ACIT, CIRCLE- 34(1), NEW DELHI vs. SANJAY KHANNA (HUF), DELHI

The facts giving rise to the present appeal are that the return of income declaring total income of Rs.4,53,85,150/- was filed by the assessee on 03.08.2012. Thereafter, the case was selected for scrutiny. While framing the scrutiny assessment, the Assessing Officer observed that on perusal of the computation, it was seen that the assessee had received enhanced compensation of Rs.13,15,68,759/- (inclusive of interest) on account of compulsory acquisition of his immovable property held in the year 2001-02.

Aggrieved against this, the assessee preferred appeal before Ld.CIT(A), who after considering the submissions and relying upon the provision of section 54H of the Act and the case laws as relied upon by the Ld. Counsel for the assessee, allowed the claim of deduction u/s 54H of the Act.

Now, the Revenue is in appeal before this Tribunal.

Ld. Sr. DR on behalf of the Revenue vehemently argued that Ld.CIT(A) was not justified in allowing the claim of the assessee. Ld. Sr. DR strongly supported the assessment order. He submitted that Ld.CIT(A) has erroneously allowed the benefit of section 54H of the Act which would not be available to the assessee. In the present case, the assessee had received enhanced compensation amounting to Rs.13,15,68,759/- that included the interest on enhanced compensation of Rs.7,71,23,517/- so far the interest is concerned, the same has been offered for tax as income under the head “income from other sources”. However, for the component of enhanced compensation, the assesse claimed exemption u/s 54 of the Act by investing Rs.4,55,00,000/- under the capital gains scheme. He submitted that Ld.CIT(A) erroneously applied section 54H of the Act. He drew our attention to the provision of section 54H of the Act in support of his contention that the benefit of section 54H of the Act is not available to the assessee.

Per contra, Ld. Counsel for the assessee opposed these submissions and supported the order of Ld.CIT(A). He submitted that there is no ambiguity under law and on facts, there is no dispute with regard to the fact that the assessee had received enhanced compensation on compulsory acquisition of his property. He further submitted that Hon’ble Delhi High Court while granting stay of demand has held that the assessee’s claim for treatment of the enhanced amount received towards compensation u/s 54 of the Act is prima facie- a strong one, since the event which led him to claim such higher amount was on account of the acquisition itself. In other words, there was an intrinsic link between the reference which led to the enhancement and the acquisition u/s 54(H) of the Act.

We have heard the rival contentions of the parties and perused the material available on record. For effective adjudication and clarity, section 54H of the Act is reproduced hereunder:-

As per the Revenue, no benefit can be given to the assessee u/s 54H of the Act as the facts in the present case are that the assessee had claimed deduction u/s 54H of the Act for the compensation received in respect of Assessment Year 2003-04. It is contended that section 54/54H of the Act neither speak about the investment of additional compensation nor about the extension of the time limit in respect of claim of deduction u/s 54 of the Act qua the additional compensation into the capital gains scheme. It is further submitted that the assessee had claimed exemption u/s 54 of the Act on the original compensation by investing the same into capital gain FDR scheme which has not been utilized for the specific purpose for which he had to pay capital gain tax in the original Assessment Year 2005-06. There is no dispute with regard to the fact that in the present case, there was compulsory acquisition. The quantum of compensation was increased by the Ld. Court of Addl. District Judge (North), Delhi. We find that Ld.CIT(A) relying on the judgement of the Hon’ble Andhra Pradesh High Court in the case of Chakri Ashok Kumar, Ongole vs ITO, 2014 (11) TMI 937 vide order dated 23.07.2014 in Hon’ble Andhra Pradesh High Court has held as under:-

It was directed that benefit of section 54H of the Act shall be extended to the entire amount of compensation as enhanced by Hon’ble High Court. The Revenue has not brought any contrary binding precedents to our notice, therefore, we do not see any infirmity in the order of Ld.CIT(A) and the same is hereby affirmed. Thus, ground raised by the Revenue is rejected.

In the result, the appeal of the Revenue is dismissed.