CIT, FARIDABAD vs. AJAY SHARMA FARIDABAD

This order will dispose of ITA Nos. 150 and 343 of 2010 as common questions of law are involved.

ITA No. 150 of 2010 has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against order dated 6.5.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'A' New Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 2032/D/08 for the assessment year 2002-03 proposing to raise the following substantial questions of law:- “I. Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the Ld. CIT (A) in holding that if the litigation regarding quantum -2- of additional compensation is pending before a Court and had not finality, enhanced compensation would not accrue and could be subjected to tax only when the issue of enhanced compensation is finally settled though the assessee himself had offered enhanced compensation for taxation on receipt basis disregarding the fact that enhanced compensation would be taxed in the year of receipt as the entire controversy on the year of taxability of enhanced compensation has now come to rest with the judgment of the Hon'ble Hon'ble Apex Court has held that the year in which enhanced compensation is received is the year of taxability? II. Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in confirming the order of the Ld. CIT (A) in holding that interest on enhanced compensation could not be taxed in the year under consideration as issue regarding enhanced compensation has not attained finality disregarding the fact that interest on -3- enhanced compensation would be taxed in the year of receipt as the entire controversy on the year of taxability of enhanced compensation and interest thereon has now come to rest with the Judgment of Hon'ble Supreme Court in the (2009) 315 ITR 1 (SC) wherein the Hon'ble Apex Court has held that the year in which enhanced compensation is received is the year of taxability and the interest u/s 28 of the Land Acquisition Act, 1894 on enhanced compensation is a part of enhanced compensation, therefore, the interest u/s 28 of the Land Acquisition Act on enhanced compensation will also be taxable in the year of receipt?”

The respondent-assessee received compensation in lieu of acquisition of land under the provisions of the Land Acquisition Act, 1894 which has been assessed as capital gain under Section 45 of the Act. Question for consideration before the authorities was whether additional compensation was liable to be taxed in the year in which it was received irrespective of the fact that the proceedings had not become final. The authorities decided the matter in light of the earlier judgment of the Hon'ble Supreme Court in CIT v. Hindustan Housing & Land Development Trust Ltd. (1986) 161 ITR 524 (SC) and judgments -4- of this Court based on the said view. However, in view of subsequent amendment, the Hon'ble Supreme Court in Commissioner of Income- tax v. Ghanshyam (HUF), (2009) 315 ITR 1 (SC) held that enhanced compensation was liable to be taxed in the year in which the payment was received. The said judgment of the Hon'ble Supreme Court has been rendered after the judgment of the Tribunal.

We have heard learned counsel for the revenue.

In view of the judgment of the Hon'ble Supreme Court in Ghanshyam (HUF) case (supra), the matter has to be re-examined by the Tribunal. We have remanded matter to the Tribunal for fresh consideration in several cases including ITA No. 188 of 2010 [Commissioner of Income Tax, Faridabad v. Horam (Indl)] decided on 5.7.2010. 6. In view of above, even though notice has not yet been served on the assessee, it will be appropriate that the matter is remanded to the Tribunal for fresh decision in accordance with law. The Tribunal will hear the parties before passing its order.

A photo copy of this order be placed on the file of the connected case. (ADARSH KUMAR GOEL) JUDGE August 05, 2010 (AJAY KUMAR MITTAL) gbs JUDGE