HIGH COURT OF PUNJAB AND HARYANA
Commissioner of Income-tax
v.
Karanbir Singh
M.M. KUMAR AND RAJESH BINDAL, JJ
IT REFERENCE NO. 26 OF 1997
January 17, 2007
Section 5 of the Income-tax Act, 1961 -
Income - Accrual of - Assessment year 1986-97 - In respect of acquisition of
certain land in year 1962, assessee received enhanced compensation and interest
in relevant year - However, matter regarding quantum of compensation had not
attained finality and was still fluid - Whether till such time proceedings in
reference thereto attain finality, revenue was not entitled to tax amount of
interest received by assessee - Held, yes
FACTS
The agricultural land belonging to the assessee was acquired by the State Electricity Board in 1962. During the assessment year 1986-87, the assessee received enhanced compensation and interest. The Assessing Officer held that the entire amount of interest received by the assessee was assessable in the assessment year 1986-87 as the amount was actually received during that year. On appeal, the assessee primarily contended that the amount of interest was not at all taxable during the relevant year. In the alternative, the assessee submitted that in any case, the entire amount of interest was not assessable during the year in question as the interest had accrued year after year and the interest relatable to the assessment year in question could at best be assessed during that year. The Commissioner (Appeals) did not accept the primary contention but while accepting the alternative plea, directed the Assessing Officer to bring under assessment only that amount of interest which accrued to the assessee during the assessment year in question. On further appeal, the Tribunal relying upon decision of the Supreme Court in CIT v. Hindustan Housing & Land Development Trust Ltd.’s [1986] 161 ITR 524, held that as the matter regarding compensation had not attained finality but was still fluid, no amount of interest could be held to be taxable.
On reference:
HELD
The Andhra Pradesh High Court in CIT v. Smt. M. Sarojini Devi
[2001] 250 ITR 759 had taken the view that the Assessing Officer need not to
wait till the matter regarding assessment of compensation attains
finality. Against this, in a number of
judgments, different High Courts have taken the view in favour of the
assessee. Further, under similar
circumstances, special leave to appeal against a judgment of Bombay High Court
had also been dismissed. However keeping
in view the totality of circumstances and the ratio of various judgments of the
High Courts, taking a view in favour of the assessee, it was to be held that
the revenue was not entitled to tax the amount of interest received by the
assessee on account of acquisition of land till such time the proceedings in
reference thereto attain finality. [
CASE REVIEW :
CIT v. Laxman Dass
[2000] 246 ITR 622 (All.); Director of
Income Tax (Exemption) v. Goyal
Charitable Trust [1995] 215 ITR 672 (