Income-tax Appeal No.494 of 2010 -1- **** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.494 of 2010 Date of decision: 18.1.2011 Commissioner of Income-Tax, Faridabad ...Appellant Versus Sh.Shantivir Vashist ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Ms. Urvashi Dhugga, Senior Standing Counsel for the appellant. **** ADARSH KUMAR GOEL, J ( Oral) . 1. As per office report, the respondent refused to accept notice and the notice was affixed at the door. Thus, service is treated to be completed. 2. This Appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) against order dated 29.6.2009 passed by the Income Tax Appellate Tribunal, Delhi Bench 'G', New Delhi in ITA No.1772/(Del)/ 08, for the assessment year 2001-02, raising following substantial question of law:- “Whether on the facts and in the circumstances of the case, the ld. ITAT was right in law in confirming the order of the ld. CIT(A) in holding that since in Income-tax Appeal No.494 of 2010 -2- **** the present case the matter is still under dispute, the enhanced compensation and interest thereon received by the assessee is subject to litigation and has not reached the finality and therefore cannot be taxed in the year of dispute disregarding the fact that the entire controversy on the year of taxability of enhanced compensation and interest thereon has now come to rest with the judgment of Hon'ble Supreme Court in case of Commissioner of Income Tax, Faridabad Vs. Ghanshyam (HUF) reported in (2009) 315 ITR 1 (SC) wherein the Hon'ble Apex Court has held that the year in which enhanced compensation is received is the year of taxability and the interest u/s 28 of the Land Acquisition Act, 1894 on enhanced compensation is a part of enhanced compensation, therefore, the interest u/s 28 of the Land Acquisition Act on enhanced compensation will also be taxable in the year of receipt? 3. The assessee received compensation for the acquisition of his land on different dates from 1.9.1999 to 18.4.2002. Enhanced compensation was received during the assessment year 2001-02. The assessing officer made assessment during the compensation received as capital gain. On appeal, CIT(A) held that since enhanced compensation had not reached finality, the amount could not be taxed in the year of receipt as per judgment of this Court in Income-tax Appeal No.494 of 2010 -3- **** ITA No.595 of 2005 (CIT Vs. Prem Singh) decided on 16.5.2007 which was based upon the judgment of this Court in ITR No.26 of 1997 (CIT, Patiala Vs. Karanbir Singh Rajinder Kuti, Patiala) decided on 17.1.2007 which in turn based upon the judgment of Hon'ble Supreme Court in Commissioner of Income Tax, West Bengal-II v. Hindustan Housing and Land Development Trust Ltd., (1986) 161 ITR 524. On appeal, the said view has been affirmed by the Tribunal. 4. The matter was considered by Hon'ble Supreme Court in Commissioner of Income Tax, Faridabad Vs. Ghanshyam (HUF) (2009) 315 ITR 1 and it was held that enhanced compensation was taxed in the year of receipt even if the proceeding has not attained finality in view of the amendment to Section 45(5) of the Act. Interest on compensation awarded by the Collector was part of compensation while interest on enhanced compensation was to be treated as income from other sources. Following the said judgment, this Court has dealt with the matter in ITA No.209 of 2004 (The Commissioner of Income-Tax, Faridabad Vs. Bir Singh (HUF), Ballabgarh) decided on 27.10.2010. It was held that:- “(a) that ‘income from Business or profession’ and ‘income from other sources’ are ascertained on the basis of system of accountancy followed by the assessee; (b) where assessee is not maintaining books of accounts by adopting any specific method, it shall Income-tax Appeal No.494 of 2010 -4- **** be treated to be cash system of accountancy; (c) the interest under Section 34 to be awarded by the Collector partakes the character of compensation and is taxable in the year of receipt in view of Section 45(5)(b) of the Act; and (d) under cash system of accountancy, the element of interest awarded by the Court received on enhanced amount of compensation under Section 28 of the 1894 Act falls for taxation under Section 56 as ‘income from other sources’ in the year of receipt.” 5. In view of the above, question raised in the appeal is answered in favour of the revenue in the above terms. 6. Accordingly, the appeal is allowed. (Adarsh Kumar Goel) Judge January 18,2011 (Ajay Kumar Mittal) Pka Judge