TMI Blog2017 (11) TMI 1222X X X X Extracts X X X X X X X X Extracts X X X X ..... eby tribunal has dismissed the appeal of the department and confirmed the order of the CIT (A). 2. This court while admitting the appeal on 24.9.2012 framed following substantial question of law:- Whether the Tribunal was legally justified in holding that the receipts and the interest were neither certain nor quantifiable so no addition could be made for the relevant year when the amount of interest was actually received by the assessee in the year under consideration? 3. The facts of the case are that assessee respondent is a firm carrying the business of contractor. For the impugned assessment year 2007-08 the return of income was filed at ₹ 20,240/- and a notice u/s 143(2) was issued. The AO made a trading addition of ₹ 2,47,680/- on contract receipt of ₹ 30,96,012/- by applying the profit rate of 8%. Further, it was noticed by the AO that the assessee had undertaken contract work with the Irrigation Department, Dausa. The said work could not be completed by the stipulated period and hence a dispute arose between the assessee and the Irrigation Department. The cost of this work was estimated at ₹ 60,48,691/- out of which ₹ 14,31,728/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis that the income accrued to the assessee on the date of the award. The assessment was confirmed by the Appellate Assistant Commissioner of Income-tax on first appeal. In second appeal by the assessee before the Income-tax Appellate Tribunal, two contentions were raised by it. It was urged that the amount of compensation received by the assessee was not a receipt of a revenue nature. It was also contended that in any event the amount did not accrue to the assessee as its income during the relevant previous year ended March 31, 1956. The Appellate Tribunal rejected the first contention and held that the compensation received by the assessee related to the acquisition of land which was the stock-in-trade of the assessee, and was, therefore, a trading receipt of the business carried on by the assessee, and therefore, a receipt of a revenue nature liable to tax. The Appellate Tribunal, however, accepted the other contention that the sum of ₹ 7,24,914 was not taxable in the assessment year 1956-57. It allowed the appeal accordingly by its order dated February 22, 1964. At the instance of the Revenue the Appellate Tribunal referred the question of law set out earlier to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. MANU/PH/0305/1960. The very foundation of the claim made by the assessee was in serious jeopardy and nothing would be due if the appeal was decided against the assessee. Our attention has been drawn by the Revenue to Pope The King Match Factory v. Commissioner of Income-tax MANU/TN/0558/1962 : [1963]50ITR495(Mad) . That case, however, proceeded on the basis that excise duty was payable and its quantification alone remained to be decided in the appeal. Wemay point out that the Andhra Pradesh High Court, dealing with the taxability of compensation received under the Land Acquisition Act in Khan Bahadur Ahmed Alladin Sons v. Commissioner of Income- tax MANU/AP/0157/1968 :[1969]74ITR651(AP) held that when land was taken over by the Government the right of the owner to compensation was an inchoate right until the compensation had been actually determined and had become payable. It was observed that the enhanced compensation accrued to an assessee only when the Court accepted the claim and not when the land was taken over by the Government. Examining the question whether income could be said to have accrued to the assessee on the date when possession of the land was taken by the G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be any justification for such a proposition. On a proper construction of the terms 'accrue' or 'arise', we are of the view that such an interpretation cannot be placed. The interpretation given by us does not affect the interests of the revenue. At the same time, it safeguards the assessee and prevents harassment. To hold otherwise would be contrary to the provisions of law. The legal position was explained in further detail by the Gujarat High Court in Topandas Kundanmal v. Commissioner of Income-tax, Gujarat MANU/GJ/0029/1976 : [1978]114ITR237(Guj) . The High Court was called upon to decide without the right to receive the enhanced compensation under the Land Acquisition Act accrued or arose to the assessee when he sought a reference under Section 18 of the Act or when the award was made by the Civil Judge although an appeal was pending against that award. The learned Judges referred to the nature of an award made by the Collector, and adverting to the opinion of this Court in Harish Chandra Raj Singh v. The Deputy Land Acquisition Officer and Anr. MANU/SC/0386/1961 : [1962]1SCR676 that the award made by the Collector was merely an offer or tender of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght in the view taken by it and, therefore, this appeal must be dismissed. 6. The tribunal has sought to rely upon the aforesaid judgment. 7. However, Supreme Court in subsequent decision in Commissioner of Income Tax, Faridabad vs. Ghanshyam (HUF) (2009) 315 ITR 1 (SC) held as under:- 27. In the case of Hindustan Housing (supra) certain lands belonging to the assessee- company, which was in the business of dealing in land and which maintained its account on mercantile system, were first requisitioned and then compulsorily acquired by the State Government. The Land Acquisition Officer awarded ₹ 24,97,249/- as compensation. On appeal the Arbitrator made an award at ₹ 30,10,873/- with interest at 5% from the date of acquisition. Thereupon, the State preferred an appeal to the High Court. Pending the appeal, the State Government deposited in the Court ₹ 7,36,691/- being the additional amount payable under the award and the assessee was permitted to withdraw that additional amount on furnishing a security bond for refunding the amount in the event of the said Appeal being allowed. On receiving the amount, the assessee credited it in its suspense account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, in our view, the judgment of this Court in Hindustan Housing (supra) is not applicable to the present case. 35. It was urged on behalf of the assessee that Section 45(5)(b) of the 1961 Act deals only with re-working, its object is not to convert the amount of enhanced compensation into deemed income on receipt. We find no merit in this argument. The scheme of Section 45(5) of the 1961 Act was inserted w.e.f. 1.4.88 as an overriding provision. As stated above, compensation under the L.A. Act, 1894, arises and is payable in multiple stages which does not happen in cases of transfers by sale etc. Hence, the legislature had to step in and say that as and when the assessee-claimant is in receipt of enhanced compensation it shall be treated as deemed income and taxed on receipt basis. Our above understanding is supported by insertion of Clause (c) in Section 45(5) w.e.f. 1.4.04 and Section 155(16) which refers to a situation of a subsequent reduction by the Court, Tribunal or other authority and recomputation/amendment of the assessment order. Section 45(5) read as a whole (including clause c ) not only deals with re- working as urged on behalf of the assessee but als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the above mentioned phraseology and we find that the question is already answered by the Supreme Court in RAMA BAI vs. C.I.T.2. The fact that the compensation was enhanced by the High Court in an appeal and the interest accruing to it was received by the assessee makes him liable to pay the tax. However, it will be spread over the period for which it accrued to him, in accordance with the Supreme Court judgment. In any case, if the judgment enhancing the compensation in favour of the assessee is reversed by the Supreme Court, then the assessee, even after payment of the tax on the accrued interest, would not be remediless. He can always seek the refund of the tax so paid, by making appropriate application for rectification of the assessment. The Tribunal relied on judgment in Smt. Sankari Manickyamma (1 supra) that obviously stands reversed in view of the judgment of the Supreme Court judgment in Rama Bai (2 supra). 10. However, counsel for the respondent has contended that the assessee has suffered actual loss and it has been contended that the assesse has incurred loss as observed by the AO which reads as under:- 11. He further contended that while considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee as held by the Hon ble Apex Court (supra). In view of these facts and circumstances and in view of the detailed reasoning given by the ld. CIT(A), we confirm his order. 11. However taking into account that the carry forward loss was not there and in view of the decision of the Supreme Court in Ghayshyam (supra) as reproduced herein above, we are of the view that the interest actually received was income. 12. We restore the order of the AO and the order of CIT(A) and order of the tribunal is quashed and set aside. 13. It is made clear that ultimately assessee will make payment in case he lost before the court the same will be treated as set off expenses. 14. Counsel for appellant contended that in view of the provision of Section 155 (16) of the Income Tax Act which reads as under:- 155 . (16) Where in the assessment for any year, a capital gain arising 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, is computed by taking the compensation or consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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