TMI Blog2015 (1) TMI 1116X X X X Extracts X X X X X X X X Extracts X X X X ..... cordingly, the issue of ‘Capital gains computed on protective basis’ is not adjudicated. - Decided in favour of revenue. - ITA No. 1049/Bang/2012 - - - Dated:- 17-1-2014 - George George K, JM And Jason P. Boaz, AM,JJ. For the Appellant : Dr. S. Palani Kumar, Jt. CIT(DR) For the Respondent : Shri K Gururaj Acharya, CA ORDER Per: George George K, Judicial Member This appeal, at the instance of the Revenue, is directed against the order of the CIT(Appeals), Hubli, dated 30.5.2012. The relevant assessment year is 2006-07. 2. The Revenue has, in its Memorandum of appeal, raised a solitary issue, namely, that the CIT (A) erred in deleting the addition of ₹ 3,47,804/- (sic) ₹ 2,00,000/- added to the assessment being interest on land acquisition compensation assessed on receipt basis. 3. Briefly stated, the facts of the issue are as under: The assessee is a HUF and the Karta of HUF is Ramvallabh Asawa. The assessee (HUF) filed its return of income, declaring a total income at ₹ 19,82,370/- on 31.7.2009 wherein it had also declared interest receipt of ₹ 3,47,804/- on account of additional compensation received on acquisition of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to account the contentions of the assessee, the CIT (A) had decided the issue in favour of the assessee. The reasoning of the CIT (A) is extracted as under: I have gone through the facts of the case, contents in the assessment order and assessee s written submissions. The AO has added the interest income on receipt basis, relying on Hon ble Supreme Court judgment in the case of CIT v. Ghanshyam (HUF) (2009) 315 ITR 1/182 Taxman 368. The facts of the case relied by the AO are distinguishable. In the Supreme Court case the enhanced compensation and the interest received by assessee was in dispute and is pending before the court, and the assessee has received the amount against the security furnishing up to the satisfaction of the executing court. In this regard, it is pertinent to mention that the amendment include clause (viii) to sub-section 2 to sec. 56 which is introduced through Finance Bill (2), 2009 with effect from 01.04.2010 prospectively and the amendment to sec. 145A with effect from 01.04.2010 wherein clause (b) has been introduced which is of a mandatory to tax the interest received on compensation on receipt basis only which is effective from the assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inguishable with that of the judgment of the Hon ble Supreme Court (supra), it is not applicable to the assessee s case; - that in the present case, as the issue dealt with is only in relation to interest received on enhanced compensation, the ratio laid down by the Hon ble Supreme Court in Rama Bai s case (supra) continues to apply until the amendment to s. 145A by Finance Act, 2009 prospectively from the AY 2010-11. Thus, until the amendment to the Finance Act, 2009, interest on enhanced compensation could be offered to tax under mercantile basis using the precedence of Supreme Court s verdict in Rama Bai s case (supra); - that the verdict in case of Rama Bai was delivered by a Three Judges Bench whereas the verdict in Ghanshyam s case was pronounced by Two Judges Bench of the Hon ble Apex Court and according to the ruling of the Hon ble Supreme Court in Pradip Chandra Parija Others v. Pramod Chandra Patnaik Others reported in (2002) 254 ITR 99 (SC) that the Bench of Two Judges is bound to follow the decision of Bench of Three Judges and, hence, the judgment in Ghanshyam case is per incuriam; and that the CIT (A) had rightly considered this fact and decided the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of introduction of section 45(5) and taxability of interest on enhanced compensation in depth. The issue before the Hon ble Apex Court in the case of Ghanshyam (HUF) (supra), in brief, was that during the previous year relevant to the AY 1999-2000, the assessee received enhanced compensation on his lands being acquired by the Haryana Urban Development Authority as also interest thereon. In the return of income for the relevant AY, the assessee did not offer the amount of enhanced compensation and the interest received thereon for taxation, on the plea that the amount of enhanced compensation received had not accrued to him during the year of receipt as the entire amount was in dispute in appeal before the H C which appeal stood filed by the State against the order of the reference Court granting enhanced compensation; and that the amount of enhanced compensation and the interest thereon were received by him in terms of the interim order of the HC against his furnishing of security. The AO did not accept the assessee s contentions on the premise that in terms of s. 45(5) enacted w.e.f. 1.4.1988, the amount by which compensation or consideration stood enhanced or further enhanced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unlike interest under section 34 is an accretion to the value, hence, it is a part of enhanced compensation of consideration which is not the case with interest under section 34 of the 1894 Act. So also additional amount under section 23(1A) and solatium u/s 23(2) of the 1961 Act forms part of enhanced compensation u/s 45(5)(b) of the 1961 Act. In fact, what we have stated hereinabove is reinforced by the newly inserted clause (c) in section 45(5) by the Finance Act, 2003 with effect from 1.4.2004. This newly added clause envisages a situation where in the assessment for any year:- - the capital gain arising from the transfer of a capital asset is computed by taking the - - compensation or consideration referred to in clause (a) of section 45(5) or, as the case may be, - enhanced compensation or consideration referred to in clause (b) of section 45(5), and subsequently such compensation or consideration is reduced by any Court, Tribunal or other authority. 34. In such a situation, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by Such Court, Tribunal or other authority to be the full value of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in doubt . 5.3. It is pertinent to mention here that while coming to the above conclusion, the Hon ble Court had duly taken note of its earlier judgment in the case of CIT v. Hindustan Housing Land Development Trust Ltd (1986) 161 ITR 524 (SC) and distinguished the same. 5.4 Likewise, the ITAT, Delhi Bench A has, in the case of DCIT v. Ajay Sharma reported in (2011) 15 taxmann.com 366 (Delhi)/ (2011) 48 SOT 164 (Delhi) held as under: The Supreme Court in the case of CIT v. Ghanshyam (HUF)[2009] 315 ITR 1 / 182 Taxman 368 has viewed that the additional compensation received by the assessee is to be assessed in the year in which it is received. The Supreme Court also held that interest on enhanced compensation under section 28 of the Land Acquisition Act, 1894, will form part of the enhanced value of the land. While section 34 of that Act will be construed as interest simpliciter for delay in payment so that it would be governed by law relating to assessment of interest on such delay being on accrual basis. In the instant case, the assessee had received interest on enhanced value of land and it was covered by section 28 of the Land Acquisition Act, and, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Delhi Bench of the ITAT in the case of Ajay Sharma (supra); we are of the view that the CIT (A) was not justified in allowing the assessee s appeal. In substance, the Revenue s appeal is allowed. 6. Before parting with, we would like to deal with the issues raised by the learned AR during the course of hearing as under: (i) The AO had neither furnished nor communicated the reasons for initiation of proceedings u/s 147 of the Act: At the out-set, we would like to point out that, as could be seen from the assessment order under consideration, the assessee had not objected to the re-opening of the assessment during the course of re-assessment proceedings and, therefore, the judgment of the Hon ble Supreme Court in the case of GKN Driveshafts (I) Ltd v. ITO (supra) cannot be of any help to the assessee. (ii) Capital gains computed on protective basis in the AY 2006-07: As a matter of fact, the issue raised by the Revenue in its appeals under consideration is only the assessing of the interest received during the AY 2006-07. Moreover, the assessee has not ventured to file its Cross Objection before this Bench against the AO s alleged stand in computing the Capita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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