TMI Blog2005 (9) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals have been represented by the same counsel Shri C.S. Aggarwal and these appeals argued simultaneously. Therefore, for the sake of convenience a consolidated order is passed. 2. The ground Nos. 1 to 9 being interlinked relate to order confirming the assessment wherein income of the assessee, Shri Vijay Kaushik has been computed at Rs. 74,32,404 as against income declared at Rs. 20,320. Similarly the income has been assessed at higher figure in the case of other two assessees. Briefly stated facts are that the land located in the same place, village Dabra in Tahsil/District Hissar belonging to late Shri Balraj Kaushik and Vijay Kaushik and the Hisar Vijay Laxmi Co-operative House Building Society Ltd. were compulsorily acquired by the Haryana Urban Development Authority (HUDA) in the last quarter of 1993-94. Initial compensation was received on 16-3-1994 in assessment year 1994-95. The assessees contested the award and in September 1999 the Punjab Haryana High Court enhanced compensation and granted solatium as well as interest. In accordance with this order the Land Acquisition Collector (LAC) made payments to all the three assessees during the period between 1-4-2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axmi Co-operative House Building Society Ltd. stated that the return was filed in only w.e.f. 1999-2000. In the case of Hisar Vijay Laxmi Co-operative House Building Society Ltd. the land was purchased by them for Rs. 12,86,250 from late Shri Balraj Kaushik and Shri Vijay Kaushik for development of plots for residential purpose and the development work was also claimed to have started in the financial year 1991. These works were in the nature of building of roads, lanes, boundary walls and long of sewers, electricity and telephone line etc. The same land was acquired by HUDA for which the compensation had been given. The return for assessment year 1994-95 was never filed. Therefore, the question of determination of loss by the Assessing Officer. 5. In all the three cases, the Assessing Officer did not accept the claim of carry forward of loss from assessment year 1994-95 onwards for the reason that in the case of the Hisar Vijay Laxmi Co-operative House Building Ltd. no return for assessment year 1994-95 was filed and no claim of carry forward was ever made till that year. In the cases of Shri Vibhor Kaushik and Vijay Kaushik the return of income were filed late i.e., on 31-3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and acquired and asked him to send his reply by 26-3-2004. In the meantime the Assessing Officer alongwith Inspector visited the place on 18-3-2004 while in Hissar he visited the office of the Land Acquisition Collector, Municipal Council and Tehsil office. He also visited the site of bus depot of Hissar and made enquiry with Kanungo namely Shri Mahinder Singh working in the office of Collector of Hissar. He came to know that the land acquired was situated at a distance of 2 km. only from the municipal limit of Hissar city. In the case of Hisar Vijay Laxmi Co-operative House Building Society Ltd. the Assessing Officer obtained details of development charges of development of residential plots amounting to Rs. 82,49,100. This information was furnished on 17-3-2000 saying that expenditure was incurred on development through engagement of petty contractors. On the basis of above mentioned facts the Assessing Officer concluded that land was capital asset and not agriculture land and the claim of carry forward of losses was not admissible. On the basis of this conclusion the Assessing Officer treated the enhanced compensation received in assessment year 2001-02 as long-term capital gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vious year in which such compensation or part thereof is first received. The cost of acquisition is reduced for the initial compensation. When the enhanced compensation is received it is taxable in the year of receipt and cost of acquisition of land and cost of improvement is taken as nil. The rules are applicable whenever compensation is enhanced by Court/Tribunal/authority. A loss cannot be carried forward unless it is determined in pursuance of return filed within the time allowed under section 139(3). In other words if an assessee fails to file the return of loss on or before the due date of furnishing return as prescribed by section 139(1) then by virtue of section 80 the short-term or long-term capital loss cannot be carried forward. The right to carry forward the capital loss will be lost if the return is not filed in time for the year in which the loss was incurred. In order to ensure that such right is not lost the loss should be determined in pursuance of the return filed within the time-limit of section 139(1) and such loss should be notified by the Assessing Officer to the assessee by order in writing under section 157. Section 80 is a clear mandate that it is only th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en I will discuss the rate adopted for arriving at the cost of land as on 1-4-1981 in the succeeding paragraphs. 8. The learned CIT(A) has further observed that while claiming capital loss the cost of acquisition of land as on 1-4-1981 in the case of Shri Vijay Kaushik and late Shri Balraj Kaushik has been taken by the assessee at the rate of Rs. 6,750 per marla i.e., 3.6 times higher than the purchase price in 1990 for Hissar. He has further mentioned that it is important to know that the land was in the same area adjacent to the land of Hisar Vijay Laxmi Co-operative House Building Society Ltd. and earlier building to the assessees themselves. In the case of acquisition in the year 1981 has been shown at Rs. 6,750 per marla whereas the actual cost after 10 years i.e., 1990 was Rs. 1,875 per marla. This is very strange and illegal and appears to have been done to arrive at a loss. In this regard the assessee explained that the land of Hisar Vijay Laxmi Co-operative House Building Society Ltd. was in a badly located site and the expenditure has to be incurred for improvement and development of land. He also submitted a certificate dated 8-5-2001 from Singla Property Dealer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have been refunded to the members in cash. Thus, the claim of the development expenses was only for the purpose of inflating the cost of Rs. 999 and to arrive a capital loss. 9. As regards the claim of the assessee that it was agriculture land, the representative of the assessee submitted that the report of the Assessing Officer relating to his enquiry and visit to Hissar was not reliable because no statement of Kanungo was based on her say only. It was also claimed that no opportunity was given to the assessee to counter the statement. It was further submitted that there was no reason to reject the certificate issued by Shri Ravi Dutt. The assessees representative relied on the letter sent by the Deputy Tehsildar stating that at the time of acquisition the land was agriculture. The learned CIT(A) in this regard has observed that the fact of land located within the territorial jurisdiction of municipality is one of the several factors in determining the nature of land. The most important factor is that it must be agriculture land at the time of acquisition as held in the case of TSMO Mohd. Othuman Sahib v. CIT [1957] 31 ITR 480 (Mad.). He has further mentioned that in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned CIT(A) has held that land was agriculture land. 10. As regards the enhanced compensation whether the same is taxable in the year of receipt is concerned, the CIT(A) has mentioned that according to the assessee s representative if the addition/enhanced compensation has been challenged before the higher authorities, the same is not chargeable to tax in view of the judgment of the Supreme Court in the case of Hindustan Housing Land Development Trust Ltd. ( supra ). Thus, he has observed that in the light of this argument it has to be seen whether enhanced compensation amount has accrued in this case. He has mentioned that the first award was given by the Additional District Judge, Hissar in 1994. After that it was enhanced in 1998. It was further enhanced in September, 1999 by the Punjab Haryana High Court when it was settled that the interest @ 12 per cent per annum would also be paid on the enhanced amount of compensation and besides that statutory solatium @ 30 per cent over and above the enhanced amount of compensation would be paid. It was also decided that the assessee will be entitled to interest @ 9 per cent per annum for a period of one year from the date of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that right to receive the additional/enhanced compensation was a right which right has not been crystallized in the instant year and, as such, it could not be said that the income had accrued to the assessee. He has further submitted that the CIT(A) has overlooked the fact that the Haryana Government as well as the assessee had filed an appeal before the Punjab Haryana High Court against the order of the ld. District Judge which is still pending. A reference in this regard has been made to pages 44-51 of paper book II. He has further argued that the ld. CIT(A) has failed to appreciate that the amount allowed be withdrawn against furnishing of bank guarantee could not be held to be of the nature of income. A reliance in this regard was made upon the decision in the cases of CIT v. Smt. Shantavva [2004] 267 ITR 67 (Kar.), Harish Chandra v. CIT [1985] 154 ITR 478 (Delhi), Jahangir P. Wajifdar v. ITO [2002] 82 ITD 67 (Bom.). 14. Ld. counsel has also submitted that no capital could be said to have arisen as the land acquired by HUDA was not covered under the definition of capital asset as defined in section 2(14) of the Income-tax Act. The said land was outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, notified area committee, town area committee, town committee or by any other name) or a cantonment board and which as a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or ( b )in any area within such distance, not being more than eight kilometers, from the local limits of any municipality or cantonment board referred to in item ( a ), as the Central Government may, having regard to the extent of, and scope for, urbanization of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette." 18. The question that arises for consideration is whether in the year of acquisition the land in question was agricultural land and, as such, did not fall within the ambit of capital asset and, therefore, the profit arising out of this acquisition was not capital gain within the meaning of section 45(1). If the answer to this question is in negative then whether the enhanced compensation received by the assessee in the year under consideration would fall within the ambit of section 45(5) or not. A perusal of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and according to the purpose for which it is mentioned or set apart and kept used is a matter which ought to be determined on the facts of each particular case. What is really required to be shown is the connection with agricultural purpose and user and not a mere possibility of user of the land by some possible future owner or possessor for agricultural purpose. It is not the mere potentiality, but its actual condition, intended user which has to be seen. If there is neither anything in its condition nor anything in evidence to indicate the intention of its owner or possessor so as to connect it with agricultural purpose, the land cannot be termed agricultural land. Entries in the revenue record are, however, good prima facie evidence but they are not conclusion on the point. Simply because the land is entered in the revenue record would not mean that this being used mainly for the purpose of agriculture (reference State of UP v. Nand Kumar Aggarwal 1998 AIR 473. It is mentioned that regarding the issue whether the land in question is agricultural land or not the ld. CIT(A) has pointed out that the most important indicator is the land in the possession of the Hisar Vijay Lux ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s determinable and payable, the amount cannot be said to arise or accrue. With the filing of the appeal by the Government against the determination of the compensation by the District Court, the amount is in jeopardy. The right to receive the enhanced compensation by the assessee is clearly unsettled. Where the assessee withdraws it on furnishing security for restitution, the withdrawal of the amount is contingent inasmuch as it is likely to be defeated by the acceptance of the appeal of the Government. The liability to pay additional or enhanced compensation is an inchoate or contingent right not creating a debt. Section 54 of the Land Acquisition Act, 1894 gives a right to the Government to have the compensation reduced in appeal to the High Court or further reduced in appeal to the Supreme Court. The enhanced compensation would thus accrue only when the court accepts and the decision becomes final. Unless finality is attached to the determination by the District Court on enhancement by the High Court, it cannot be said to accrue or be deemed to accrue." 20. The right to receive additional/enhanced compensation is an inchoate right of the assessee as the same has not yet been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on FDR was unjustified. It was submitted that the assessee had declared proportionate interest on FDR for the assessment year 2002-03 at Rs. 2,29,106 and the difference of amount only could be taxed in the assessment year 2001-02. However, the said submission of the assessee did not find favour with the CIT(A). He has observed that the Assessing Officer has calculated interest for the period 16-6-2000 to 31-3-2001 correctly. The mere fact that that in the next year excess amount was declared as interest on FDR would not justify the claim that the interest of Rs. 3,37,800 accrued during the assessment year 2001-02 should be reduced by the excess amount declared in the assessment year 2002-03. He has further observed that the interest is to be taxed on accrual basis year after year. Thus, he has upheld the action of the Assessing Officer. 22. We, after hearing the parties find no infirmity in the impugned order passed by the CIT(A) inasmuch as the Assessing Officer has correctly assessed interest income accrued on the FDR of Shri Vijay Kaushik. Hence, we uphold the order passed by the CIT(A). 23. The next ground of appeal relates to levy of interest under sections 234A, 234 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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