IT: Accrual of interest on enhanced compensation for land acquired under Land Acquisition Act should be determined on year to year basis
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[2013] 38 taxmann.com 48 (Allahabad)
HIGH COURT OF ALLAHABAD
Commissioner of Income-tax
v.
Smt. Tapeshwari Devi*
R.K. AGRAWAL AND RAM SURAT RAM (MAURYA), JJ.
IT APPEAL NO.514 OF 2008†
NOVEMBER 8, 2012
Section 5 of the Income-tax Act, 1961 - Income - Accrual of [Interest on compensation] - Assessee received interest on enhanced compensation for compulsory acquisition of her land under Land Acquisition Act - Such interest was for period 5-8-1987 to 3-11-1993 - Assessing Officer brought to tax entire interest to tax in relevant year - Whether accrual of interest would be determined on year to year basis and, hence, Assessing Officer was to be directed to recalculate interest on year to year basis and levy tax accordingly - Held, yes [Para 5] [In favour of assessee]
CASE REVIEW
Rama Bai v. CIT [1990] 181 ITR 400/[1991] 54 Taxman 496 (SC) and Mrs. Khorshed Shapoor Chenai v. Asstt. CED [1980] 122 ITR 21/3 Taxman 23 (SC) (para 5) followed.
CASES REFERRED TO
Rama Bai v. CIT [1980] 181 ITR 400/[1991] 54 Taxman 496 (SC) (para 3) and Mrs. Khorshed Shapoor Chenai v. Asstt. CED [1980] 122 ITR 21/3 Taxman 23 (SC) (para 5).
A.N. Mahajan and Dhananjai Awashthi for the Appellant. R.R. Agrawal and S. Agrawal for the Respondent.
ORDER
Ram Surat Ram (Maurya), J. - The Revenue has filed the present Appeal u/s 260 (A) of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') from the judgment of Income Tax Appellate Tribunal, New Delhi dated 25.4.2008. Following substantial questions of law have been proposed by the Revenue:
| "(1) | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in coming to the conclusion that interest from one source can be assessed on cash basis and interest from another source can be assessed on accrual basis in contravention of the provisions of Section 145 (1) of the Act? | |
| (2) | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that the interest received from Meerut Development Authority was taxable on accrual basis ignoring the fact that the assessee herself has offered to tax interest on NSC on cash basis? | |
| (3) | Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in deleting the addition of interest income of Rs. 22,90,873/- which was not assessed to tax in any other assessment year?" |
2. The respondent assessee received compensation of her land acquired in the proceedings under the Land Acquisition Act. Accordingly, notice u/s 148 of the Act has been issued by the Assessing Officer to the respondent on 8.7.2004 on which, the assessee submitted her return on 10.3.2006 in which she has shown her agricultural income as Rs. 60,000/- and other income as Rs. 9,360/-. The Assessing Officer made addition of Rs. 56,29,713.90 towards compensation, solacium, additional compensation, interest @ 9% from 5.8.1987 to 4.8.1989 and interest @ 15% from 5.8.1989 to 3.11.1993. The assessee has stated that from the compensation received, she has purchased land on 31.10.1995 and Rs. 46,18,846/-has been spent on it. The capital gain being within two years from the date of receiving compensation, as such, it is liable to be adjusted. The Assessing Officer by order dated 20.3.2006 found that in the sale deed, share of the assessee was 1/6, as such, capital gain to her share comes out to Rs. 7,62,794/-. Accordingly, her income was assessed as Rs. 23,00,233/- + Rs. 20,89,021/- + Rs. 60,000/- and interest u/s 234-A, 234-B and 234-C and penalty u/s 271 were imposed.
3. The assessee filed appeal being Appeal No. 177/2006-07 from the aforesaid order. The appeal was heard by CIT (A), Meerut, who by judgment dated 30.3.2007 upheld the order of A.O. in respect of income, but partly allowed the appeal in respect of interest u/s 234-A and 234-B of the Act. The assessee filed Income Tax Appeal No. 3531/Del/07 before the Income Tax Appellate Tribunal, New Delhi in which the computation of interest in the income was challenged. The Tribunal by judgment dated 25.4.2008 relying upon the judgment of Hon'ble Supreme Court in the case of Rama Bai v.CIT [1990] 181 ITR 400/[1991] 54 Taxman 496 held that since the interest was of the period 5.8.1987 to 3.11.1993, as such, the interest is liable to be counted on year to year basis. Accordingly, the Assessing Officer was directed to verify and re-calculate the interest on year to year basis and levy tax accordingly.
4. Heard Sri Dhananjay Awasthi, learned Senior Standing Counsel for the appellant and Sri R.R. Agarwal for the respondent.
5. The questions raised in this appeal have already been decided by the Hon'ble Supreme Court in Rama Bai's case (supra) and Mrs. Khorshed Shapoor Chenai v. Asstt. CED [1980] 122 ITR 21/3 Taxman 23, in which, it has been held that accrual of interest will be determined on year to year basis. Accordingly, the order of the Tribunal does not suffer from any illegality.
The appeal fails and is dismissed.
USPRegards
Prarthana Jalan
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