News Update

CBIC revises tariff value of edible oils, gold & silverFormer IPS officer Sanjiv Bhatt jailed for 20 yrs for planting drugs to frame lawyerCentre receives Rs 18.5 lakh crore tax revenue upto Feb monthUN says Households waste across world is now at least one billion meals a dayExpert Committee on developing GIFT IFSC as 'Global Finance and Accounting Hub' submits report to IFSCAIndia, China hold fresh dialogue for complete disengagement on Western borders: MEADefence Production issues notification for re-organisation of DGQAThakur says India is prepared for 2036 OlympicsCBDT substitutes Form in ITR-5EV Revolution: Lessons for India to learn from US and China!London court green-signals auction of luxury apartment of fugitive Nirav ModiGovt consults RBI; finalises borrowing plan for first half of FY 2024-25Gadkari says Farmers’ protest is politically-motivatedVP calls upon women entrepreneurs to be 'Vocal for Local'America offers USD 10 mn bounty for information on ‘Blackcat’ hackers after UnitedHealth gets hitI-T- The order of the ITSC can only be reopened in cases of fraud or misrepresentation: HC8 persons including Hezbollah militants killed in Israeli strike on LebanonMacron pillories EU-South Africa trade deal; calls it ‘really bad’ in BrazilThailand’s Lower House okays Bill to legitimise same-sex marriageYellen warns China against clean energy dumpingMilky Way’s central black hole - Twisted magnetic field observedCus - Assessee has not proved beyond reasonable doubt that goods in question imported under air way bills/bills of entry were in fact filed by him and hence the only natural corollary available to Revenue is confiscation of same: CESTATSmall investors help Trump Media’s valuation skyrocket to USD 13 billionJustice Ritu Raj Awasthi joins as Judicial member of Lokpal
 
Income tax - Whether interest received on account of enhanced compensation of acquired property by State is liable for taxation in year of receipt- YES: SC

By TIOL News Service

NEW DELHI, SEPT 17, 2014: THE issue before the Bench is - Whether interest received on account of enhanced compensation of acquired property is liable for taxation in the year of receipt.And the answer is YES.

Facts of the case

The assessees are individuals. They had inherited a land property from their father. Subsequently, a part of the said land was acquired by the State Govt. and they were accordingly paid compensation. The amount of compensation was however enhanced and additional compensation was awarded to them along with interest. Thereafter, the assessees filed their return claiming themselves to be "individual". However, the AO passed the assessment order by treating them as "Association of Persons" (AoP). The AO also refused to spread the interest income over the years and treated it as taxable in the year of receipt. Ultimately, the High Court had decided that these persons were to be given the status of 'individual' and assessed accordingly and not as AoP and that the interest income was to be spread over from the year of dispossession of land, that was the assessment year 1987-88 till the year of actual payment which was received in the assessment year 1999-2000 applying the principles of accrual of income. It was in this backdrop that the Revenue approached the Apex Court challenging the decision of the High Court.

Before the Bench, the Revenue conceded the point that the issue of treatment of the assessees as 'individual' was no more res integra.

Having heard the parties, the Supreme Court held that,

++ it is not disputed that the property in question which was acquiredby the Govt., came to the assessee on inheritance from their father. Furthermore, even the income which is earned in the form of interest is not because of any business venture of the three assessees but it is the result of the act of the Govt. in compulsorily acquiring the said land. In these circumstances, the case is squarely covered by the ratio of the judgment laid down in case of Meera and Company, Ludhiana vs. CIT, Punjab, J & K and Chandigarh, Patiala, inasmuch as it is not a case where any "AoP" was formed by violation of the parties for the purpose of generation of income. This basic test to determine the status of AoP is absent in the present case. Therefore, we are of the view that the assessees will be treated as "individual";

++ it is therefore clear that whereas interest u/s 34 of Land Acquisition Act (LAA) is not treated as a part of income subject to tax, the interest earned u/s 28, LAA, which is on enhanced compensation, is treated as a accretion to the value and therefore, part of the enhanced compensation or consideration making it exigible to tax. After holding that interest on enhanced compensation u/s 28 is taxable, the other aspect to be considered is the year of tax. This question can be answered by holding that it has to be tested on receipt basis, which means it would be taxed in the year in which it is received, and spread over of this interest on accrual basis is not permissible. Therefore, we upheld the disallowance of speared over of interest;

++ we allow these appeals in part and set aside that portion of the impugned judgment of the High Court whereby spread over of the interest received under section 28 of the 1894 Act, on the enhanced income is allowed with the direction that it would be taxed in the year in which such interest on enhanced compensation was received.

(See 2014-TIOL-77-SC-IT)


POST YOUR COMMENTS
   

AR not Afar by SK Rahman

TIOL Tube Latest

Shri Shailendra Kumar, Trustee, TIOL Trust, giving welcome speech at TIOL Awards 2023




Shri M C Joshi, Former Chairman, CBDT




Address by Shri Buggana Rajendranath, Hon'ble Finance Minister of Andhra Pradesh at TIOL Awards 2023