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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI SANJAY GARG & DR. B.R.R. KUMAR
Per Sanjay Garg, Judicial Member:
The present appeals have been preferred by the assessees
against the separate orders dated 23.01.2017 of Commissioner of
Income Tax (Appeals)-2, Chandigarh [hereinafter referred to as
‘CIT(A)’].
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 2
Since the issues involved in both the appeals are identical,
these have been heard together and are being disposed of by this
common order. For the sake of convenience, the ITA No.
542/Chd/2017 is taken as a lead case for discussion.
The assessee in this appeal has taken the following grounds:- 1. That the Ld. CIT(A)-2 Chandigarh has wrongly confirmed the addition of 50% of amount of interest of Rs. 32,88,074/- made by the ITO without going through the facts of the case of the appellant. 2. That the Ld. CIT(A)-2 Chandigarh has failed to understand that the Fiancé Act No.2 of 2009 was inserted in October 2009 and was applicable for income from the assessment year 2011-12 and not for the assessment year 2010-11 and the income of interest received by the appellant before New insertion of section was to be assessed on accrual basis year wise. The addition is likely to be deleted.
The brief facts of the case are that assessee received Rs.
69,12,449/- during the relevant year as interest on enhanced
compensation from Punjab Government for acquisition of land.
Assessee failed to disclose the interest income in the return of
income, and, therefore, the income had escaped assessment.
Assessing officer initiated reassessment proceeding and notice u/s
148 was issued on 16.3.2015. The assessee filed revised return on
13.1.2016 but the same was not a valid return as no return u/s
139(1) or in response to notice issued u/s 148 was filed. As per the
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 3
provisions of section 57(iv) read with section 56(2)(viii)of the Act ,
Assessing officer assessed 50% of the interest received and made
addition of Rs. 32,88,074/- (Rs. 34,56,224 - Rs. 1,68,250) as the
assessee had shown interest of Rs. 1,68,150/- in original return filed
on 15.12.2015.
In appeal, the assessee submitted before the CIT(A) that the
land of the assessee was acquired by Chandigarh Administration and
the assessee filed appeal before the Hon'ble Punjab & Haryana High
Court for which the compensation was enhanced and assessee
received interest on enhanced compensation of Rs. 69,21,385/- in
May 2009 and TDS was deducted on the same. That out of the
interest received, interest of Rs. 1,68,150/- was assessable in
assessment year 2010-11 as it pertained to the period from 1.4.2009
to 10.5.2009 and assessee accordingly had shown the same in the
return of income. That the interest could not be assessed in lump
sum in the year in which it was received as the amendment to
section 56(2)(viii) was applicable from financial year 2010- relevant
to assessment year 2011-12.
However, the Ld. CIT(A) dismissed the appeal of the assessee
observing as under:- “5.3 Submissions of the appellant have been considered. There is no dispute that the appellant has received interest of Rs. 69,12,449/- on enhanced compensation as per the order of the Hon'ble Punjab & Haryana High Court. It is also not in dispute that this interest of Rs. 69,12,449/- has been received by the appellant in
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 4
financial year relevant to the assessment year. As per the amendment to section 56(2)(viii) read with section 145A(b) which is applicable from 1.4.2010, the entire interest income shall be deemed to be the income of the year in which it is received and therefore, after allowing benefit of 50% as per section 57(iv) of the Act, Assessing officer has rightly assessed the interest income in the relevant assessment year. The addition made by the Assessing officer is confirmed. Grounds of appeal No.1 & 2 are dismissed.”
Being aggrieved by the above order of the CIT(A), the assessee
has come in appeal before us.
The main contention of the Ld. Counsel for the assessee has
been that the interest on enhanced compensation was received by the
assessee at the orders of the Hon'ble High Court and that the interest
pertained to the period from 15.5.2003 to 10.5.2009 and that as per
the decision of the Hon'ble Supreme Court in the case of ‘Rama Bai,
Vs. CIT’, [1990] 181 ITR 400 (SC), the interest cannot said to have
been accrued on the date of the order of the court granting enhanced
compensation but as having occurred year after year from the date of
delivery of possession of land till the date of such order, and that
such interest cannot be assessed to income tax in one lump sum in the
year in which the order is made.
The Ld. counsel has further submitted that the amendments in
the section 57(vi) and section 145A have been made / substituted
vide Finance (No.2) Act of 2009 in the month of October 2009 w.e.f.
1.4.2009 and that the said provisions would be relevant to
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 5
assessment year 2011-12 and not for the assessment year under
consideration i.e. assessment year 2010-11. He, therefore, has
pleaded that since the amended provisions will apply to the next
financial year, hence, the case of the assessee was covered by the
decision of the Hon'ble Supreme Court in the case of ‘Rama Bai Vs.
CIT’ (supra) and that the action of the lower authorities in taxing the
interest income in the year under consideration was wrong and not
justified.
The Ld. DR, on the other hand, has relied upon the findings of
the lower authorities.
We have considered the rival submissions. It is pertinent to
mention here that prior to amendment / substitution brought vide
Finance (No.2) Act of 2009 in the provisions of section 57(iv) of
the Income Tax Act, as per the decision of the Hon'ble Supreme
Court in the case of ‘Rama Bai Vs. CIT (supra), the interest income
was required to be bifurcated for the years to which that interest
income was related and that the same could not be taxed in lump sum
in the year it is received or cannot be said to be accrued or to have
accrued in the year in which the Court passed order directing the
payment of such interest on compensation / enhanced compensation.
However, vide Finance (No.2) Act of 2009, section 145A has been
substituted which now reads as under:-
Method of accounting in certain cases “16. 145A -. Notwithstanding anything to the contrary contained in section 145,—
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 6
……….. (b) interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.” 16. Substituted by the Finance (No.2) Act, 2009 w.e.f. 1-4.2010
Further, section 56(2) (viii) of the Act is also relevant, which
reads as under:-
Income from other sources (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head "Income from other sources", namely :— …… (viii) income by way of interest received on compensation or on enhanced compensation referred to in clause (b) of section 145A;
Further, the assessee is entitled to a deduction @ 50% of such
income on such interest received on compensation or enhanced
compensation u/s 57 (iv) which reads as under:-
Deductions. “57. The income chargeable under the head "Income from other sources" shall be computed after making the following deductions, namely:— …… (iv) in the case of income of the nature referred to in clause (viii) of sub-section (2) of section 56, a deduction of a sum equal to fifty per cent of such income and no deduction shall be allowed under any other clause of this section.
Now, the lower authorities applying the above amended
provisions for the assessment year under consideration i.e.
assessment year 2010-11 have taxed the interest income on
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 7
compensation / enhanced compensation and have also given
deduction @ 50% as provided u/s 57(iv) of the Act. The assessee
admittedly had received the amount in question in the month of May
2009.
Now the moot question before us is as to whether the above
reproduced amended provisions vide Finance (No.2) Act of 2009
w.e.f. 1.4.2010 will be applicable for the assessment year under
consideration or in other words whether the interest income received
by the assessee can be brought to tax as per the aforesaid provisions
during the assessment year under consideration.
For this purpose, it will be relevant to refer to the relevant part
of the Finance (No. 2) Act, 2009, which has been passed by the
Parliament and received the ascent of the President on 9.8.2009 and
has been enacted as Act No.33 of 2009. The introductory part and
section of the said as is reproduced as under:-
“FINANCE (NO.2) ACT, 2009 An Act to give effect to the financial proposal of the Central Government for financial year 2009-10
BE it enacted by Parliament in Sixtieth year of the Republic of India as follows:-
Chapter I
Preliminary Short title and commencement
1(1). This Act may be called for Finance (No.2), 2009
(2) Save as otherwise provided in this Act, section 2 to 84 shall be deemed to have come into force on the Ist day of April,2009”
ITA Nos. 542 & 543/Chd/2017- Sh. Darbara Singh & Sh. Amrik Singh, Chandigarh 8
A perusal of the above introductory part of section I relevant to the Finance Act reveals beyond doubt that the said Finance Act is to be given effect to the financial proposals of the Central Government for the financial year 2009-10 as per sub section (2) of section I of the
Act, it has been provided that sections 2 to 84 of the Act shall be deemed to have come into force on the first day of April 2009. Section 145A of the Income Tax Act has been substituted by section 57 of the Finance (No. 2) Act, 2009 and in view of the above provisions, for the transactions carried out by the assessee during the financial year 2009-10, the amended provisions will apply to the assessment year 2010-11 w.e.f. 1.4.2010. The contention that the
assessee had received the interest payment in the month of May 2009 whereas the Finance (No.2) Act, 2009 had received the ascent of the President in the month of August 2009 becomes irrelevant when the Act is deemed to have been applied w.e.f. 1.4.2009.
In view of this, we do not find any merit in the appeals of the assessee and the same are accordingly dismissed.
Order pronounced in the Open Court on 04.06.2018
Sd/- Sd/- (B.R.R.KUMAR) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 04.06.2018 Rkk Copy to: • The Appellant • The Respondent • The CIT • The CIT(A) • The DR