IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 440 of 2007 DATE OF DECISION: APRIL 10, 2008 Shri Mool Chand (HUF) .....APPELLANT Versus The Commissioner of Income Tax, Faridabad ....RESPONDENT CORAM: HON'BLE MR.JUSTICE SATISH KUMAR MITTAL HON'BLE MR.JUSTICE RAKESH KUMAR GARG --- Present: Mr.Avneesh Jhingan, Advocate, for the appellant-assessee. Mr. Yogesh Putney, Advocate, for the respondent-revenue. .. SATISH KUMAR MITTAL, J. The instant appeal filed by the assessee under Section 260A of the Income Tax Act (hereinafter referred to as `the Act') is directed against the order dated 29.3.2007 passed by the Income Tax Appellate Tribunal, New Delhi (hereinafter referred to as `the Appellate Tribunal'), in ITA No.2769/Del/2005 in case of the appellant-assessee for the Assessment Year 2002-03 by raising the following substantial question of law:- Whether, in the facts and circumstances of the case, the enhanced compensation is to be taxed in the year of its receipt in terms of the provisions of Section 45(5) of the Income Tax Act, notwithstanding that the order under which compensation has been enhanced is challenged before the higher courts and litigation is pending? In the present case, the assessee received enhanced amount of I .T.A. No. 440 of 2007 -2- compensation amounting to Rs.6,91,620/- including interest on account of acquisition of his land from Haryana Urban Development Authority. The Assessing Officer, while assessing the return of income of the assessee for the Assessment Year 2002-03, taxed the above-said amount on receipt basis in the year of receipt. Against the aforesaid order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who vide order dated 10.3.2005 deleted the addition made in the assessment order while observing that the Assessing Officer had erred in bringing to tax the enhanced compensation and interest received thereon for taxation in this particular year. Against the aforesaid order, the revenue filed an appeal before the Appellate Tribunal. While deciding ITA No.2769/Del/2005 of the assessee for the Assessment Year 2002-03, the Appellate Tribunal vide order dated 29.3.2007 reversed the order passed by the Commissioner of Income Tax (Appeals) relating to the taxability of enhanced compensation while holding that the amount of enhanced compensation received by the assessee in the year under consideration is liable to be included in the income chargeable to tax. As far as the taxability of interest on enhanced compensation is concerned, it has been held by the Appellate Tribunal that the interest received by the assessee not having been finally determined because of the appeals pending in this court, the same is not liable to be taxed in the year under appeal. To that extent, the order passed by the Commissioner of Income Tax (Appeals) has been upheld in principle. The Appellate Tribunal came to the said conclusion by following the decision of the Special Bench in the case I .T.A. No. 440 of 2007 -3- DCIT Versus Padam Parkash (HUF) 104 ITD 1 (Del)(SB), which was arrived at after considering the judgment of the Madras High Court in the case of CIT Versus T.Girija Ammal, 282 ITR 614 (Mad.). Consequently, it was held that the Assessing Officer shall be within his jurisdiction to bring to tax the enhanced compensation in the year of its receipt, irrespective of the fact that the order of enhanced compensation had not attained finality. The controversy in this appeal is exactly the same as involved in ITA No.4 of 2005 (Shri Chandi Ram Versus The Commissioner of Income Tax, Faridabad), decided by this Court on February 25, 2008, wherein it has been held as under:- “In the present cases, the dispute relates to the assessment years 1994-95 to 1998-99 and during that period, only Section 45(5)(b) of the Act was applicable, which has already been interpreted by this Court and various other Courts, wherein it has been clearly held that Section 45(5)(b) will be attracted only when the assessee receives the enhanced compensation in pursuance of a final award/order of a court, Tribunal or other authority increasing the compensation. If any amount is received after stay of the award, in pursuance of any interim order, as a payment subject to the final result, it will not be an amount received as enhanced compensation as contemplated under section 45(5)(b), but only an interim payment received subject to final decision. Since this Court has already taken the view, therefore, in our opinion, the Tribunal was not justified in taking contrary view to the view taken by this Court in ITR No.26 of 1997 (the Commissioner of Income Tax, Patiala vs. Shri Karanbir Singh, Rajinder Kuti, Patiala, decided on 17.01.2007) and ITA No.695 of 2005 (The Commissioner of Income Tax, Faridabad vs. Shri Prem Singh; decided on 16.5.2007), by following the I .T.A. No. 440 of 2007 -4- decision of the Karnataka High Court in the case of Chief Commissioner of Income Tax vs. Smt.Shantavva (2004) 267 ITR 67 (supra).” Counsel for the revenue is unable to controvert the aforesaid legal position and stated that the controversy involved in this case is squarely covered by the aforesaid judgment in favour of the assessee. Consequently, the appeal is allowed and the substantial question of law is, thus, answered in favour of the assessee and against the revenue. (SATISH KUMAR MITTAL) JUDGE April 10, 2008 (RAKESH KUMAR GARG) vkg JUDGE