TMI Blog2016 (6) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the Assessing Officer, and disapprove the CIT(A)’s action of confirming the same. Grievance of the assessee is thus upheld. - I.T.A. No.: 630/Ahd/16 - - - Dated:- 31-5-2016 - PRAMOD KUMAR AM AND S S GODARA JM For the Petitioner : Hiren Trivedi For the Respondent : Anita Hardasani ORDER PER PRAMOD KUMAR, AM: 1. The short point that requires our adjudication in this case is whether or not the learned CIT(A) was justified in upholding the addition of ₹ 7,47,143 on account of interest awarded to the assessee, as a part of enhanced accident compensation, by Hon ble Supreme Court. The assessment year involved is 2012-13 and the impugned order was passed by the learned CIT(A) on 28th January 2016. 2. The issue in appeal lies in a very narrow compass of facts. The assessee before us is an unfortunate victim of a motor accident. On 18th May 1990, she was travelling in a car, which met a serious accident, leaving her permanently disabled, what is termed by the competent authority, at ninety percent level. She claimed a compensation of ₹ 15,00,000 for this tragic loss of her physical abilities. She did eventually get it but she had to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied, and is in further appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered facts of the case and the applicable legal position. 5. As we have noted earlier in this order, the assessee had to go right upto Hon ble Supreme Court to have her compensation claim accepted. What ought to have been paid to her soon after the accident, was eventually paid in full after twenty one years of the tragic incident. Hon ble Supreme Court, vide judgment dated 26th April 2011, concluded that Considering all this, we grant compensation of ₹ 15 lacs (Rupees fifteen lacs) with interest at the rate of 8% on the enhanced compensation from the date of filing the claim petition before MACT (Motor Accidents Claims Tribunal) till the date of realization . The payment made to the assessee, therefore, is in the nature of compensation for the loss of her mobility and physical damages. Clearly, such a receipt, in principle, is a capital receipt and beyond the ambit of taxability of income since only such capital receipts can be brought to tax as are specifically taxable under section 45. Hon'ble Supreme Court has, in the case of Pad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Allahabad High Court has, inter alia, held that To our opinion, the award of compensation under motor accidents claims cannot be regarded as income. The award is in the form of compensation to the legal heirs for the loss of life of their bread earner. Hence the interest on such an award cannot be termed as income to the legal heirs or to the victim himself . Their Lordships have also observed, referring to a series of judicial precedents on the issue, that if interest awarded by the court for loss suffered on account of deprivation of property or paid for breach of contract by means of damages, or were not paid in respect of any debt incurred or money borrowed, shall not attract the provisions of Section 2(28A) read with Section 194A(1) of the Income Tax Act . Essentially, this conclusion supports the school of thought that when principal transaction, i.e. accident compensation for the delayed payment of which the interest is awarded, itself is outside the ambit of taxation, similar fate must follow for the subsidiary transaction, i.e. interest for delay in payment of compensation, as well. Touching a different chord but coming to the rescue of the assessee, Hon ble Punj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r on enhanced compensation referred to in sub-section (2) of section 145A shall be assessed as income from other sources in the year in which it is received. This amendment will take effect from 1st April, 2010 and shall accordingly apply in relation to assessment year 1998-99 and subsequent assessment years. [Clauses 26,27,56] 8. In the case of Rama Bai (supra), which is raison d' tre for this amendment in law, Hon ble Supreme Court, speaking through Hon ble Justice S Ranganathan- as he then was, one of the most illustrious former Presidents of this Tribunal, had observed that the interest cannot be taken to have accrued on the date of the order of the Court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order . What is significant, however, that taxability of interest was not in dispute in the said case; the only dispute was the year in which the income should be taxed. The amendment in law, therefore, deals with the point of time when an income is it to be taxable. It does not bring to tax an income which was, until the point of time when amendment was ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to income tax under the head income from other sources , if it is not chargeable to income tax under any of the heads specified in Section 14, items A to E , and then, in the subsequent provision, i.e. Section 56(2), proceeds to set out an illustrative, rather than exhaustive list of, such incomes . Clearly, unless a receipt is not an income, there is no occasion for the provisions of Section 56(1) or 56(2) coming into play. Section 56 does not decide what is an income. What it holds is that if there is an income, which is not taxable under any of the heads under Section 14, i.e item A to E, it is taxable under the head income from other sources . The receipt being in the nature of income is a condition precedent for Section 56 coming into play, and not vice versa. To suggest that since an item is listed under section 56(2), even without there being anything to show that it is of income nature, it can be brought to tax is like putting the cart before the horse. The very approach of the authorities below is devoid of legally sustainable merits. The authorities below were thus completely in error in bringing the interest awarded by Hon ble Supreme Court to tax. The que ..... X X X X Extracts X X X X X X X X Extracts X X X X
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