THE COMMISSIONER OF INCOME TAX vs. MAN SINGH

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ITA/228/2004HC Punjab & HaryanaPHHC01051362200415 July 2010Bench: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE ADARSH KUMAR GOEL2 pages
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What did the High Court hold?

The High Court held that the judgment of the Supreme Court in Hindustan and Land Development Trust Ltd. would not apply after the insertion of Section 45(5) of the Income Tax Act, 1961. This position was affirmed in a subsequent judgment in CIT, Faridabad Vs. Ghanshayam (HUF). Consequently, the High Court found that the ITAT was not justified in its findings. The appeals were allowed, and the substantial questions of law were answered in favour of the Revenue and against the assessee. The operative direction was to allow the appeals, implying that the enhanced compensation and interest were taxable in the year of receipt as per the amended Section 45(5).

What were the facts?

The Commissioner of Income Tax (Revenue) filed these appeals under Section 260A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal (ITAT) Bench 'SMC-I', Delhi, for the Assessment Year 1997-98. The appeals, including ITA No. 228 of 2004, involved common questions of law. The ITAT's order was under challenge. The dispute pertains to the taxation of enhanced compensation and interest received by the assessee, Man Singh.

What were the issues?

The High Court was called upon to decide the following substantial questions of law: 1. Whether the ITAT was justified in applying the ratio laid down in CIT Vs. Hindustan and Land Development Trust Limited, even after the insertion of Section 45(5) of the Income Tax Act, 1961, which specifically deals with the charging of enhanced compensation in the year of receipt. 2. Whether the ITAT was justified in holding that neither additional compensation nor interest accrued or received thereon can be taxed unless it attains finality from the Highest Court, despite the fact that the additional compensation and interest had actually been received by the assessee. Contentions: Assessee: The ITAT's decision was justified, relying on the ratio in CIT Vs. Hindustan and Land Development Trust Limited and holding that taxation is contingent on finality of the award. Revenue: The ITAT erred in applying the ratio of Hindustan and Land Development Trust Limited after the insertion of Section 45(5) and in holding that received additional compensation and interest are not taxable until finality is reached.

Which sections of the Income-tax Act were involved?

Section 45(5),Section 260A

AI-generated summary — verify with the full judgment below

ITA No.228 of 2004 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ***** ITA No.228 of 2004 & other connected cases being ITA Nos.229, 230, 240, 234, 237 and 239 of 2004 Date of decision : 15.7.2010 The Commissioner of Income Tax, Faridabad .....Appellant Vs. Man Singh .....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. Avinash Jhingan, Advocate, for the respondent --- ADARSH KUMAR GOEL (J):- 1. This order will dispose of ITA Nos. 228, 229, 230, 234, 237, 239 and 240 of 2004, filed by the appellants, as learned counsel for the parties state that common question of law is involved in all these appeals. The facts are being taken from ITA No.228 of 2004. 2. This appeal has been preferred by the appellant under Section 260 A of the Income Tax Act, 1961, against the order of ITAT Bench 'SMC-I', Delhi, passed in ITA No.454/Del/2001 for the Assessment Year 1997-98. 3. Appeal was admitted to consider the following substantial questions of law, proposed by the Revenue; (i)Whether the Hon'ble ITAT was justified in applying the ratio laid

ITA No.228 of 2004 -2- down in the case of CIT Vs. Hindustan and Land Development Trust Limited in the present case even after insertion of Section 45 (5) in the Income Tax Act specifically for charging of enhanced compensation in the year of receipt. (ii)Whether the Hon'ble ITAT was justified in holding that neither additional compensation nor interest accrued or received thereon can be taxed unless it attains finality from the Highest Court in spite of the fact that the additional compensation as well as interest has actually been received by the assessee. 4. We have heard learned counsel for the parties. 5. It is not disputed that after the insertion of Section 45 (5), the judgment of the Hon'ble Supreme Court in Hindustan and Land Development Trust Ltd.(supra), shall not apply, as held in subsequent judgment in CIT, Faridabad Vs. Ghanshayam (HUF), (2009) 315 ITR Page 1. 6. Accordingly, the appeals are allowed and above questions are answered in favour of the Revenue and against the assessee. 7. A photocopy of this order be placed on each file of the connected case. (ADARSH KUMAR GOEL)

JUDGE 15th July, 2010

(AJAY KUMAR MITTAL ) akm JUDGE

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