TMI Blog2015 (10) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation for the standing mango and other fruit bearing trees, building, borewell and other assets on the agricultural land of the assessee, which was acquired under a notification for compulsory acquisition? - Held that:- What is to be noted in this regard is that it was acquisition of the land, along with structure, trees etc., which was made by a single transaction. It was only for the purpose of payment of compensation that valuation of the building, borewell, standing trees (which may be mango, tamarind and other fruit bearing trees) was made. While calculating the valuation of the trees, which was done by the Land Acquisition Officer of the Board, part relief had been granted by the Authorities with regard to certain kinds of trees and also the building and the borewell. But mango trees, which were approximately 12 years of age, were valued separately, and compensation on the same was treated as taxable. In this regard, since it is clear that the acquisition was for the entire land on "as is where is basis", and the land in question is agricultural land, and the valuation of the trees and other assets, were made only for the purpose of calculating compensation, therefore th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase the suit filed by the cousins of the assessee was decided in their favour. Consequently, though the cheques were deposited in Vysya Bank in the name of the assessee, but security in the form of Bank Guarantee was to be furnished by the assessee (as well as his brother), for which the Bank demanded 100% collateral security, and thus the amount so deposited in the name of the assessee was pledged as security, which he could not withdraw. 4. Consequently, a tripartite agreement was executed between the assessee (including his brother), Vysya Bank and the Board, which provided for Fixed Deposits of the amount credited in the account of assessee and his brother to be kept with the Bank as security on behalf of the Board, and would be payable either to the assessee (and his brother) or the cousins who had filed the suit, after dispute was resolved by the Court. On 09-03-2001, in exchange of Bank Guarantee, an Indemnity Bond was executed by the appellant-assessee in favour of the Board, according to which also the amount of compensation so deposited in the Bank, along with interest, was to remain as security in favour of the Board, till the suit/ appeal was finally decided. 5. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-11-2009 with the following order: Appeal is admitted for examination, not only on the substantial question relating to the levy of tax on the value of the trees, which form part of agricultural lands, which were come to be acquired by the government for a public purpose, and in respect of which the government had compensated the owners and as to whether the value so apportioned to the trees standing on the lands could have been brought to tax as non-agricultural income, and the other substantial question of law, as raised in the memorandum of appeal, as, in our view, such questions do arise for examination . However, at the time of arguments, learned counsel for the parties have formulated two substantial questions of law to be considered and decided by this Court, which are as follows: (1) Whether, in the facts and circumstances of the case, the Tribunal is right in law in holding that interest on fixed deposits representing compensation, pledged against bank guarantee given to KIADB pending resolution of dispute over title of land, is taxable in the respective years when such interest was credited by bank in its books? (2) Whether, in the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee till the decision of the Regular Second Appeal, as it was a part of the legal dispute which was raised by the cousins of the assessee (and his brother) with regard to title of the land which was acquired by the Board. It is contended that the assessee does not maintain any books of account and, as such, mercantile method of accounting would not be applicable, and in the cash system of accounting, the income would be chargeable to tax only when the assessee becomes complete owner of the interest amount, without any dispute or restriction over the same. The submission, thus, is that till the title of the suit land was finalized in the Regular Second Appeal by the High Court on 23-07-2008, there was always some condition or impediment or restriction over the compensation amount, as well as on the interest that accrued on the same, and thus, the appellant-assessee never became the complete or real owner of the interest amount till 23-07-2008, which was only in the assessment year 2009-10 and not before, and the interest amount which accrued from the year 1997 till assessment year 2009-10, would be payable by the assessee only in such assessment year. 14. Per contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had not acquired full and complete right over the compensation amount, as well as the interest, which was acquired only after the decision in the Regular Second Appeal on 23-07-2008, and that income of the assessee became taxable only in the assessment year 2009-10. 17. In the absence of the assessee maintaining any books of accounts, and in the circumstances of the case, the accounting method which could be adopted in the case of the assessee would be nothing but cash system of accounting. In such a case, even as per Section 5 of the Act, it would be income subjected to tax only when received or deemed to be received by the assessee. There can be tax imposed only on an income which is real, or in the hands of the assessee. In a case, where the assessee might have received some money in his account, but with certain impediment because of which the same cannot be used by the assessee till such impediment is overcome, which in the present case is of the decision in the suit/appeal filed by the cousins of the assessee, the same cannot be said to be actual receipt of money in the hands of or in favour of the assessee. If a right over certain money is dependent on contingency, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e taxable even when he may have actually received part of the enhanced compensation under the interim orders. Though the said case was under Section 45(5) of the Act, the principle laid down in the said judgment, would squarely apply to the facts of the present case. 20. In another case, being COMMISSIONER OF INCOME-TAX v/s A.B.V.GOWDA (DECD) (1986) 157 ITR 697 (Kar), a Division Bench of this Court held that interest on the enhanced compensation, which was in dispute, would be taxable only after the dispute was over. The same view has been taken by the Madras High Court in the case of COMMISSIONER OF WEALTH TAX/INCOME-TAX v/s T.GIRIJA AMMAL (2006) 282 ITR 614 (Mad). 21. In a recent judgment rendered in the case of COMMISSIONER OF INCOME TAX v/s SRI. L. SAMBASHIVA REDDY in ITA No.347/2009 decided on 19-01-2015, a Division Bench of this Court, after relying on the decision of the Hon'ble Supreme Court in the case of the COMMISSIONER OF INCOME TAX, WEST BENGAL-II v/s HINDUSTAN HOUSING AND LAND DEVELOPMENT TRUST LTD. (1986) 161 ITR 524 (SC) has held that in the case of a private dispute between two parties, even if some payment is made to a party, the taxability of the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, etc., cannot be justified in law. 25. The Tribunal has wrongly relied on the decision in the case of COMMISSIONER OF INCOME TAX v/s M.RAMAIAH REDDY (1986) 158 ITR 611 (Kar), as the said case related to acquisition of urban land, where the assessee therein was claiming compensation for the trees to be treated as potential agricultural income and thus, be treated separately and exempted from tax. In the said case, though the Tribunal accepted the plea of the assessee, the High Court rejected the same, and held that the acquisition of the land, along with trees, was a single transaction which could not be split and thus, the benefit of trees being treated as separate transaction could not be given. The Division Bench of this Court, in paragraph 9, while deciding the said question held that This legal formulation proceeded on the basis that there were two transactions in the acquisition, one pertaining to the land and the other to malkies thereon. This is wholly incorrect. The land was compulsorily acquired by the C.I.T.B., Bangalore. There were two transactions. While making the award the land and the tree growth were separately valued, but that does not mean that there were tw ..... X X X X Extracts X X X X X X X X Extracts X X X X
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