CIT, FARIDABAD vs. LAXMAN SWAROOP GOEL

ITA/95/2010HC Punjab & HaryanaPHHC01093889201006 October 2010Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL7 pages
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What were the facts?

This appeal by the Commissioner of Income Tax, Faridabad (Revenue) challenges an order of the Income Tax Appellate Tribunal (Tribunal) for the assessment year 2005-06. The Tribunal had upheld the order of the Commissioner of Income Tax (Appeals) which deleted an addition of Rs. 22,72,663/- made by the Assessing Officer (AO). This addition pertained to interest received on enhanced compensation by the assessee's minor children, which the AO sought to tax in the hands of the assessee (father) under Section 64(1A) of the Income Tax Act, 1961. The Tribunal found that the interest income was not taxable in the hands of the assessee as the matter of enhanced compensation was under dispute before the High Court until 17.11.2007, and the AO passed the assessment order on 16.11.2007. Furthermore, the Tribunal held that Section 64(1A) was inapplicable as the enhanced compensation was deposited in FDR until the minors attained majority, making the assessee a custodian/trustee.

What did the High Court hold?

The High Court held that the Tribunal's view could not be sustained. The Court found that the assessee's counsel was unable to distinguish the Supreme Court judgment in CIT Vs. Ghanshyam, which clearly states that the year of receipt is the year of taxability for enhanced compensation and interest thereon. The counsel also failed to provide any reason for excluding the applicability of Section 64(1A) of the Act. The Court noted that the validity of Section 64(1A) was upheld by various High Courts. Therefore, the questions raised by the revenue were answered in its favour. The appeal was allowed, implying that the addition made by the AO was to be upheld.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in holding that interest on enhanced compensation was not taxable in the hands of the assessee as the matter was under dispute before the Hon'ble High Court until 17.11.2007, thereby disregarding the Supreme Court judgment in CIT Vs. Ghanshyam (HUF) which states that interest on enhanced compensation is taxable in the year of receipt? (Section 28 of the Land Acquisition Act, 1894, and Section 143(3) of the Income Tax Act, 1961 are implicitly relevant). 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in deleting the addition of Rs. 22,72,663/- made by the AO on account of interest received by the assessee's minor children under Section 64(1A) of the Income Tax Act, 1961, disregarding that such income is taxable in the hands of the father? Assessee's arguments (as reflected in the Tribunal's order and the High Court's discussion): The amount received had not attained finality, and the income of minor children from inherited property could not be clubbed in the hands of the father. The interest was deposited in FDR until the minors attained majority, making the assessee a custodian/trustee, thus rendering Section 64(1A) inapplicable. The Madras High Court judgment in K.J. Ramaswamy was relied upon. Revenue's arguments: Taxability of capital gain on acquisition of property is governed by the Supreme Court judgment in CIT Vs. Ghanshyam, where the amount is taxed in the year of receipt. The Tribunal failed to apply Section 64(1A) properly and wrongly relied on K.J. Ramaswamy, which was on unamended provisions. After amendment, income of a minor, unless falling in exceptions, is taxable in the hands of parents. The validity of Section 64(1A) was upheld by Patna High Court in Syed Askari Hadi Ali Augustine Iman and Karnataka High Court in K.V. Kupparaju.

Which sections of the Income-tax Act were involved?

Section 260A,Section 64(1A),Section 28,Section 143(3)

AI-generated summary — verify with the full judgment below

Income-tax Appeal No. 95

of 2010

-1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No. 95

of 2010

Date of decision: 6.10.2010 Commissioner of Income Tax, Faridabad ...Petitioner Versus Shri Laxman Swaroop Goel ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms. Urvashi Dhugga, Advocate for the appellant. Mr. R.C.Garg, Advocate for the respondent. **** ADARSH KUMAR GOEL, J (

Oral)

.

1.

This appeal has been preferred under Section 260A of Income Tax Act, 1961 (hereinafter referred to as 'the Act”) proposing following substantial questions of law arising out of order dated 18.6.2009 of the Income Tax Appellate Tribunal, Delhi Bench 'G', New Delhi (hereinafter referred to as “the Tribunal”) passed in ITA No.1442/Del./2009 in respect of assessment year 2005-06:- “I). Whether, on the facts and in the circumstances of the case, the ld. ITAT was right in law in conforming the order of the ld. CIT(A) in holding that the interest on enhanced compensation was not taxable in the hands of the assessee, Shri Laxman Swaroop Goel as the interest on enhanced

The order continues below.

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