TaxTMI 
TaxTMI 
2015 (12) TMI 464
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....tember, 2004. By the order dated 7th April, 2011, ITA Nos. 22 to 28 of 2003 were disposed of by the Court without answering the questions framed on account of the Circular dated 9th February, 2011 of the Central Board of Direct Taxes (CBDT) since the tax effect in each of the appeals was less than Rs. 10 lakhs. Subsequently, review petitions were filed by the Revenue in respect of three of the appeals, i.e., ITA Nos. 23, 24 and 25 of 2003. The said review petitions were dismissed by the Court on 26th March, 2012, after giving liberty to the Revenue to file "proper applications, if so advised." 3. The orders dated 7th April 2011 and 26th March 2012 in ITA No. 24 of 2003 were challenged by the Revenue in the Supreme Court by filing Civil Appeal Nos. 4919-20 of 2015. The said appeals were allowed by the Supreme Court on 1st July, 2015 by holding that the CBDT Circular dated 9th February, 2011 was prospective. The appeal was remitted to the High Court for re-adjudication on merits. As a result, ITA No. 24 of 2003 was revived. Taking note of the above development, this Court on 24th August 2015, passed an order directing that the aforementioned ITA No. 24 of 2003 pertaining to AY 198....
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....4 (DLRA) declared Smt. Gulab Sundri as bhumidar on 5th July 1958, with effect from 20th July, 1954. A few days thereafter on an application filed by 4-5 proprietors of the land, the Revenue Assistant cancelled the bhumidari certificate on 14th July, 1958 and ordered that the land be vested in the Gaon Sabha. 8. On 24th November, 1959, Smt. Gulab Sundri filed a suit being Civil Suit No.174/66 before the Court of the Subordinate Judge, Delhi seeking a declaration that the order dated 14th July, 1958 of the Revenue Assistant cancelling the bhumidari certificate in her favour was void, illegal and without jurisdiction. This suit was decreed by the Sub Judge on 12th December, 1966. Against the aforementioned order, the Gaon Sabha as well as the Union of India filed an appeal which was dismissed by the Senior Sub Judge on 23rd April, 1968. No further appeal was filed by the Gaon Sabha. The aforementioned judgement dated 23rd April, 1968 became final and conclusive between the parties. 9. It is in the above background that late Mr. J.N. Dhamija acquired by way of sale deed dated 1st June, 1965 from Mr. Rampal Malhotra 1/16th share of the bhumidari rights. Proceedings under Sectio....
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....d 14th July 1958 passed by the Revenue Assistant operates as res judicata? (iii) Whether the land in dispute was a waste land as defined in the DLRA and as alleged by Gaon Sabha. If so its effect? (iv) Whether there were orders of the Deputy Commissioner dated 1st November 1954 and 10th March 1966 in respect of the land in dispute as alleged by Gaon Sabha and if so, whether the same were valid (objected to). 13. While deciding the issues (i) and (ii) framed on 18th December, 1969 and 7th November, 1970, the learned ADJ (Mr. P.S.Singla) held that the earlier judgement passed by the Sub Judge confirmed by the Senior Sub Judge operated as res judicata. Issue Nos.(iii) and (iv) were also decided against the Gaon Sabha. Issue Nos.(iii) and (v) framed on 18th December, 1969 were decided in favour of Smt. Gulab Sundri. It was held that the land in question fell within the purview of Section 3(13) of DLRA and that Smt. Gulab Sundri was a tenant as defined under Section 4(5) of the Punjab Tenancy Act. Deciding issue No. (iv) framed on 18th December, 1969 in favour of Smt. Gulab Sundri, the learned ADJ held that she had rightly been declared as a bhumidar and that the proprietors we....
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....e said sum amounting to Rs. 15,82,839.12, additional amount of 12 % amounting to Rs. 27,64,511.90 and interest under Section 28 of the LA Act amounting to Rs. 2,67,75,949.85. Appeals arising from the proceedings under Section 31(2) LA Act 19. Meanwhile the appeals filed by the Union of India being RFA No.309 and 310/80 in respect of the proceedings under Section 31 (2) of the LA Act were dismissed by the High Court on 26th February, 1991 on the ground of partial abatement in respect of the sum of the Respondents whose LRs were not brought on record by the Appellant. 20. Against the aforementioned order, the Union of India went in appeal to the Supreme Court by way of a Special Leave Petition. By a judgement in S. Amarjit Singh Kalra (Dead) By LRs v. Smt. Pramod Gupta (Dead) By LRs 2002 (9) SCALE 577, the judgement dated 26th February, 1991 of the High Court was set aside and a direction was issued to the High Court decide the appeals afresh on merits. As a result RFA No.309 and 310/80 along with the other RFAs stand restored to the file of the High Court and are pending. Appeals in the enhancement proceedings under Section 18 LA Act 21. As far as the order dated 7th ....
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.... amount by the Assessee was pursuant to an inchoate and contingent right and therefore not liable to any capital gains. Further details were furnished in this regard by letters dated 27th September, 1990, 5th December, 1990, 16th January, 1991, 13th February, 1991 and 27th November, 1991. A copy of the original compensation order dated 26th March 1969, which stood modified by the aforementioned order of the ADJ, was also furnished. 24. The AO passed an order dated 27th March 1992 holding that the entire compensation received by Mr. Dhamija, whether in the form of interest on solatium or additional compensation, was taxable in the year of receipt. Capital gain was charged on this amount. The CIT (A) by an order dated 28th August 1992 held following the order rendered by him in the case of Mr. K.K. Kochar, one of the co-owners of the same property, that the land in question was not agricultural land, and to this extent the plea of Mr. Dhamija was negatived. The CIT (A) however agreed with Mr. Dhamija that since the negotiable instrument in the nature of the treasury vouchers were received by Mr. Dhamija on 30th March 1988, the taxability of the said sums had to be examined in AY 1....
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.... Court in CIT v. Hindustan Housing and Land Development Trust Limited (1986) 161 ITR 524, the CIT (A) agreed with Mr. Dhamija that he would be subject to tax at that stage only to the extent of the amount on which there was no dispute, i.e. Rs. 1,20,446/- together with the corresponding interest. The CIT(A) held that the re-opening of the assessments for AY 1981-82 to 1987-88 by invoking Section 147 of the Act was not justified. Consequently, the CIT (A) invalidated the action of the AO in charging interest in AYs 1981-82 to 1987 -88. 29. At this stage Mr. J.N. Dhamija expired. Against the above order of the CIT(A), the Revenue and Mr. Dhamija's legal heir, Suman Dhamija (hereafter 'the Assessee'), filed appeals. 30. The Revenue was aggrieved by the order of the CIT (A) in invalidating the reopening of the assessments and in declining to apply Section 45 (5) of the Act for even AY 1988-89. The Revenue was also aggrieved by the CIT (A) holding that interest could not be taxed since the receipt itself was not covered under Section 45(5) of the Act. The Assessee was in appeal before the ITAT on the ground that the invoking of Section 147 was justified only for AY 198....
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....na 79 ITD 455 (Del). 33. As far as the WT Act cases were concerned, the ITAT agreed with the Assessee that the monies received were in the nature of trust money. The WT Act did not contemplate including trust money in the net wealth. The appeals of the Revenue were dismissed and those of the Assessee were allowed. As regards sum of Rs. 6,02,330/-, since the CIT(A) had not dealt with the grievance of the Assessee, the said issue was remitted to the CIT(A) for a fresh adjudication. Questions of law 34. The following questions of law were framed by this Court in the ITAs by the order dated 14th September, 2004: "1. Whether the amount of enhanced compensation received by the assessee during the relevant previous year is taxable in view of the provisions of Section 45(5)(b) of the Income Tax Act, 1961? 2. Whether the Income Tax Appellate Tribunal was correct in law in holding that the decision of the Supreme Court in CIT vs. Hindustan Housing and Land Development Trust Limited 161 ITR 524 is to be applied despite the subsequent change in provisions of law, namely the provisions of Section 45(5) of the Act? 3. Whether the ITAT was correct in law in hol....
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....cuted by Mr. Ram Pal Malhotra in favour of Mr. Dhamija, the latter had merely became a shareholder of 1/16th share of the bhumidari rights which were acquired by him from Mr. Ram Pal Malthora who had agreed to sell his share which he had purchased by virtue of the purchase deed executed on 14the April 1960. In view of the aforesaid purchase deed, Mr. Ram Pal Malhotra had nothing to do with the land in question and consequently the Assessee too had nothing do with it. The compensation received and/or receivable was not in respect of any land and was in respect of a capital asset being merely a right which right itself was an inchoate right. Thus Section 45(5) of the Act had no application since the Assessee had not acquired any land but only a 1/16th share in the bhumidari rights. (ii) Further, the question whether the Assessee had the right to receive the compensation was itself in dispute and as such Section 45(5) of the Act had no application. Thus, where the right to receive the compensation itself was inchoate and not merely the amount received or receivable, Section 45 (5) of the Act would have no application. The decision in CIT v. Hindustan Housing and Land Development Tr....
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....proved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any Court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely:- (a) the capital gain computed with reference to the compensation awarded in the first reference or, as the case may be, the consideration determined or approved in the first instance by the Central Government or the Reserve Bank of India shall be chargeable as income under the head 'Capital gains' of the previous year in which such compensation or part thereof, or such consideration or part thereof, was first received; and (b) the amount by which the compensation or consideration is enhanced or further enhanced by the Court, Tribunal or other authority shall be deemed to be income chargeable under the head 'Capital gains' of the previous year in which such amount is received by the assessee: Provided that any amount of compensation received in pursuance of an interim order of a court, Tribunal or other authority shall be deemed to be income chargeable under the head 'Capital gains' of the pr....
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....nhanced compensation would be taxed in the respective years of receipt. The amount would be taxed in the hands of the recipient of the additional compensation, even if that person was not the original transferor. Section 155 (7A) was omitted with effect from 1st April 1992. By a further amendment with effect from 1st April 2004, clause (c) to sub-section (5) to Section 45 was introduced in terms of which, for this purposes of Section 45 (5) (b) the cost of acquisition would be taken as nil. 41. For the purposes of Section 45 (5), in order to attract capital gains in regard to enhancement of compensation received in respect of land that has been acquired, the following conditions must be fulfilled: (i) There must be a transfer of a capital asset (ii) the compensation or consideration for such transfer has to be enhanced by a court, Tribunal or other authority 42. Two questions that have arisen in the past in relation to the enhanced compensation received in terms of Section 45 (5) are: what happens (a) when the right to receive compensation is itself in dispute and has not attained finality, and (b) when the question of the quantum enhanced compensation is pending final ....
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....e decision in CIT v. Ghanshyam (HUF) 44.1 The Supreme Court in CIT v. Ghanshyam (HUF) (supra) was called upon to interpret Section 45 (5) of the Act and determine if it applied to a situation where the order of the civil court enhancing compensation was pending challenge in the superior court. The facts were that the in the return filed for AY 1999-2000, the Assessee did not offer the amount of enhanced compensation and the interest received thereon during the previous year relevant to the assessment year for taxation, on the plea that the amount of enhanced compensation received had not accrued during the year of receipt as the entire amount was in dispute in appeal filed by the State before the High Court against the order of the Reference Court granting enhanced compensation. The amount was received by the Assessee in terms of the interim order of the High Court against the Assessee furnishing security to the satisfaction ofthe executing court. The Assessee also contended that the interest received on enhanced compensation during the previous year was not chargeable to tax. 44.2 The AO did not accept the contentions of the Assessee in view of the clear language of Section ....
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....on is received. It is not in dispute that the said proviso which is prospective does not apply to the case on hand. Clause (c) to Section 45 (5), introduced with effect from 1st April 2004 envisages re-computation of capital gains of a particular AY where by a subsequent order of a Court the enhanced compensation is reduced. Likewise Section 155 (16) introduced simultaneously also envisages likewise. This would take care of the final outcome of the compensation enhancement proceedings, which may be pending in the Court. The position in the present case 46. The question that then arises is whether in the facts and circumstances of the present case the conditions for sub-section 5 (b) of Section 45 to be attracted can be said to have been fulfilled? 47. There are two strands of litigation. One pertains to right of the Assessee to receive compensation which, from the above narration of facts, has obviously not attained finality. The civil suit pertaining to the right of the Assessee was decreed. However, after the land acquisition Award was passed, there were three sets of claimants to the compensation and this led to the reference to the ADJ under Section 31 (2) of the LA Ac....
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....ave to return the compensation amount and the enhanced compensation she has received. 52. As is evident from the decision of the Supreme Court in S. Amarjeet Singh Kalra (Dead) by LRs v. Smt. Pramod Gupta (Dead) by LRs (supra) there are two other claimants for compensation, viz., the Gaon Sabha of Village Masoodpur and owners of the land. It was acknowledged in the said decision that "the claim of each one was in respect of his distinct, definite and separate share and their respective rights are no inter-dependant but independent." 53. The decision of the Bombay High Court in CIT v. Sharda Sugar Industries Limited (supra) also appears to support the case of the Assessee insofar as it holds that "where the right to receive payment is in dispute, no income will arise or accrue." In that case, again the amounts deposited by the State which was withdrawn by the Assessee on furnishing a bank guarantee, where rights to dispute the amount can be said to have accrued to the Assessee. It is noticed that "the Assessee was accountable for the excess collection and obliged to refund the same if so directed by the court. Such amounts collected by the Assessee are not assessable as the in....
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....ndia ('UOI') in the High Court, in an appeal, which was admitted but the Assessee was allowed to withdraw the compensation that has been deposited on furnishing security. The amount was withdrawn on 30th July 1987, by the Assessee by furnishing security/guarantee. The CIT (A) reversed the order and the Revenue filed an appeal before the ITAT before which it invoked Section 45 (5) of the Act. The ITAT upheld the order of the CIT (A). 57. The questions framed by this Court in the Revenue's appeal read as under: "1. Whether the ITAT is justified in law in deleting the addition of Rs. 59,63,410 being the amount of enhanced compensation received by the Assessee during the year? 2. Whether the amount of Rs. 59,63,410 received by the Assessee during the previous year relevant to assessment year 1988-89 is taxable in view of the provisions of Section 45 (5) of the IT Act? 3. Whether the ITAT is correct in law that no capital gains arose to the Assessee on receipt of compensation because of the acquisition of land in which the Assessee had tenancy rights only? 58. It was held by the Court that the tenancy right had computable cost of acquisition and ther....
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....unts received by the Assessee by way of enhanced compensation would have been amenable to capital gains tax in the year of receipt as explained in CIT v. Ghanshyam (HUF) (supra). However, on account of the pendency in this Court of the appeals arising from the order of the ADJ in the proceedings under Section 31 (2) of the LA Act, the right of the Assessee to receive the said sums is still unclear or inchoate. Consequently, the question of bringing to tax the said enhanced compensation has to await the final outcome of the above proceedings. This would equally apply to the interest, solatium, additional sums received by the assessee on enhanced compensation in the AYs in question. A further corollary is that the stage for applying Section 45 (5) (c) read with Section 155 (16) of the Act cannot be said to have arisen yet. Consequently, that question need not be examined at this stage. Section 45 (5) effective from AY 1988-89 63. On the question as to the AY from which Section 45 (5) would become applicable, reference may be made to the Circular No. 495 issued by the Central Board of Direct Taxes. Para 24.5 to 24.7 which explain the rationale behind the introduction of Section ....