the year of receipt (A.Y. 2003-04) but when the matter is finally settled? This question turns on the taxability of interest on enhanced compensation in the year of receipt. The revenue contended that it should be taxed in the year of receipt. The assessee's contention is not recorded. 2. Whether the ITAT was right in holding that provisions of Sections 45(5)(c) and 155(16) are not applicable retrospectively for A.Y. 2003-04, contrary to the Supreme Court's decision in Allied Motors (P) Ltd. Vs. CIT (224 ITR 677)? This question concerns the retrospective applicability of specific sections of the Income Tax Act. The revenue argued for retrospective application, citing the Supreme Court precedent. The assessee's contention is not recorded.

Which sections of the Income-tax Act were involved?

Section 260A,Section 45(5)(b),Section 45(5)(c),Section 155(16),Section 56

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 31.1.2011 The Commissioner of Income-tax ....Appellant. Versus Shri Mohan Singh Chandail ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Yogesh Putney, Advocate for the appellant. AJAY KUMAR MITTAL, J.

1.

This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 against the order dated 4.7.2008 passed by the Income Tax Appellate Tribunal, Chandigarh Bench “A”, Chandigarh, in ITA No. 316/Chandi/2008 for the assessment year 2003- 04, claiming following substantial questions of law:- “1. Whether on the basis and in the circumstances of the case, the Ld. ITAT was right in dismissing the appeal of Revenue on the grounds that the interest on enhancement

compensation

amounting

to Rs.75,71,149/-, even when actually received by the assessee, shall not be assessed in the year under appeal i.e. year of its receipt, but will be assessed as -2- and when the matter is finally settled?

2.

Whether the Hon'ble ITAT was right in holding that provisions of section

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 45(5)(b)

All 25 judgments and leading authorities on Section 45(5)(b) →

Recent GST High Court judgments

Search GST case law →