TaxTMI 
TaxTMI 
2009 (3) TMI 240
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....building at No. 83/84, Acharya Jagdish Chandra Bose Road, Kolkata. Here in these appeals two set of assessees are owners of these properties. In lot A, HUF were the owner and lot B the individuals were the co-owners. The Government of West Bengal while exercising the powers under s. 3(1) of the West Bengal Land (Requisition and Acquisition) Act, 1948 (hereinafter called the said Act), requisitioned land and building in question on 23rd April, 1976 for the purpose of use by the Calcutta State Transport Corporation (CSTC). Later on by notification dt. 7th April, 1990 issued under s. 4(la) of the said Act, the West Bengal Government acquired the land for public purpose and consequently the land vested in the State Government w.e.f. 7th April, 1990. The asses sees received requisition compensation for the period 23rd April, 1976 to 6th April, 1990 and also enhanced acquisition compensation on 20th April, 2000 vide order dt. 3rd March, 2000 of Hon'ble Calcutta High Court, whereby the dispute regarding the additional compensation has reached the finality. In the meantime, pursuant to interim conditional order passed by the Hon'ble Calcutta High Court, the asses sees received certain amou....
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.... amount of compensation varies from assessee to assessee but the issue remains the same. As the Hon'ble jurisdictional High Court has held that the compensation received as per the interim conditional orders cannot be assessed before the appeals pending in the Hon'ble Calcutta High Court reached finality, the assessment proceedings for the asst. yr. 2001-02 were reopened by the AO and assessed the requisition compensation as well as the acquisition compensation received by the asses sees under long-term capital gain as per ss. 45(5)(a) and 45(5)(b) of the IT Act, 1961 as under: "In the case of the assessee, the land which has been acquired by the Government of West Bengal by order dt. 7th April, 1990, was requisitioned as early as 23rd April, 1976. Accordingly, the requisitioned land on and from the beginning of the day on which such notice is published vests absolutely with the State (Government) free from all encumbrances and the period of requisition of such land shall end [vide 4(2) of the said Act]. Hence, any compensation that has been received by the assessee from the West Bengal Government on account of requisition/acquisition of the land has to be considered for taxing ....
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.... the same is also not covered under s. 45(5) as it is not a compulsory acquisition. Since, there is no letting of any property by the owner to the tenant and the requisition of land as per the statute is not voluntary act of the asses sees and does not create the relationship of landlord and tenant, therefore, the requisition compensation does not constitute rent and is not an income for the purpose of taxation. He has referred to the various relevant provisions of West Bengal Land (Requisition and Acquisition) Act, 1948. He has relied upon the decision of the Hon'ble Supreme Court in the case of Senairam Doongarmall vs. CIT (1961) 42 ITR 392 (SC) and in the case of CIT vs. D.P. Sandu Bros. Chembur (P) Ltd. (2005) 193 CTR (SC) 578 : (2005) 273 ITR 1 (SC). 8. After considering the rival contentions and materials on record, the issue before us is whether the compensation received for requisition of the land and building in question is taxable and more particularly under the head capital gain of IT Act. In the present case, the land and building in question were initially requisitioned by the State Government of West Bengal under s. 3(1) of the West Bengal Land (Requisition and Acq....
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....ital in nature because it is not against the transfer of the land or transfer of any right by the assessees to the State, because it is not a voluntary transfer by the assessees to the Government but only as per the provision of statute. Moreover, the said compensation is also not an income of the owner/assessees because it is neither a rent nor receipt in lieu of loss of income or transfer of any right by the assessees. Therefore, the compensation received for requisition cannot be taxed as an income of the assessees under the IT Act. 11. In the case of Senairam Doongarmall vs. CIT, the Hon'ble apex Court has held as under: "The assessee, which owned a tea estate consisting of tea gardens, factories and other buildings, carried on the business of growing and manufacturing tea. The factory and other buildings on the estate were requisitioned for defence purposes by the military authorities. Though the assessee continued to be in possession of the tea gardens and tended them to preserve the plants, the manufacture of tea was stopped completely. The assessee was paid compensation for the years 1944 and 1945 under the Defence of India Rules calculated on the basis of the out tur....
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....a casual or non-recurring receipt under s. 10(3) r/w s. 56. We are fortified in our view by a similar argument being rejected in Nalinikant Ambalal Mody vs. S.A.L. Narayan Row, CIT (1966) 61 ITR 428 (SC), 432, 435." 14. Even otherwise, when the compensation which is not against the transfer of the property (compulsory acquisition), then the same cannot be included as consideration for computation of capital gain as held by the Hon'ble apex Court in the above noted judgments and the same cannot be taxed as income of the assessee under any other head. 15. In view of the above discussion, we hold that the compensation received for requisition of the land and building by the State Government under the provisions of the requisition and acquisition Act, does not have any element of income for tax either under the head of capital gain or other heads. 16. Issue No. 2: Regarding the deduction of expenses claimed against the enhanced compensation: The assessees in these appeals claimed the expenses incurred as legal, telephones, conveyance, vehicle and office expenses during the period of litigation which reached finality only when the Hon'ble Calcutta High Court has finally decided....