TaxTMI 
TaxTMI 
2014 (9) TMI 59
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....e Tribunal (Tribunal, for short), are that land admeasuring 24.1 acres in village Arkpur, owned by the Government and managed by the Land Development Officer was given on lease in favour of M/s Delhi Pottery Works (P) Ltd., vide registered lease deed dated 19th March, 1924. Late Kesar Singh and his sons took on sub-lease 19.1 acres of land and constructed factory premises and installed machinery thereon under the sub-lease dated 20th March, 1942. The sub-lease was for a period of 17 years and rent fixed was Rs. 500 per month. Respondent assessee Late Gulab Sundri Bapna, now represented by her legal heirs, was wife of Late Kesar Singh. M/s Delhi Pottery Works (P) Ltd., went into liquidation and the leasehold rights were transferred in favour of Harnam Kaur, widow of Ram Singh Kabli, in March, 1949 and thereafter rent payable under the sub-lease was paid to her. Notification under Section 4 of the Land Acquisition Act dated 15th September, 1962, was issued in respect of land in Village Arkpur including the land under sub-tenancy and occupation of the respondent assessee. This was followed by a notification under Section 6 of the Act dated 5th December, 1968. In January, 1975, two awa....
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....could be taken as NIL in cases where there was no purchase price and the said amendment was applicable only with effect from the assessment year 1994-95. 6. The Supreme Court in CIT vs. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC) had held that if cost of acquisition of a capital asset was not determinable, then the sale consideration received would be a capital receipt but not taxable, because cost of acquisition was incapable of being ascertained and computation as envisaged under Section 48 was not possible. The effect thereof was that in such cases the assessee would not be liable to pay capital gains tax on the sale consideration received. The aforesaid decision was in relation to consideration received for transfer of goodwill. The said principle was extended to tenancy rights, by the Delhi High Court in Bawa Shiv Charan Singh vs. CIT, Delhi, [1984] 149 ITR 29, observing that the tenancy right had no cost of acquisition and, therefore, capital gains cannot be computed. Faced with the aforesaid decisions, Section 55(2) was inserted and amendments were made stipulating that in transactions specified including payment received for surrender or relinquishing tenancy rights, wher....
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....ht had computable cost of acquisition and, therefore, the consideration received on surrender or acquisition was taxable as capital gains even prior to 1st April, 1995. In the present case, as noticed, the sub-lease was for 17 years and even construction had been raised by the predecessors of the respondent assessee. 9. This brings us to Section 45(5) of the Act and whether the same would be applicable to the facts of the present case. The aforesaid Section reads as under:- "Section 45. ... (5) Notwithstanding anything contained in sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, tribunal or other authority, the capital gain shall be dealt with in the following manner, namely :- (a) the capital gain computed with reference to the compensation awarded in the first instance or, as the case may be, the consideration determined or approved in the first inst....
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....With a view to remove these difficulties, by Finance Act, 1987, Section 45(5) was enacted to provide for taxation of additional compensation as deemed income in the year of receipt in the hands of the recipient. The Section also stipulated that the cost of acquisition in the hands of the receiver of the additional compensation would be deemed to be NIL and this would not affect the compensation already taxed at the first instance in the earlier previous year when the transfer of capital asset took place. Thus, in case of compulsory acquisition of assets, capital gain was/is charged on the compensation originally awarded in the year of transfer, and the additional compensation was/is deemed to be taxable income and was/is taxed in the year in which it was/is received and, it was/is not taxed in the year of transfer of the capital asset. Earlier decision of the Supreme Court in CIT vs. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 (SC), was held to be inapplicable after enactment of Section 45(5) of the Act. In light of the aforesaid decision, it has to be held that the additional compensation received would be taxable in the present assessment year, i.e. 1988-....
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....respondent assessee has to be taxed. For the purpose of taxation of enhanced compensation received, cost of acquisition is to be taken as NIL as per the statutory mandate of Section 45(5). The stand that the compensation received in any year pertains to only one transfer and gain, has been undone and negated by enactment of Section 45(5). Each assessment year is separate and distinct and enhanced compensation received is to be taxed in the year of receipt i.e. the year in question. Thus, the argument of the respondent assessee is untenable and is contrary to the dictum of the Supreme Court in the case of Ghanshyam (HUF) (supra). Similarly, the contention that capital gains on enhanced compensation received is taxable only when the original or earlier compensation itself was taxed in the facts of the present case has to be rejected for several reasons. Firstly, there is no evidence that original compensation received by the respondent assesse was not taxed and there is no such factual finding to that effect by any authority. Secondly, each assessment year/order is separate and distinct. The assessee or Revenue cannot take advantage of a wrong computation or failure to tax or erroneo....