Ashwani Dhingra vs Addl. CCIT
S. 234A/B/C - Interest is mandatory, but it cannot be charged retrospectively when there was no receipt in the hands of assessee. No law is applicable retrospectively unless specified in the statute.
The assessee is primarily an agriculturist. His land was acquired by the Government and he got compensation under Section 23 of the Land Acquisition Act. The assessee has also received interest on additional compensation and solatium. The assessee has declared the amount of compensation and solatium under VDIS, 1997, but interest on additional compensation received under Section 23(1A) was not declared by the assessee for the purpose of tax.
P & H High Court judgment dated 17.8.2000 in the case of Union of India v Birla held that interest would also be payable on additional amount determined under Section 23(1A) of the Land Acquisition Act. Hon'ble Apex Court has confirmed the same in the case of Sundar Vs. Union of India dated 9th September, 2001. Resultantly, the assessee has received the interest on the amount of additional compensation, which was spread over during the assessment year under consideration. On 20th November, 2003 the A.O. has issued a notice under Section 148 of the Act. Being aggrieved, the assessee filed a writ petition before Hon'ble Allahabad High Court, which was dismissed vide order dated 31st August, 2004. On 11th October, 2004 the assessee filed returns of income declaring an income of Rs. 6,53,760/- being taxable income in each of the six years the tax was paid under Section 140A of the I.T. Act, 1961.
Whether chargeability of the interest under Section 234A, 234B, 234C for the assessment year under consideration. The A.O. has charged the interest. Ld. CIT(A) & ITAT confirmed the order.
Hon`ble High court observed that, no doubt the charging of the interest is mandatory, the assessee is liable to pay the advance tax and on delay/failure, interest is chargeable. In the instant case, the assessee has received compensation and interest thereupon only after the judgment of the Hon'ble Supreme Court in the year 2001. Only due to judicial pronouncement, the assessee has become entitled to receive the additional compensation and interest thereupon. The interest can be charged only on the income. No interest can be charged on notional interest.
In the Case of CIT Vs. ICD, Syndicate, 285 ITR 310 Karnataka, it was held that no interest can be charged when there is no real income. In the instant case, the interest would be charged in the year when the real income was received by the assessee and certainly, not during the year when the land wasacquired.
Thus, the interest will have to be charged only on the interest earned on additional compensation which was received after the year 2001. So, the interest will have to be charged in the year. When income was earned as per the ratio laid down in the case of Ghanshyam [2009] 315 ITR 1 (SC), it cannot be charged retrospectively when there was no receipt in the hands of assessee. Needless to mention that no law is applicable retrospectively unless specified in the statute.
Interest is compensatory in nature as per the ratio laid down in the case of CIT Vs. Pranoy Roy, 309 ITR 231 Sc. Interest on advance tax is also compensatory in nature as per the ratio laid down in the case of CIT Vs. Insilco Ltd. (2010) 321 ITR 105 Delhi.
Hon`ble High court directed the A.O. to charge the interest under Section 234A, 234B, 234C of the Act, as per the law in the assessment year when the interest earned on the additional compensation was actually received.
Regards
Prarthana Jalan
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