AI Drafter 
TaxTMI 
TaxTMI 
1977 (8) TMI 92
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....eived by the assessee family partly in July, 1974 and partly in September, 1974. Not satisfied with the enhanced compensation given by the Sub-Court, Chingleput, the assessee went up in appeal before the High Court, Madras. 3. The High Court decided the appeal and passed a decree on 8th April, 1974 awarding further compensation of Rs. 3,93,338. But the State Government appealed against the said High Court's Judgment to the Supreme Court. The Supreme Court granted stay of the operation of the judgment and decree of the High Court pending disposal of the appeal. The matter is now pending before the Supreme Court. On the assessee's application, the Supreme Court however, permitted the assessee to draw the extra compensation amount granted by the High Court and which was deposited by the State Government in the Supreme Court as per its order, on furnishing bank guarantee. The assessee drew the above amount and deposited the same in India Bank in fixed deposit by way of counter guarantee on 15th April, 1975. 4. For the asst. yrs. 1970-71 and 1971-72, the WTO reopened the WT assessments originally made to bring to tax the aforesaid extra compensation amount aggregating to Rs. 4,20,....
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....hances of further appeals in the even of the High Court allowing the claim in full or in part; (g) the time that would be consumed in such litigation and (h) the fact that immediate payment has to be made while purchasing the right while the realisation would take many years. The above circumstances would completely dip and possibility or marketability of this asset. (v) In any case, the counter guarantee furnished by the appellant for an equal amount of compensation decided by the Madras High Court should be treated as a liability and deducted for WT purpose." The AAC held the compensation is an asset, that the Madras High Court has decided the actual amount of compensation and that the same would represent the market value of the assessee's right to receive compensation on the different valuation dates from the asst. yr. 1970-71 onwards. The AAC also referred to the ruling of the Supreme Court in the case of Pandit Lakshmi Kant Jha vs. CWT (1973) CTR (SC) 260 : 90 ITR 97 (SC) and rejected the assessee's contention that the compensation amount is not yet finally determined by the Supreme Court and, therefore, the same was not includible in the net wealth for the ass....
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....ight has no market value. In this connection he referred to Mulla's Transfer of Property Act, s. 6 cl. (e) and to the passages at pages 238 and 240. He then submitted that the Department has relied upon the ruling of the Supreme Court in the case of Pandit Lakshmi Kant Jha vs. CWT. The Supreme Court in the said decision has not overruled the Calcutta High Court decision in the case of CWT vs. U.C. Mahatab referred to above. The learned counsel then submitted that the latest ruling of the Calcutta High Court in case of CIT, West Bengal-II vs. Hindustan Housing & Land Development Trust Ltd. 108 ITR 380 (Cal) would squarely apply to the facts of this case. In fact he relied very heavily on the ratio of the above ruling. Our attention was also invited to the ruling of the Gujarat High Court in the case of Shri Topandas Kundanmal vs. The CIT, Gujarat 1976 CTR (Guj) 507 : 1976 Taxation Vol. 45 s. (3) at 68. He also referred us to the order of the Tribunal, Cochin Bench dt. 31st May, 1971 in WTA No. 98 (Coch) of 1969-70 relating to the asst. yr. 1969-70 in the case of Shri T.K. Damodaran vs. The WTO, Calicut (WTA 98 (Coch) 69 : 70 decided on 31st May, 1971). 7. On behalf of the Revenue....
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....ub Court, Chingleput and that Court enhanced the compensation payable by Rs. 26,898. This compensation was received by the assessee partly in July, 1974 and partly in September, 1974. The assessee took up the matter in appeal before the High Court of Judicature at Madras. The High Court decided the case on 30th Jan., 1974 and passed a decree on 8th April, 1974 awarding further compensation amount of Rs. 3,93,338. The State Government did not accept the judgment of the High Court. It took it up in appeal before the Supreme Court which granted stay of operation of the High Court judgment. However, on the assessee's application the Supreme Court permitted the assessee to withdraw the extra compensation decided by the High Court. The assessee had accordingly drawn the amount and deposited the same in entirety in the Indian Bank by way of counter guarantee in April, 1975. For the assessment years under appeal, i.e., 1970-71 to 1974-75 (both inclusive) the WTO included the sum of Rs. 4,20,236 (Rs. 3,93,338 plus Rs. 12,966 plus Rs. 13,932) in the assessee's net wealth. In the asst. yr. 1974-75 the WTO treated the sum of Rs. 3,89,115 as the assessee's net wealth excluding the sum amounting....
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....rued to it in the relevant year. The AAC confirmed the order of the ITO. On appeal, the Tribunal held that the sum of Rs. 7,24,914 could not be said to have accrued to the assessee in the relevant previous year. The Tribunal further, noticed that there was an appeal preferred by the State Government against the amount order pending before the High Court and, therefore, at the end of the relevant year the claim of the assessee to receive the additional amount was sub judice. The Tribunal also noticed that the assessee had to execute security bond before it was permitted to withdraw the said amount deposited by the State Government in Court. The Tribunal considered the terms and conditions of the said bond. The Tribunal was of the view that under the circumstances the assessee had no absolute right to receive extra amount of compensation until the decision of the appeal the High Court. The Tribunal referred to the ruling of the Punjab High Court in the case of CIT vs. Jai Prakash Om Prakash Co. Ltd. (41 ITR 718) and relied on the following observations of the Court in the said decision: "The scheme of the Act would show that only those sums are taxable which accrue as income, i.e.....
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....ed Alladin vs. CIT (3) E.D. Sassoon & Co. Ltd. vs. CIT (26 ITR 27 (SC). (4) Pope The King Match Factory vs. CIT (50 ITR 495) (5) CIT vs. Sampangira maiah (69 ITR 159) (6) Kedarnath Jute Mfg. Co. Ltd. vs. CIT (82 ITR 363 (SC) (7) CIT vs. Dr. Sham Lal Narula (84 ITR 625) (8) CIT vs. Hiralal Mittal & Sons (86 ITR 463). After considering the above decisions. Their Lordships of the Calcutta High Court observed as under: "On a consideration of these authorities, we are of the opinion that a compensation amount can only be considered to have accrued or arisen when the said amount has become determined and payable. The authorities which we have discussed so far, in our opinion, support us in this view. Whether the amount of compensation is determinate and payable or not, will necessarily depend on the facts of each particular case. In the facts of the instant case the Collector made an award for a particular sum. On appeal to the Court of the arbitrator the arbitrator has enhanced that amount. Against the decision of the arbitrator enhancing the amount an appeal has been preferred and is now pending in the High Court. So far as the amount awarded by the Collector is....
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....th the facts in the case before the Calcutta High Court. In this case also the assessee has drawn the amount of additional compensation deposited by the Tamil Nadu Government by giving a counter guarantee to the Indian Bank. The Indian Bank, Madras have given the guarantee to Supreme Court in India in the following terms: "INDIAN BANK Indian Bank Building, 17th North Beach Road, Mardas-I Head Office. Re : Gtee/Mylapore. In the matter of: Civil Appeal Nos. 21 to 41(N) of 1975 and In the matter of : The Special Dy. Collector for L.A.S.H.S. Scheme, Madras Appellant. Versus 1. A.R. Krishnamurthy 2. A.S. Muthuswamy 3. A.S. Anantharaman 4. Sri Krishna Tiles & Porteries (Madras)(P) Ltd. 5. A.R. Rajagopalan 6. A. Lakshmi for self and as legal representative of Kumari Shyamala (deceased) 7. A.R. Lakshmi 8. A.S. Indira 9. Kumari Kameswari 10. N.L. Lalithambal 11. N. Kalavanthi Respondents. WHEREAS the Special Dy. Collector for L.A.S.H.B. Scheme; Madras, filed the above mentioned appeals in the Supreme Court against the judgment and Decree of the Hon'ble High Court of Judicature at Madras in Appeal Nos. 305 to 325 of 1....
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....decree or allowing such other lesser amount as the Court may order. We, Indian Bank, are hereby held firmly bound upto the Supreme Court of India through the Registrar of the said Court for the payment to it or to the Appellant on demand and without demur of the said sum of Rs. 33,75,245.50 (Rupees Thirty three lakhs seventy five thousand two hundred and forty five and paise fifty only) or such other lesser amount as may be ordered by the Supreme Court and require to be refunded by the Respondents to the Appellant as a result of the final disposal of the said Civil Appeal Nos. 21 to 41(N) of 1975 and the guarantee herein contained shall not be affected by any change in the constitution of the bank and it is hereby agreed by and between the parties that this guarantee shall remain in full force and virtue till the disposal of the Civil Appeal Nos. 21 to 41(N) of 1975 to which the aforesaid order of the Court relates and until an order of the Supreme Court is made discharging this guarantee. IN WITNESS WHEREOF WE, INDIAN BANK, have executed this the 4th March, 1975. For INDIAN BANK Sd/..................... MANAGER, MYLAPORE As already stated, the Supreme Court has g....
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....ment of the High Court. As for the earlier years here also there is the risk of the Supreme Court reversing the judgment of the High Court in entirety. In these circumstances, we are of the opinion that no prudent, purchaser would be willing to purchase such a right and even if we were to assume a notional market for such a right the value which that right would fetch in the open market would be practically nil. In this view of the matter also we are of the opinion that no amount is includible in the net wealth of the assessee towards the extra compensation amount for all the years under appeal. We are fortified in our above view by the ruling of the Andhra Pradesh High Court in the case of Khan Bahadur Ahmed Alladin & Sons vs. CIT. It will be profitable to refer to the observations of Their Lordships occurring at page 658: "In our view, unless the amount of compensation actually becomes payable or enforceable, it cannot be said to accrue or deemed to accrue. On the date when the Collector awarded the compensation, it is only that amount which had accorded or deemed to accrue, whether in fact paid or not. But by no stretch of the words in s. 4(1)(b)(i), could it be said that the....
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....3 and the above compensation was received by him legal heirs. The Estate Duty assessment of the estate of Rashi Shapoor Chenai was made on 29th March, 1966. In the said assessment the value of the lands acquired by the Government was taken at the respective figures of compensation awarded by the Special Dy. Collector. The legal heirs were not satisfied with the compensation awarded and on their application to the Civil Court the compensation amount was enhanced by the Civil Court by Rs. 1,90,000 and Rs. 20,45,000 by order passed on 6th March, 1967 and 30th Oct., 1967. The Asstt. CED sought to rectify the Estate Duty assessment under s. 61 stating that there was a mistake apparent from record and the enhanced compensation awarded by the Civil Court should be taken to be the value of the dutiable estate. The said proceedings of the Asstt. CED were challenged in a writ petition before the Andhra Pradesh High Court. His Lordship Mr. Justice Sriramulu of the Andhra Pradesh High Court referred to the ruling of the same High Court in 74 ITR 651 and said that decision dealt with the accrual of compensation amount as income under the IT Act and that the same would not be relevant while cons....
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....sed in July, 1962, a sum of Rs. 24,293 was offered by way of compensation. On reference, the Civil Court enhanced the compensation to Rs. 5,04,824. The Civil Court further directed payment of interest at the rate of 4 per cent from August, 1960 to August 1963 which worked out to Rs. 61,417. The State Government went up in appeal before the High Court of Gujarat against the order of the Civil Court. The assessee also filed cross objections. The High Court set aside the judgment of the Civil Court. When the matter was pending in appeal before the High Court, the High court stayed the execution of the award of the Civil Court on condition that the State Government deposited the amount of compensation awarded by the Civil Judge and directed that the assessee would be at liberty to withdraw the amount of Rs. 50,000 on furnishing security. As stated about, the High Court allowed the appeal of the State Government was entitled to the return of the amount withdrawn by the assessee with interest at the rate of 4 per cent per annum from the date of withdrawal till the date of repayment. The assessee was, however, granted certificate to go in appeal to the Supreme Court against the judgment o....
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....tional amount of compensation claimed by the owner of the land sought to be acquired." Their Lordships of the Gujarat High Court thereafter referred to the decision of the Andhra Pradesh High Court in Khan Bahadur Ahmed Alladin & Sons vs. CIT and expressed that they are in respectful agreement with the observations made by Their Lordships. Their Lordships of the Gujarat High Court then proceeded to refer to the decision of the Andhra Pradesh High Court in the case of CIT, Andhra Pradesh vs. Smt. Sunkari Manickyamma 1973 TLR at 1096 & 1974 (AP) and where a Division Bench of the Andhra Pradesh High Court held that the entire amount of interest on the compensation awarded by the Land Acquisition authorities though relatable to more than one year would be deemed to have accrued in the year in which it is awarded and taxable as such. It was further held therein that the right of a person whose property was acquired accrued to him only form the date when the statutorily designated authorities under the Acquisition Act determine the same and till that happens, what the person concerned has is only a right to claim the amount and not the right to receive the amount that would be determi....
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.... amounts, that were awarded as compensation during the relevant previous year, could be brought to tax under s. 12-B. In other words, the learned counsel would accept for assessment only the sum of Rs. 28,017 and not the other two sums, which were brought to tax by the AAC and by the Tribunal. Taking the language of s. 12-B it would be found that it provides for tax on capital gains. Such tax has to be levied on the profits or gains arising from certain stated transactions after a particular date. Such profits and gains are to be deemed to be the income of the previous year in which the sale, exchange, relinquishment or transfer took place. There is, thus a statutory fiction introduced in s. 12-B. The fiction overrides all other considerations. For instance under the IT Act, the question of method of accounting would be relevant in the matter of arriving at the taxable income under certain heads. That would not be relevant to s. 12-B, as a statutory fiction has been introduced. Under the provision, as it is, we have to find out what are the profits and gains in the transaction. Such profits and gains would then have to be deemed to be income of the previous year in which the releva....