COMMISSIONER OF INCOME TAX,PANCHKULA vs. DAVENDER PARSHAD JAIN.HISAR

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ITA/213/2001HC Punjab & HaryanaPHHC01042051200102 August 2010Bench: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE AJAY KUMAR MITTAL2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the view taken by the ITAT could not be sustained in light of the Supreme Court's decision in CIT v. Ghanshyam (2009) 315 ITR 1. This judgment clarified that taxability of compensation for acquired land would arise in the year the amount was received, regardless of whether the proceedings for final determination of entitlement were concluded. Therefore, the ITAT's reliance on the earlier judgment, which predated the amendment and the subsequent clarification by the Supreme Court, was found to be incorrect. The High Court allowed the revenue's appeal and remanded the matter to the ITAT for a fresh decision on merits in accordance with the prevailing law.

What were the facts?

The revenue, Commissioner of Income Tax, Panchkula, preferred an appeal under Section 260A of the Income Tax Act, 1961, against an order dated June 28, 2000, passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench. The dispute pertains to the assessment year(s) not explicitly stated but related to the acquisition of the assessee's land and the subsequent receipt of compensation. The assessee received compensation for acquired land, which was initially taxed as capital gain. Enhanced compensation was also treated as income. However, the CIT(A) and the ITAT, relying on a Supreme Court judgment, held that enhanced compensation could not be taxed until the entitlement was finally determined. The amount in dispute is the tax on enhanced compensation.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there is no justification for assessing the amount of enhanced compensation, additional amount of market value under Section 23(2) of the Land Acquisition Act, and interest on enhanced compensation as the matter relating to acquisition of land and enhanced compensation is still subjudice and has not become final. (Question of law) Assessee's contention: The ITAT and CIT(A) held that enhanced compensation could not be taxed until entitlement was finally determined, following the Supreme Court judgment in CIT v. Hindustan Housing Land Development Trust Limited (1986) 161 ITR 524. Revenue's contention: The revenue argued that following the amendment to Section 45 of the Act, the Supreme Court in CIT v. Ghanshyam (2009) 315 ITR 1 held that taxability would be in the year of receipt, irrespective of whether proceedings had become final.

Which sections of the Income-tax Act were involved?

Section 260A,Section 45,Section 23(2)

AI-generated summary — verify with the full judgment below

ITA No.213 of 2001 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. ITA No. 213 of 2001 Date of decision: 2.8.2010 The Commissioner of Income Tax , Panchkula -----Appellant Vs. Shri Davender Parshad Jain ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON’BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Sanjiv Kaushik, Standing Counsel for the revenue. Adarsh Kumar Goel,J. 1. This order will dispose of ITA Nos.213 of 2001, 120 and 121 of 2002 as common question of law is involved in all these appeals. Facts have been taken from ITA No.213 of 2001. 2. The revenue has preferred this appeal under section 260A of the Income Tax Act, 1961 (for short, ‘the Act’) against order dated 28.6.2000 passed by the Income Tax Appellate Tribunal, Delhi Bench, ‘C’ New Delhi in ITA No.5611/Del/1992, proposing to raise following substantial question of law:- “Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there is no justification for assessing the amount of enhanced compensation, additional amount of market value under section 23(2) of the Land Acquisition Act and interest on enhanced compensation as the matter relating to acquisition of land and enhanced compensation is still subjudice and has not become final.” 1

ITA No.213 of 2001 3. Land of the assessee was acquired for which compensation was received. Compensation was taxed as capital gain under section 45 of the Act. Enhanced compensation was also treated as income but on appeal, the CIT(A) and the Tribunal, following earlier judgment of the Hon’ble Supreme Court in CIT v. Hindustan Housing land Development Trust Limited, (1986) 161 ITR 524, held that till entitlement to compensation was finally determined, the same could not be taxed. 4. Learned counsel for the revenue submits that after considering the amendment to Section 45 of the Act, the Hon’ble Supreme Court in CIT v. Ghanshyam, (2009) 315 ITR 1 has held that taxability will be in the year in which the amount was received irrespective of the fact whether the proceedings had become final or not. 5. In view of above, the view taken by the Tribunal cannot be sustained. The matter will have to be decided afresh. The appeals are allowed. The matter is remanded to the Tribunal for a fresh decision on merits in accordance with law. (Adarsh Kumar Goel) Judge August 2, 2010 (Ajay Kumar Mittal) ‘gs’ Judge 2

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