TARUN KANTI ROY,KOLKATA vs. ITO, WD-2(4), BURDWAN, BURDWAN

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ITA 1778/KOL/2017Status: DisposedITAT Kolkata05 September 2018AY 2006-074 pages
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What did the Tribunal hold?

The Tribunal held that interest on enhanced compensation should be spread over the period it accrued, not taxed entirely in the year of receipt. Only the interest accrued during the impugned assessment year was to be taxed.

What were the facts?

The assessee's appeal was filed with a significant delay, which the Tribunal condoned on payment of costs. The core issue concerned the taxability of enhanced compensation and interest received by the assessee for acquired land.

What were the issues?

The primary issue was the correct method of taxing interest on enhanced compensation received by the assessee. This involved determining whether the entire interest was taxable in one year or if it should be spread over the accrual period.

Which sections of the Income-tax Act were involved?

Section 45(5),Section 145A

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Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, BENCH ‘SMC’ KOLKATA

Before: Hon’ble Shri J.Sudhakar Reddy, AM]

This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax-(A)-Burdwan dated 29.06.2016 passed u/s 250 of the Income Tax Act, 1961 (the ‘Act ‘) relating to A.Y. 2006-07.

2.

There is a delay of 311 days in filing of the appeal. The assessee submitted a petition for condonation of delay, which is supported by copies of medical certificates issued by the doctors as well as an affidavit. The assessee pleaded that the delay be condoned and the appeal of the assessee be allowed. The learned Departmental Representative opposed the same on the ground that the assessee has not explained each day of the delay as required under law.

3.

After hearing rival contentions, I am of the view that this is a fit case for condonation of delay. The assessee had produced sufficient evidence to demonstrate that he was wholly prevented by sufficient cause for some period from filing the appeal within the period of limitation. Though there are certain gaps in the explanation, I am of the considered opinion that in the larger interest of justice the delay should be condoned and the appeal of the assesee be admitted on payment of cost of Rs.10,000/-. The assessee is directed to pay cost of Rs.10,000/-.

4.

We now take up the matter on merits. The assessee is an individual and derives income from business. The issue before me is taxability of enhanced compensation granted by the Hon’ble high court from L & LR Department, Govt. Of West Bengal as well as taxability of interest thereon for acquisition of land. The assessee had initially received compensation of an amount of Rs.28,80,307/- towards land acquisition in the year 1988. When the matter was carried in appeal before the Hon’ble high court, the compensation was enhanced and the assessee received Rs.4,16,516/- as the 1/4th co- owner on 21.06.2005 relevant to A.Y.2005-06. He also received interest from the period 21.06.1988 to 20.07.2005 amounting to Rs.10,54,827/-. The ld. CIT(A) confirmed the action of the AO. Aggrieved the assessee is in appeal before me.

5.

Though the assessee has raised six grounds of appeal

challenging both the reopening of assessments, as well as assessment of income under the head ‘capital gains’ and under the head ‘other sources ‘ , during the course of appellate proceedings the ld. Counsel for the assessee did not press ground no.1 to 4,5 and 6. He has only pressed ground no.3 which reads as follows :- “3. For that the Ld. Assessing Officer erred in adding Rs.416,516/- u/s 45(5) of the I.T.Act, 1961 with the total income of the assessee.”

The ld. Counsel for the assessee submitted that the entire interest of Rs.10,54,827/- cannot be brought to tax in this year amounting to Rs.62,048/- accrued during the year. He relied on the decision of the Hon’ble Supreme Court in the case of Rama Bai vs CIT [1991] 54 Taxman 496 (SC) and requested interest which is accrued during the current financial year only has to be brought to tax on an accrual basis. The ld. Departmental Representative relies on section 145A of the Act.

6.

In my view the judgement of the Hon’ble Supreme Court in the case of M/s Rama Bai vs CIT, is binding and hence accordingly the interest income earned should be spread over the period of years, for which it has been granted. The Hon’ble Supreme Court in the case of Rama Bai vs CIT [1991] 54 Taxman 496 (SC) held as follows : In view of the decisions in CIT v. T.N.K.Govindarajulu Chetty [1987] 165 ITR 231 (SC), T.N.K. Govindarjulu Chetty v. CIT [1973] 87 ITR 22 (Mad.) and Mrs. Khorshed Shapoor Chenai v. ACED [1980] 122 ITR 21 (SC) it s clear that the interest on enhanced compensation under the Land Acquisition Act could not be taken to have accrued on the date of the order of the Court granting enhanced compensation but had to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order.”

7.

Respectfully following this judgment of the Hon’ble Supreme Court I direct the AO to compute only that interest on accrual basis in the impugned assessment year. If the interest accrued during the impugned assessment year is Rs.62,048/- as claimed by the assessee, the addition should be restricted to this count only. The balance is deleted.

8.

In the result the appeal of the assessee is allowed in part.

Order pronounced in the Court on 05.09.2018.

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