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TMI Blog2007 (3) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... a partition in the year 1956 made by their father who died in the year 1969. The said lands were acquired by the Government in the land acquisition proceedings. The assessee received compensation from the Government for the first time in the assessment year 1984-85. The assessee went on appeal against the compensation granted under the acquisition proceedings before the Sub Court, Poonamallee, which ordered additional compensation together with interest. Both the assessee as well as the State went on appeal before the High Court. Till the assessment year 1990-91, the additional compensation received was admitted in the returns. In the assessment year 1991-92, the assessee received additional compensation of Rs. 2,02,624. The assessee claimed exemption of this compensation by making an entry in Part-IV of the income-tax return. In the proceedings taken under section 148, the assessing authority held that in view of the insertion of section 45(5)(b) with effect from the assessment year 1988-89, the additional compensation of Rs. 2,02,624 received by the assessee was taxable under section 45(5)(b). It was pointed out that the State Government obtained stay from the High Court, Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to enhanced compensation was still a matter to be adjudicated upon by the High Court, and hence the assessee did not have the right to receive the enhanced compensation amount. The question of capital gains could be considered in the year in which the matter was finally decided by the High Court. In so holding, the Commissioner of Income-tax (Appeals) followed the decision of the Supreme Court reported in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524. Thus, on the merits, the Commissioner of Income-tax (Appeals) allowed the appeal. 6. The Revenue preferred an appeal before the Income-tax Appellate Tribunal, challenging the correctness of the order of the Commissioner of Income-tax (Appeals) on the question of assessability of the compensation enhanced, then pending before the High Court for final verdict. The assessee filed a cross-appeal and challenged the order of the Commissioner of Income-tax (Appeals) that the appellate authority erred in not giving a clear direction that the entire amount of Rs. 2,02,624 received from the Sub Court, Poonamallee, was not income and hence, not taxable ; that the Income-tax Officer bifurcated the said amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 148 was well within law. 8. Learned counsel appearing for the assessee submitted that the Tribunal ought to have considered the decision of the apex court in a proper perspective to grant the relief. 9. Learned counsel appearing for the assessee pointed out to the passages from the decision of the apex court to contend that the amendment had not brought forth any change in the declaration of law by the apex court. He also referred to the order of the apex court dated November 14, 1991, in C. A. No. 3094 of 1990, etc., and to the order of this court dated December 22, 1997, in A. S. Nos. 1122 of 1990, etc. ; that the mere receipt of money under an undertaking does not make the recipient as having received the income ; that until such time the dispute reaches a finality, the recipient need not claim it as his income. In these circumstances, placing reliance on the decision of the Karnataka High Court reported in Chief CIT v. Smt. Shantavva [2004] 267 ITR 67 (Karn), the assessee submitted that the decision of the Karnataka High Court fully governed the case and, hence, prayed for setting aside the order of the Tribunal. 10. Learned counsel appearing for the assessee subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... davit of the claimants, we dispose of these SLPs. No order as to costs. Stay granted in this case shall stand vacated. Claimants may move the High Court for appropriate order for withdrawing the compensation amount." 13. The order in the main appeal was passed by the High Court after remand from the Supreme Court only on December 22, 1997. The further special leave petition preferred was dismissed by the Supreme Court on January 22, 1999. Hence, at least till orders on the question of additional enhanced compensation reached a finality, the amount received by the assessee as per the orders of the Supreme Court was on the basis of a written undertaking given by the assessee to return the receipt of 50 per cent. of the enhanced compensation with interest. 14. Dealing with the contention based on the decision of the Supreme Court reported in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524, the assessing authority took the view that the provisions of law under the Finance Act of 1987 made the difference that the amendment itself was brought about to cover cases of capital gains arising out of additional compensation even in cases where finality had not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) was introduced. Section 155(7A) of the Income-tax Act, 1961, enabled the Income-tax Officer to recompute the capital gains arising from the transfer of the capital asset by taking the enhanced compensation to be the full value of the consideration received or accrued as a result of the transfer. Thus, the provision enabled recomputation by providing for a period of limitation of four years to be reckoned from the end of the previous year in which the additional compensation was received by the assessee. However, difficulties were also experienced in cases where the additional compensation is received by a person other than the original transferor where the legal heirs stepped into the shoes of the original owner. Repeated rectification of assessment on account of the enhanced compensation at different stages often resulted in mistakes of computation of tax liability. To remove these difficulties, sub-section (5) of section 45 was inserted by the Finance Act, 1987, to provide for taxation of additional compensation in the year of receipt in respect of the transfer of capital asset. The Explanation to sub-section (5) of section 45, particularly to clause (iii), shows that where by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It will attract section 45(5)(b) only when the final decision is rendered. We are supported in the said view by a decision of the Supreme Court and a decision of this court." 21. The decision of the Supreme Court reported in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524 relied on by the assessee and referred to in the above decision may also be noted. It related to a case of an award granted in respect of compulsory acquisition of land. It was taken up on appeal by the land owner. The arbitrator made an award enhancing the compensation to Rs. 30,10,873 as against the award at a sum of Rs. 24,97,249, and interest at 5 per cent. from the date of acquisition was also ordered. The State went on appeal to the High Court. Pending the appeal, the State Government deposited a sum of Rs. 7,36,691, being the additional amount payable under the award. The claimant was permitted to withdraw the said amount on furnishing a security bond for refunding the amount in the event of the State succeeding the appeal. The assessee credited the amount in a suspense account on the same day. The said amount was assessed at the hands of the assessee in respect of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 45, this court held that the additional compensation received could not be treated as part of the compensation received for the transfer of the land until it is finally determined by the High Court or the Supreme Court. The decision reported in Anil Kumar Forma (HUF) v. CIT [2007] 289 ITR 245 (Mad) followed the decision reported in CWT/CIT v. Smt. T. Girija Ammal [2006] 282 ITR 614 (Mad). The view expressed therein fully covers the issue here too. 23. It may be seen that following the decision of the Supreme Court reported in CIT v. Hindustan Housing and Land Development Trust Ltd. [1986] 161 ITR 524, a similar view was also taken by the Allahabad High Court in the decisions reported in CIT v. Laxman Dass [2000] 246 ITR 622 and Chief CIT v. Smt. Shantavva [2004] 267 ITR 67 (Karn). These decisions relate to the period prior to the amendment. 24. In the light of the decisions of the apex court and this court referred to above, we accept the stand of the assessee and allow the appeal on the issue relating to capital gains. 25. On the question of reopening of the assessment, we do not find any error in the order of the Tribunal. The proceedings taken do not suffer from any illegalit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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