TMI Blog2007 (9) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the grounds of appeal before or at the time of hearing of appeal." 2. No body appeared on behalf of the assessee in spite of giving the opportunity, the Bench therefore decided to dispose the appeal after hearing the ld. DR and considering the materials placed on record. We have heard the learned DR and found from the record that during the year under consideration, the assessee was in receipt of enhanced compensation as well as interest thereon in respect of his land acquired by the Government. In the return, the assessee has claimed exemption under section 54B of the Act in respect of enhanced compensation. By referring to the amended provisions of section 45(5), the Assessing Officer brought to tax the enhanced compensation along with the interest. 3. By the impugned order, CIT (Appeals) deleted the addition. 4. We have considered the contentions of the learned DR. The issue regarding taxability of enhanced compensation and interest thereon is squarely covered by the decision of ITAT, Special Bench in case of Dy. CIT v. Padam Prakash (HUF) [2006] 10 SOT 1 (Delhi) wherein enhanced compensation was held to be liable to be taxed in the year of receipt whereas int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o income-tax in the year in which transfer of a capital asset takes place. It is deemed to be income of the previous year relevant to the assessment year. The definition of transfer of a capital asset, as per section 2( 47 ) encompass the compulsory acquisition under law profit or gain arising from compulsory acquisition is deemed income of the year in which compulsory acquisition takes place. It is the scheme of the Act relating to taxability of the capital gains. It is now restricted to capital gains arising on compensation awarded on compulsory acquisition. Their Lordships of Supreme Court in the case of Hindustan Housing Land Development Trust Ltd. ( supra ) held that unless compensation awarded or right to receive compensation attains finality, capital gain cannot be computed. If right to receive compensation awarded is subject-matter of dispute then unless and until that dispute is settled, compensation allowed is inchoate and capital gains cannot accrue or arise. The aforesaid scheme and statutory provisions which were considered by their Lordships did not work well and Department had to face difficulties in realizing capital gains arising on compensation enhanced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to disregard change introduced by the Legislature by applying old scheme to cases of enhanced compensation. 22. In the background narrated above, we do not see nor were given any good reason why scheme of sub-section (5) should not be applied to receipt of enhanced or further enhanced compensation as envisaged by the sub-section. Why the amount received should not be brought to tax in the year of the receipt when language and intention of the Legislature is absolutely clear. Why Court should not give effect to the legislative intent and follow its mandate. In the case of A.N. Roy, Commr. of Police v. Suresh Sham Singh JT 2006 (6) SC 89, their Lordships observed as under: 18. It is now well-settled principle of law that the Court cannot enlarge the scope of legislation or intention when the language of the statute is plain and unambiguous. Narrow and pedantic construction may not always be given effect to. Courts should avoid a construction, which would reduce the legislation to futility. It is also well-settled that every statute is to be interpreted without any violence to its language. It is also trite that when an expression is capable of more than one meaning, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pe to whittle down applicability of the provision by introducing philosophy that gain has not accrued or arisen. The right to receive compensation has not attained finality. Idea of accrual of income not being supported by the Legislature s intent as is available from the plain language cannot be accepted. Even otherwise statutory provision is quite equitable. Obligation to pay tax is cast on the assessee only after enhance compensation is pocketed by the assessee. It is taxed when it is actually received. 24. The main thrust of the argument of learned counsel for the assessee and of the interveners was that compensation is received under an order which is not final. The finality is shaken when order is challenged before a superior Court. The right to receive compensation is under dispute. The same is yet to be adjudicated upon and Court in its wisdom might reverse, modify or reduce the compensation awarded or hold that it was not payable at all. Superior Court under an interim arrangement may impose conditions and compensation might be received on furnishing of securities. Therefore, unless final word on compensation or enhanced compensation is heard, there can be no gains. Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, the date on which sub-section (5) was inserted in the statute. 27. Clause ( c ) to sub-section (5) was inserted by Finance Act, 2003 but it has to be held to be retrospective in operation and taken to be introduced with effect from 1-4-1988. The picture without insertion of above clause ( c ) was incomplete as the section did not deal with a situation where enhanced compensation is reduced in further appeal by Courts or Tribunal. The provision was made to obviate the hardship and unintended consequences of sub-section (5) of section 45. The clause was inserted to make entire scheme workable and to supply an obvious omission in the provision. The situation envisaged as per clause ( c ) above was required to be given reasonable construction to accomplish purpose and object of the enactment. Principle of reasonable construction by treating a provision as retrospective, on the ground that such construction would make the whole enactment workable, was applied by their Lordships of the Supreme Court in the case of Allied Motors (P.) Ltd. v. CIT [1997] 139 CTR (SC) 364 : [1997] 224 ITR 677 (SC). The aforesaid principle is fully applicable to the interpretation of clause ( c ) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be out of place to state that clause ( c ) of aforementioned sub-section would be redundant if arguments of assessee are accepted. In fact all the clauses would be redundant if capital gain is to be brought to tax only when compensation attains finality. Sub-section (5) of section 45 has no purpose to serve if above contention is accepted. The assessee wishes to apply only sub-section (1) of section 45 in total disregard of statutory provision of sub-section (5). Further after insertion of sub- section (5), the scheme of assessment of enhanced or further enhanced compensation is to be taxed only in the year of the receipt. If it is not taxed in that year, but is held to be taxed in the year in which amount of compensation is finally determined, then there is no provision to charge it to tax otherwise than in the year of receipt. Therefore special provision relating to taxability of amount is the year of receipt, cannot be disregarded. For aforesaid reasons also the arguments advanced on behalf of assessees cannot be accepted. 30. That as far as question of interest income on enhanced compensation is concerned, the Legislature had made no change in the statutory provision and, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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