2015 (10) TMI 953
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....aid land at Rs. 92,41,235/-. The compensation for the land portion was paid to the assessee and his brother vide cheque dated 28-11-1997, and the compensation for the standing trees, building, borewell, etc. was paid on 12-02-1999. 3. Since the cousins of the assessee and his brother had filed a civil suit, being O.S.No.141/1997, whereby the family partition arrived at in 1970 was under challenge, and a claim of share in the properties so acquired had been made, the compensation awarded to the assessee (and his brother) could not be actually received by the assessee, as the Board required the assessee to furnish adequate security for the same, to secure the interest of the Board in case the suit filed by the cousins of the assessee was decided in their favour. Consequently, though the cheques were deposited in Vysya Bank in the name of the assessee, but security in the form of Bank Guarantee was to be furnished by the assessee (as well as his brother), for which the Bank demanded 100% collateral security, and thus the amount so deposited in the name of the assessee was pledged as security, which he could not withdraw. 4. Consequently, a tripartite agreement was executed between t....
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....ssessee (as well as his brother), and since the same was not disclosed by the assessee as income in the years in question, it was to be treated as undisclosed income, on which tax at enhanced rate of 60% along with interest thereon would be payable by the assessee. The authorities below have also held that the compensation received by the assessee and his brother towards the trees, building, borewell and other assets amounting over Rs. 92.41 lakhs would form part of the capital assets and would, thus, not be exempted from payment of tax. 9. Aggrieved by the orders of the authorities below, including the Tribunal, this appeal has been filed, which was admitted on 10-11-2009 with the following order: "Appeal is admitted for examination, not only on the substantial question relating to the levy of tax on the value of the trees, which form part of agricultural lands, which were come to be acquired by the government for a public purpose, and in respect of which the government had compensated the owners and as to whether the value so apportioned to the trees standing on the lands could have been brought to tax as non-agricultural income, and the other substantial question of law, as r....
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....ounsel for the respondent-Revenue) that at no point of time, before the final decision in the Regular Second Appeal, the assessee became entitled to withdraw even the interest, which had accrued on such compensation amount which was kept in deposit with the Bank. 12. In the light of the aforesaid facts, we may proceed to answer the two questions of law which have been framed: Question No.1: 13. This question relates to taxability of the interest amount which accrued on the compensation deposited in the bank account of the assessee. The submission of the learned counsel for the assessee-appellant is that, the amount had never been in the hands of the assessee till the decision of the Regular Second Appeal, as it was a part of the legal dispute which was raised by the cousins of the assessee (and his brother) with regard to title of the land which was acquired by the Board. It is contended that the assessee does not maintain any books of account and, as such, mercantile method of accounting would not be applicable, and in the cash system of accounting, the income would be chargeable to tax only when the assessee becomes complete owner of the interest amount, without any dispute or....
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.... accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year. 16. Admittedly, the assessee does not maintain any books of accounts. He is an agriculturist, who had never filed any returns of income prior to the acquisition of the land, and until the search operations were conducted in his premises on 2-2-2001, whereafter also the return was filed in response to the notice issued by the Department and then too, in the said returns, he had disclosed his taxable income as NIL, as by then the Regular Second Appeal had not been decided and he had not acquired full and complete right over the compensation amount, as well as the interest, which was acquired only after the decision in the Regular Second Appeal on 23-07-2008, and that income of the assessee became taxable only in the assessment year 2009-10. 17. In the absence of the assessee maintaining any books of accounts, and in the circumstances of the case, the accounting method which could be adopted in the case of the assessee would be nothing but cash system of accounting. In such a case, even as per Section 5 of the Act, it would be income ....
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.... owner, and thereafter enhancement by the Reference Court, which was challenged by the Acquiring Body in the High Court where a conditional deposit of the enhanced amount was directed by an interim order, and thereafter final amount of compensation was paid to the land owner (assessee therein), this Court held that part amount of the enhanced compensation paid in terms of the interim order would be subject to tax only when the appeal was finalized by the High Court, as the assessee therein (land owner) became complete owner of such compensation after finalization of the appeal, and the amount paid earlier was not to be taxable even when he may have actually received part of the enhanced compensation under the interim orders. Though the said case was under Section 45(5) of the Act, the principle laid down in the said judgment, would squarely apply to the facts of the present case. 20. In another case, being COMMISSIONER OF INCOME-TAX v/s A.B.V.GOWDA (DECD) (1986) 157 ITR 697 (Kar), a Division Bench of this Court held that interest on the enhanced compensation, which was in dispute, would be taxable only after the dispute was over. The same view has been taken by the Madras High Cou....
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....t mango trees, which were approximately 12 years of age, were valued separately, and compensation on the same was treated as taxable. In this regard, since it is clear that the acquisition was for the entire land on "as is where is basis", and the land in question is agricultural land, and the valuation of the trees and other assets, were made only for the purpose of calculating compensation, therefore the amount paid to the assessee was actually for acquisition of the agricultural land, which was exempted from tax. Hence, the question of payment of capital gains on the compensation only for the mango trees, etc., cannot be justified in law. 25. The Tribunal has wrongly relied on the decision in the case of COMMISSIONER OF INCOME TAX v/s M.RAMAIAH REDDY (1986) 158 ITR 611 (Kar), as the said case related to acquisition of urban land, where the assessee therein was claiming compensation for the trees to be treated as potential agricultural income and thus, be treated separately and exempted from tax. In the said case, though the Tribunal accepted the plea of the assessee, the High Court rejected the same, and held that the acquisition of the land, along with trees, was a single tran....