Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that in acquisition of land proceedings belonging to the assessee made by the State Government and payment of interest on additional compensation made thereof at different points of time due to the fact that appeals were pending are liable to tax at what point of time ?

High Court Of Madras

Commissioner Of Wealth Tax/Income Tax vs. Smt. T. Girija Ammal

Sections 5, 45(5), WT 2(m),

Asst. Years 1981-82, 1982-83, 1983-84, 1984-85, 1985-86,

1986-87, 1987-88, 1988-89, 1989-90, 1990-91

P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.

Tax Case (Appeal) Nos. 550 to 553, 573 to 576, 763 to 766 & 1105 to 1108 of 2005

21st January, 2006

Counsel Appeared

J. Narayanasamy, for the Appellant

JUDGMENT

P.P.S. Janarthana Raja, J. :

These tax appeals were preferred by the Revenue both in respect of income-tax as well as wealth-tax, against the common order passed by the Tribunal dt. 16th Oct., 2003, raising the following common substantial questions of law :

“1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that in acquisition of land proceedings belonging to the assessee made by the State Government and payment of interest on additional compensation made thereof at different points of time due to the fact that appeals were pending are liable to tax at what point of time ?

Whether, on the facts and circumstances of the case, ss. 45(5)(c) and 155(16) of the IT Act are applicable to the facts of the case for the asst. yrs. 1981-82 to 1990-91, 1991-92 and 1993-94 ?

Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee did not own the amount of compensation whether received or not on the valuation date of the respective assessment years ?”

2. The facts leading to the above questions of law are as under. The assessment years involved are 1981-82 to 1990-91. The assessee filed return of income for the asst. yr. 1981-82 onwards, and assessment was completed under s. 143(1)(a) of the Act. During the course of income-tax and wealth-tax proceedings for the asst. yr. 1985-86, the ITO found that the Sub-Collector, Thirupattur, apart from awarding the compensation and additional compensation, had also awarded interest on additional compensation to the assessee for the compulsory acquisition of the assessee’s land at Ambur for TNHB and National Highways by the Government of Tamil Nadu, by order dt. 3rd July, 1987, as amended, on 30th Nov., 1987. Possession was taken over by the Government on 21st Oct., 1980. The sub-Court awarded interest on additional compensation from the date of taking over possession by the Government, i.e., 21st Oct., 1980 to 31st March, 1990. The entire dispute raised in these appeals are centered around the above aspect of receiving compensation, additional compensation and interest thereon. In respect of wealth-tax assessment, it is related to the receipt of compensation and additional compensation. The dispute is whether the assessee had owned the amount of compensation and whether she received it or not on the valuation date of the respective assessment years. Since the assessee had not disclosed any interest income on the additional compensation for the period 1st April, 1984 to 31st March, 1985, in the return filed by her for the asst. yr. 1985-86, the ITO had reason to believe that the interest income chargeable to tax for the asst. yr. 1985-86 had escaped assessment.

3. The appellant owned 5.01 acres of land at Thirupattur which was acquired by the Land Acquisition Officer (LAO), Thirupattur under the Land Acquisition Act, by notification issued under s. 4 of the Land Acquisition Act, on 11th May, 1977. The Housing Board took possession of the land on 21st Oct., 1980. The LAO had awarded a compensation of Rs. 45,038 on 20th June, 1982. The capital gains on this compensation to the tune of Rs. 37,190 were offered for taxation by the assessee for the asst. yr. 1983-84. Subsequent to the award of the LAO, the appellant put forth a claim under s. 18 of the Land Acquisition Act claiming a higher compensation. In pursuance of this claim, the sub-Judge awarded enhanced compensation of Rs. 40,76,708 which was computed in the following manner : (A) (i) Compensation for lands : Rs. Rs. Compensation at Rs. 12 per sq. ft. for 2,18,236 sq. ft. 26,18,832.00 30% solatium 7,85,649.60 34,04,481.60 (ii) Compensation for coconut trees : 11 coconut trees at Rs. 2 per tree 2,260.00 30% solatium 600.00 2,860.00 34,07,341.60 (B) Interest for the period from 21-10-1980 to 20-7-1982 (i.e. From the date of taking over possession by TNHB till the date of award by LAO). Interest for land compensation 7,12,942.60 Interest for tree compensation 462.00 7,14,404.60 41,21,746.20 Less : Amount awarded by the LAO 45,037.73 40,76,708.47 While computing the income of the assessee for various assessment years, the AO made addition to the return of income under the heading “Other sources”, bringing to tax the interest on additional compensation, on the ground that the same had accrued in the various years and held that it is taxable on accrual basis. Aggrieved by the order, the assessee filed an appeal to the CIT (A), and the CIT(A) accepted the contention of the assessee and allowed the appeals. Aggrieved by the order of the CIT(A), the Revenue filed appeals before the Tribunal. The Tribunal also confirmed the order of the CIT(A) and dismissed the Revenue’s appeal.

Learned counsel for the appellant contended that the AO had rightly brought to tax, the interest element in each of the respective assessment years. Further it was submitted that the method adopted by the AO by bringing to tax the entire compensation including interest, was proper. He also further stated that in s. 45(5)(c) and also in s.155(16), there is a provision for revision of assessment suo motu, in the event of the award passed earlier getting reduced in subsequent judgment, which would clearly show that the intention of the legislature was to have the compensation assessed as and when received, no matter that it is challenged in appeal in a higher forum or not.

We heard the contention raised by the Revenue. In this case the additional compensation awarded by the Civil Court had not been accepted by the State Government and it has preferred an appeal objecting to the enhancement. Hence, 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 Supreme Court. If the appeal of the State is allowed, the assessee is bound to refund the amount and hence, the same cannot be assessed before reaching finality. The right to receive additional amount awarded by the Court as part of the compensation, was only an inchoate right during the pendency of the matter before higher judicial forums. In such circumstances, the disputed compensation has to be assessed only when it is finally determined by the higher Courts. The Tribunal had rightly held that the additional compensation could not be assessed during the years in question and can be assessed only at a time when the final higher Court decides the issue.

In respect of question No. 3 arising out of wealth-tax appeals, the wealth-tax assessment had been framed on the basis of the corresponding income-tax assessments. So, when the income itself is not accruing or arising, the question of levying wealth-tax also does not arise. In view of the above conclusion, question No. 3 relating to wealth-tax is only consequential and hence requires no interference.

In the foregoing conclusions, we are of the view that the order passed by the Tribunal is in accordance with law and requires no interference. We find no merit in these appeals, as no questions of law arise for consideration of this Court. Hence the above cases are dismissed. No costs.

[Citation : 282 ITR 614]

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