1. All the four appeal have been filed by the assessee appellants arising out of separate orders of CIT (A) XVII, Mumbai all dated 25/11/2002. The issue raised as per ground of appeal and the grounds involved are identical in all the appeals, therefore, for the sake of convenience these appeals have been consolidated and hereby decided by this common order.
2. The grounds are inter related and revolve around a single issue of charging of "Long Term Capital Gain" by invoking Section 45(5)(b) of IT Act (herein after referred the Act). Ground No. 4 to 7 have not been contested being consequential in nature and ground No. 1 to 3 are reproduced herein below to specify the issue involved:- "1. The Ld.CIT (Appeal) erred in confirming the assessment of Rs. 88,94,199/- as long-term capital gain as made by the Ld. Assessing Officer without properly appreciating the facts of the case that additional compensation awarded by City Civil Court, Madras is challenged in further appeal by Government as well as Messrs Bharat Petroleum Corporation Ltd., for whose benefit the property was acquired in its entirety before High Court.
2. The Ld. CIT (Appeal) erred in concluding that 50% of the additional compensation allowed to be withdrawn to the appellant by Hon'ble High Court is without any contingency, as the said amount has been received and enjoyed by the appellant, without properly appreciating the fact that the appellant was allowed to withdraw 50% of the additional compensation on the conditions of restitution.
3. The ld.CIT (Appeal) erred in upholding that all the case laws cited in the course of the proceedings are not applicable, as those cases are decided prior to introduction of Section 45(5) of the Income Tax Act w.e.f. 01/04/1988 without appreciating the law in its proper perspective. The ld.CIT (Appeal) should have appreciated that additional compensation allowed to be withdrawn is taxable within the provisions of Section 45(1) and only the year of taxation has been amended by introduction of Section 45(5).
3. The interesting issue raised for our adjudication lies in a narrow compass of undisputed facts, briefly stated hereinafter. In the hands of the appellants separately the four assessments have been made by ld.A.O Under Section 143(3) r.w.s. 147 all dated 22/3/2002. There was a Plot of land having some structures and electric fittings situated at Vill. & PO Tondiarpad, Taluk & Dist. Madras(Chennai). This plot has four co-owners and one lease holder and the details of the same are as under:- 1. Executor or Estate of Late Shri Dharambir Hansraj Aggarwal - Co-owner It is worth mentioning that the assessment if any made in case of the lessee i.e. M/s. Dharambir Manoharlal Ltd. is not before us for adjudication. All the above four persons, now under appeal, are members of the same family and they are co-owners of the property in question.
As per the award dated 23/11/90 the Land Acquisition Officer, Madras has acquired the said land for the purpose and benefit of M/s. Bharat Petroleum Corporation Ltd. As per the award the value of the Plot was adopted at Rs. 1,23,00,831/- and the value of the structure with electric fittings adopted at Rs. 95,15,915/-. As per the award the total compensation including solatium and additional compensation was awarded at Rs. 3,62,01,455/-. The total compensation amount was allocated among the four co-owners and the lessee, having 1/5th share each worked out to Rs. 72,40,291/-. As the award was dated 23/11/90, therefore, the compensation awarded was duly disclosed as Long Term Capital Gain for the a.Y.1991-92 by the assessees' declaring 1/5th of the total compensation at Rs. 72,40,291/- respectively in each hand.
The A.O has further recorded that against the order of award of Land Acquisition Officer, Madras the assessee claimants have filed an appeal/review petition before the Hon'ble Madras City Civil Court. By an order dated 29/4/94 of Madras City Civil Court the compensation was enhanced by adopting the rate at Rs. 2,25,000/-. This order, through which the compensation was enhanced, was challenged by M/s. Bharat Petroleum Corporation (hereinafter referred as BPCL) by filing an appeal before the Hon'ble High Court of Madras. After filing an appeal before the Hon'ble High Court M/s. BPCL has also prayed to stay the operation of the order of City Civil Court, Madras. The Hon'ble High Court passed an interim order for stay of further proceedings but directed M/s. BPCL to deposit 50% of the enhanced compensation within 8 weeks. The appellants/claimants have filed an application before Hon'ble High Court for withdrawal of 50% of the enhanced compensation so deposited. The Hon'ble High Court has passed an order dated 30/1/95, allowing the appellants to withdraw 50% of the enhanced compensation as deposited by M/s. BPCL, which amounted at Rs. 4,79,92,495/-. This amount was equally divided among the five claimants. M/s. BPCL has objected the enhancement of compensation and through an affidavit challenged the rate adopted by the lower Court. The Hon'ble Madras High Court permitted the withdrawal of 50% of the compensation as deposited by M/s. BPCL through an order dated 30/1/95 with the following observations.
"I have carefully considered the submission of the learned senior counsel appearing on other side. In my view, the objection taken for the appellant in this appeal does not appear to be well merited Normally in matter of the kind, 50% of the compensation used to be permitted to be withdrawn by the claimants, who have been denied of their property and the use of their property which has been acquired. Of late, a practice has been adopted in cases where the compensation appears to be fabulous or in astronomical terms to permit only 25% to be withdrawn without furnishing security and a further 25% on furnishing security to the satisfaction of the court below and except for that further condition, normally the claimants always used to be permitted to withdraw 50% of the compensation.
Keeping in view the location of the land and also the extent and magnitude of the property which has been acquired, I am of the view that there could be no valid objection to the permission being granted to the claimants in this to withdraw the 50% of the compensation without furnishing any security. Though this court may not be taken to be expression any final view on the legality and propriety of awarding the particular rate of enhanced compensation by the Court below in this case, still at least for a prima facie consideration of the respective claims made in this application neither it can desist from expressing a general view nor be oblivious to the real value of the property with reference to its location which, In my view, would justify the permission being granted in this case as claimed by the claimants for withdrawing 50% of the amount deposited by the appellant in the court below. Though the order passed on 27/10/94 may have the semblance of an interim order, since it also orders notice to the other respondents, who were not represented before the learned judge at that time, for all purposes, so far as the appellant is concerned, it should be considered to be an order passed in the presence of the appellant obviously with a definite intention to permit the respondents to withdraw the 50% of the compensation as and when it is deposited." In the light of the above mentioned facts the appellants have submitted before the A.O that since the enhanced compensation awarded was disputed in appeal, pending before the Hon'ble High Court, therefore, the same should not be taxed till finally resolved. It was expressed that if the enhanced compensation awarded got reduced then the said right would automatically fall substantially. It was urged before A.O that the disputed enhanced compensation should be taxed in the year in which dispute shall be resolved, thereupon the amount of compensation should be treated as determined finally. The authorised representative of the appellant M/s. Shankerlal Jain & Associates have also drawn attention of the A.O on the provisions of Section 45(5) which was introduced w.e.f. 1/4/88 by the Finance Act 1987. The case laws cited before A.O were as follows.
However, the A.O was of the view that the receipt of additional compensation should be taxable in the hands of the assessee as a capital gain Under Section 45(5) of I.T Act. He has distinguished that the decision of M/s. Hindustan Housing & Land Development Trust(supra) was related to the period prior to 1/4/88 i.e. the date from which Section 45(5) was inserted in the Act. He has also mentioned that the receipt of Rs. 95,98,499/- respectively in each hand was not a notional income but income. According to A.O it was a real income which was not only a receipt but the recipients also enjoyed the benefits of the receipt during the year under consideration. In this context A.O has relied upon a decision of CIT (A) v. Shivprasad Janakraj, 222 ITR 583.
According to |him the income chargeable under the head "Capital Gain" of the previous year in which such an amount was received by the assessee. Since the assessee has received the said amount during the financial year relevant for the A.Y 1995-96 without furnishing any security, therefore, the amount so received ought to be taxed for the a.Y. 1995-96. With these observations the "Long Term Capital Gain" was computed by A.O in the hands of all the four appellants identical as follows:Long Term Capital Gain Rs. 95,98,499/-Under Section45(5)(b) as discussedother legal expenses etc. (-) Rs. 7,04,300/- Rs. 88,94,199as per details filed Rounded off Under Section288A Rs. 88,94,200/- 4. Before the first appellate authority almost same arguments were raised with more emphasis that the compensation so enhanced was in dispute therefore, could not be taxed in the year under consideration.
After considering the rival contentions ld. CIT (A) was of the view that the appellants case was covered by the provisions of Section 45(5)(b) of the Act. Ld. CIT (A) has also cited a decision to ITAT Delhi in the same Smt. Gulab Sundari Batna, 79 ITD 455 and distinguished the same. He was of the view that the enhanced compensation was not a notional income but a real income. The next observation was that the appellants were allowed to withdraw 50% of the compensation, therefore, the issue was covered by the provisions of Section 45(5)(b). After narrating few more case laws he has dismissed the first appeal. Being aggrieved, now the appellants are further in appeal.
5. From the side of the appellants ld. Senior Counsel Shri Y.P. Trivedi was present, assisted by ld. A.R Ms. Usha Dalal. In the beginning of his argument ld. counsel has narrated the facts of the case which have already been discussed in the above paras. It was referred by him that the issue was cropped up on account of interim order of Madras High Court according to which 50% of the amount was allowed to be withdrawn.
Undisputedly, according to him, it was an interim order and not a final order, therefore, taxing statute do not permit to impose tax at such point of time during the pendency of an issue unless and until it reaches to its finality. The amount was allowed to be withdrawn only after an affidavit was filed giving an undertaking to secure the amount if allowed to be withdrawn. This shows that there was a possibility of refund in case the enhanced award gets reversed. An income simply does not accrue on compulsory acquisition of land because in such cases the dispute about the rate of compensation takes long time. He has argued that there is always a possibility of determination of compensation in either way, sometimes in favour of the owners and sometimes in favour of the payee. He has stressed that the assessee was demanded to pay tax on uncertain amount of compensation and in case the same shall get reduced then after payment of tax the appellant had no remedy. He has raised the question whether the right to receive the enhanced compensation has actually accrued or arose to the assessee when the award itself was under dispute. He has drawn our attention that the legal position which emerges on reading of various judicial pronouncements that there is no liability in praesenti to pay an enhanced compensation till it is judicially determined by the final court. The adequacy of grant of enhanced compensation itself is in doubt, therefore, it was in a flux till the question is set at rest finally. There was no enforceable right to this particular amount of enhanced compensation. As far as the security not offered by the appellants, he has mentioned that it was the sole discretion of the Hon'ble Court and in such cases where the appellants are having substantial resources then the court generally do not demand for furnishing of any security. Non furnishing of a security do not indicate that the partial amount which was withdrawn had become the property of the appellants for all times to come. On the basis of the circumstances it cannot be presumed that the receipts have become the income of the assessee. It is an accepted fact that the right to receive the enhanced compensation was in dispute and the quantification of the amount was yet to be determined, therefore, the temporary arrangements in between this period of uncertainty should not be taken as reached to its finality, he has argued. He has further continued his arguments that the legislature was very much aware about such hardship, therefore, in Section 155 Sub-section (7A) was introduced. Under the existing provisions the capital gain was taxed in the year in which the transfer took place. As the additional compensation used to be awarded in several stages by different appellate authorities, therefore, necessary rectifications were required at each stage. This time and again rectification has further created confusion. Though Sub-section (7A) was later on omitted w.e.f. 1/4/92 but one thing is clear that the legislature always intended to simplify the procedure of taxing the capital gain in case of compulsory acquisition. He has submitted that now this issue has finally been resolved by various courts, therefore, the judicial discipline requires to follow those decision. He has relied upon all those decisions cited before the lower authorities such as Abdul Maimon Sheik Mohammed, 248 ITR 614(Bom), Hindustan Housing and Land Development Trust, 161 ITR 524(SC) and Harish Chandra and Ors., 154 ITR 478(Del) He has further relied upon certain decisions of the Tribunal and insisted that a consistent view should be adopted, namely Smt. Gulab Sundari Bafna, 79 ITD 455(Del) and Jehangir P., Vazifdar, 42 ITD 67(Bom).
6. On behalf of the revenue ld. D.R Shri Sunil Agarwal has also vehemently argued in support of the orders of the authorities below. He has narrated the brief background of the intention of the legislature specially the scheme of taxation of Long Term Capital Gain arising out of compulsory acquisition of land. He has referred that under the heads of income "Capital Gain" was not in the statute as per IT Act 1922 and for the first time it was introduced to be taxed only for two years 1947-48 and 1948-49. As a result capital gain was not taxable from 1949-50 to 1956-57. It was reintroduced by Finance Act 1956 w.e.f.
1957-58. Thereafter Section 45 is continuously in existence. Up till assessment year 1973-74 the original compensation was taxed as capital gain in the year of receipt. As per the old provisions when the enhanced compensation used to be received the originally completed assessment were used to be rectified Under Section 154. To simplify the procedure Section 155(7A) was introduced by Finance Act 1978 with retrospective effect from 1974-75. As per this section a rectification of original assessment was possible within a period of 4 years from the end of the year in which enhanced compensation was received. However, it was also deleted by Direct Tax Laws(Amendment) Act 1987. Then as per Finance Act 1987 Section 45(5) was introduced having Clause (a) and (b). After the insertion of this section there was no scope of any confusion. Clause (b) provides assessment of enhanced compensation in the year of receipt. Therefore, from the assessment year 1988-89 till date a tax payer has to pay Long Term Capital Gain tax as and when the enhanced compensation is received. According to hi m there was no reason of any anxiety on the part of a tax payer because as per Section 153(3)(ii) an assessment, reassessment or recomputation has to be revised to give effect of an order passed by any superior court. In support of this argument he has cited a decision of T.M. Kousali, 155 ITR 739(Kar) and New Jahangir Vakil Mills, 117 ITR 849(Guj). He has further mentioned that in a number of other judgments it was held that in the event of return of enhanced compensation the assessee would not be remediless and can seek appropriate rectification. A tax payer is also, entitled for refund if excessive tax had been paid. Reliance placed on the decisions of Shah Vrijlal Madhavji, 95 ITR 614(Ker) and Smt. Saronjinidevi, 250 ITR 759(A..P). He has also tried to counter the arguments of ld. A.R that the introduction of Clause (c) in Section 45(5), which is effective from assessment year 2003-2004 is an additional mechanism and further strengthen the already existing provisions of Section 153(3)(ii). As Section 45(5) clearly states to tax the enhanced compensation in the year of receipt, therefore, the same should not be construed that the amount to be taxed when it is ultimately or finally received by the assessee. He has argued that the language of the statute is clear and unambiguous, therefore, two interpretations are not possible. He has also tried to counter the assessees reliance placed on the judgments of Hindustan Housing Development Trust, as cited by Mr. Trivedi. Ld. D.R has mentioned that since this judgment was delivered in July, 1986 the Parliament lost no time and brought into statute Section 45(5)(b). An explanation was also introduced to tax the enhanced compensation with retrospective effect in respect of transfer took place before 1/4/88 only with the intention to nullify the effect of this decision of Hon'ble Supreme Court. He has further argued that the right of receipt of compensation and enhanced compensation, both are in existence and these rights in fact cannot be created being attached with the ownership but these rights were declared and quantified by the courts. Therefore, on receipt of such rights the same are subject to tax. In his arguments he has also pointed out certain distinctive features of the case laws relied upon by the Counsel of the appellant. In support of his contentions he has strongly relied upon the decision of Ramabai v. CIT (A) 181 ITR 400(SC). He has also cited the decision of TNK Govindarajulu Chetty, 165 ITR 231(SC) and Shah Vrijlal Madhavji, 95 ITR 614 and Smt.
Sarojinidevi, 250 ITR 759(A.P).
Further Mr. Agarwal, Sr. D.R has emphasized that if the" ratio of Hindustan Housing Development Trust is to be accepted that the enhanced compensation accrued in the year in which finally decided then the arrears of interest would also be taxable only in the year in which it is finally decided. But this is not so in view of another decision of Hon'ble Supreme Court in the case of Ramabai(supra). The Apex Court in the case of Ramabai has categorically held that the interest on enhanced compensation is to be apportioned to all the years right from the year of transfer. He has argued that if the principle amount of enhanced compensation itself accrues not in the year of transfer but in the year the issue reaches to finality then how can interest on enhanced compensation can accrue from year to year. He has also mentioned that the decision of Hindustan Housing Development Trust pertains to the A.Y 1956-57 when the capital gain was not taxable in statute. Finally he has concluded that the ruling of a superior court is binding in law. The decisions cited on behalf of the revenue deserves to be followed, he has submitted.
7. Rival contentions were conscientiously heard at length, the orders of the authorities below were carefully perused and the applicable provisions of the statute were deliberated upon in the light of the case laws cited. In order to decide this appeal it is necessary to ascertain the question addressed to us. The question which arises for our adjudication is whether part of additional compensation which was deposited in the High Court and permitted to be withdrawn was subject to tax as Long Term Capital Gain at that stage of receipt in the hands of the appellant.
8. Sub-section (5) of Section 45 is a non-obstante clause hence effect shall be given to the meaning so ascertained so as to over ride the provisions of the enactments mentioned in this clause. This clause reads that notwithstanding, anything contained in Sub-section (1), where the capital gain arises from the transfer of a capital asset, being a transfer by way of compulsory acquisition, and the compensation for such transfer is enhanced or further enhanced by any Court, Tribunal etc., the capital gain shall be dealt with namely, (a) capital gain computed with reference to the compensation awarded in the first instance shall be chargeable as income under the head capital gains of the previous year in which such compensation or part there of first received, and, (b) the amount by which the compensation is enhanced or further enhanced by the Court, Tribunal etc., 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. Admittedly in the instant appeals the appellants were permitted to withdraw 50% of the additional compensation by the order of the Hon'ble High court, already reproduced herein above. While allowing withdrawal of 50% of the additional compensation it was expressed by the Hon'ble High Court, Quote, "Though this court may not be taken to be expression any final view on the legality and propriety of awarding the particular rate of enhanced compensation by the Court below in this case,, still at least for a prima facie consideration of the respective claims made in this application neither it can desist from expressing a general view nor be oblivious to the real value of the property with reference to its location which, in my view, would justify the permission being granted in this case as claimed by the claimants for withdrawing 50% of the amount deposited by the appellant in the court below"- Unquote. It was therefore, expressed in clear terms that in respect of compensation no final view was adopted by the Hon'ble court. In the same para Hon'ble Court has also mentioned that the order passed has the semblance of an interim order. The question is whether such an amount which was directed to be withdrawn was unclouded and unshadowed or not. We have also to examine whether' the dispute raised by M/s. BPCL was real as well as substantial and during the pendency of the dispute whether absolute right on the additional compensation awarded by the City Civil Court Madras was available to the assessee. Also in view of the fact that half of the said amount was permitted to be withdrawn as per the High Court's order the same could be treated as the compensation enhanced was received by the assessee in the previous year, in accordance with the language of Section 45(5)(b). The words, "previous year in which such amount is received by the assessee" as appearing in Sub-clause (b) whether indicate to tax the enhanced compensation which was not reached to its finality and shadowed with litigation. We have also to examine that whether the taxing statute permit to impose tax at such point of time during the pendency of litigation when even not allowed to withdraw the total amount but an interim relief was granted.
9. In so far as the exigibility of the original amount of compensation to tax was concerned, the same had been treated differently by the legislature, already taxed in the instant appeal in the hands of the co-owners. The same was rightly taxed as is evident from Clause (a) of Section 45(5), the words used are " first received" as against that, worth mentioning, the word used in Clause (b) of this sub-section is "received" alone. There must be a valid reason while enacting the law in the mind of the law makers for the use of two different words at two places for the same section. The legislature was well aware that as far as the original compensation is concerned the same would certainly be received or become receivable by the affected party whose land was acquired. The compensation awarded by the Land Acquisition Officer can only be challenged by the affected party and there is no provisions of appeal by the State against said award. If the affected party prefers an appeal the amount of compensation can be enhanced, but under no circumstances the compensation once awarded at the first instance can be reduced. On the other hand, the additional compensation, now under adjudication, is awarded through an appeal by the order of a Court on a totally different footing. The reasonability of additional compensation is subject to dispute and both the affected party as well as the Government, in this appeal it is M/s. BPCL, have an equal right to agitate their respective claims. The High court has absolute power in such matter and may up hold the grant of additional compensation, may reduce or increase, even can disapprove the same in its entirety . In such an event when the additional compensation gets disapproved the assessee might not get even a single penny over and above the original compensation. According to us, by keeping in mind this eventuality the legislature appears to have used the terminology "received" in Clause (b). At this juncture it is worth mentioning that as per the charging section of IT Act capital gain shall be deemed to be the income of the previous year in which the transfer took place. Earlier the tax payers agitated the imposition of capital gain on enhanced compensation as the same was not linked with the income of the previous year in which the transfer had undertaken. To over come this difficulty Sub-section (5) was introduced w.e.f. 1/4/88 by Finance Act, 1987. However, in our opinion even by the introduction of Sub-section (5) the law pronounced by the Hon'ble Apex Court in the case of Hindustan Housing & Land Development Trust, 161 ITR 524 is preserved. In that case also the Hon'ble Court has observed that there is a clear distinction between cases such as the present one, where the right to receive payment is in dispute and it is not a question of merely quantifying the amount to be received, and cases where the right to receive payment is admitted and the quantification only of the amount payable is left to be determined in accordance with settled or accepted principles. The legal position which emerges according to us is that there is no liability in praesenti to pay an enhanced compensation till it is judicially determined by the final court and the arrangements were only adinterim since the entire question, namely, whether the award enhanced by the Civil Court is adequate and whether entitled to claim an additional compensation. Even the rate at which the additional compensation is to be granted remains in a flux in such cases till the question is set at rest finally, therefore, we do not think that any enforceable right to a particular amount of compensation arises. For the purpose of determination of compensation an amount can be said to be judicially determined when all the stages provided in the Acquisition Act are completed. The offer made by the Land Acquisition Officer by his award, if not accepted by the assessee, would not result automatically in liability to pay enhanced compensation. The claim made by the assessee is in respect of an inchoate right, unless the question of payment of enhanced compensation is decided and the amount of enhanced compensation becomes determinable as well as payable, until then the amount cannot be said to arise or accrue. With the filing of an appeal by challenging the enhancement of compensation the amount has become in jeopardy and unsettled. Though the amount was withdrawn in part whether on furnishing of security or without furnishing of security, the withdrawal is contingent in nature in as much as it is likely to be defeated in appeal. It is difficult to say that the right to receive has finally accrued at that point of time. At the cost of repetition a bare perusal of Section 45(5) along with its Clause (a) and (b), brings to light the key words used in this section "received". There can be two situations first, wherein no appeal is pending against the award of enhanced compensation and second, the enhanced compensation is agitated in appeal. First instance can definitely fall under the category of "amount received". However, the second category can be termed that the assessee is in the process of "receiving" the compensation. In the instant case undisputedly M/s. BPCL when came up in appeal against enhancement made by the Civil Court Madras, jeopardized the enhancement and the fate of the amount was disturbed, hence the appellants were simply receiving the portion of the amount as an interim relief. The quantification had become dependent on the out come of the final judicial pronouncement. Till then, can it be held that the assessee had "received" the enhanced compensation within the meaning of Section 45(5) is a question to be answered in negative Otherwise also it is a settled law that if there is any dispute with respect to an income, the said income cannot be said to accrue or arise unless the dispute is finally settled either by the process of law or by mutual agreement.
For this reason the assessee could not be estopped from arguing that he was not liable to be taxed on an amount yet under jeopardy. To this extent we have expressed our view based on following decisions.
10. We have noticed that the above cited decision of Abdul Mannan Shah Mohammed was pronounced by the Hon'ble Bombay High court on 28/2/2000 i.e. after the insertion of Section 45(5)(a)&(b). Being the verdict of Jurisdictional High Court this decision is binding on us, moreover in the present context it is persuasive as well. Though this judgment is a short one but it deals directly with the point in issue therefore, we do not think it necessary to go into detail to those other order. The Head notes of this decision reads as follows: "Agricultural lands owned by the assessee were acquired by the Government in 1989 under the Land Acquisition Act. On a civil suit filed by the assessee, the civil court awarded Rs. 33,80,172/- which included the interest on the additional compensation amounting to Rs. 13.50 lakhs. The State Government filed an appeal before the High Court and the amount was deposited in the court. Pending the appeal, the assessee was permitted to withdraw the amount on giving security. The question before the Court were whether the additional compensation which was deposited in the court and permitted to be withdrawn was taxable at that stage and whether the said amount could be taxed when it was specifically deposited by the Government in appeal to the High Court.
Held, that the additional compensation which was deposited in the court and permitted to be withdrawn on giving security was not taxable at that stage. No substantial question of law arose.CIT (A) v. Hindustan Housing and Land Development Trust Ltd. (1986) 161 ITR 524 (SC) followed. " 11. From the side of the revenue a decision of Hon'ble Apex Court in the case of Ramabai, 181 ITR 400 was strongly relied upon with this argument that if principle amount of enhanced compensation does not accrue in the year of transfer but in the year it reaches finality, then how the interest on enhanced compensation can accrue from the year of transfer of the assets to the year it reaches to finality as it was in the case of Rambai(supra). It was also argued by ld. D.R that the two decisions of the Hon'ble Apex Court namely Hindustan Hsg. & Land Development Trust Ltd. (supra) and Ramabai(supra) both are in a way contradictory to each other. In our opinion this is not the correct approach to interpret both the above referred landmark decisions. The issue involved in these two decisions were diagonally opposite and there was no common feature, therefore, it was wrong to state that if one stands then the other should fall. In the case of Ramabai the issue was taxability of interest on enhanced compensation. The Hon'ble Court in that decision has followed its own judgment in the case of Govindarajulu Chetty, 165 ITR 231 and Korshed Shapoor Chenai, 122 ITR 21. In the case of Govindarajulu Chetty since it was an admitted fact that mercantile method of accounting was adopted by the assessee hence the interest had accrued when the compensation amount had become due to him in each of the relevant year. It was categorically mentioned that in view of the fact that the mercantile system of accounting was the basis on which the income had accrued, therefore, the interest had to be spread over the years between the date of acquisition and the date of actual payment. The other decision of Korshed Shapoor Chenai was in respect of the provisions of estate duty and therein It was held that the award of compensation by the Collector was merely an offer and in cases where the lands are compulsorily acquired there were no two rights i.e. one a right to receive compensation and the other a right to receive extra or further compensation for the estate duty purpose.
Thus it is evident from these orders that the question referred to the Hon'ble Court were in different context and not identical with the issue now raised before us. It is a well settled law that a decision is a "precedent" on its own facts. Each case present its own features. One has to apply ratio of a decision to the facts of a particular case with due care - Mahindra Mills Ltd., 99 ITR 135. Interestingly enough in the case of CIT v. Laxmandass, 246 ITR 622 the Hon'ble Allahabad High Court has distinguished the decision of Ramabai(supra) and followed the decision of Hindustan Hsg. & Land Development Trust(supra). In this decision it was held as under:- "Held, dismissing the application for reference, that the Tribunal was correct in holding that the amounts received by the assessee by way of interest in respect of additional compensation under the Land Acquisition Act, 1894, were not taxable in view of the finding of the Tribunal that the grant of additional compensation and interest thereon had not become final due to appeals preferred by the Government to the High Court. No question of law arose from its order." On careful reading of this order we have also, noticed that the Hon'ble Allahabad High Court has mentioned that the controversy in the case of Ramabai(supra) was different on the ground that the enhanced compensation was finally settled and there was no dispute. Accordingly the quantification of interest on enhanced compensation had also become final and on that basis the Court was in a position to hold that the interest had in fact accrued year after year from the date of delivery of possession of the land till the date of such order. Following the decision of Hindustan Hsg. & Land Development Trust the Allahabad High Court has held that the interest could not be taxed till the dispute is finally settled. Factum of the instant appeals tallies with the case of Laxman Dass(supra), therefore, without hesitation can be followed along with the other cited decision, specially the decision of Jurisdictional High Court cited supra.
12. The next plank of argument of ld. D.R was that the appellant is not remediless even if the enhanced compensation is taxed in his hand.
Certain decisions were also cited and argued that in view of Section 153(3)(ii) an income can always be recomputed to give effect of an order passed by any superior court. For this proposition it was also brought to our notice that now Sub-clause (c) has also been introduced in addition to Clauses (a) & (b) to Section 45(5) w.e.f. 1/4/2004 by Finance Act 2003. According to this newly inserted Sub-clause (c) where in the assessment for any year, the capital gain arising from the transfer of capital asset is computed by taking the compensation referred to in Clause (a) or as the case may be, enhanced compensation referred to in Clause (b), and subsequently such compensation is reduced by any Court or Tribunal etc. then such assessed capital gain of that year shall be recomputed by taking the compensation as so reduced by such Court and that amount shall be the full value of the consideration. The objection raised from the side of the appellants is appealing however the effect of this sub-clause should not be treated as retrospective in nature. Moreover with the insertion of this clause now it is evident that the legislature was also aware about such eventualities when the compensation enhanced got reduced. We have also noticed that there was a provision in Section 155(7A) according to which where in the assessment for any year the capital gain arising from the transfer of capital asset, being a transfer by way of compulsory acquisition, is computed Under Section 48 and such compensation is enhanced by any court or Tribunal etc., the same can be recomputed in accordance with the Section 48 by taking the enhanced compensation to be the full value of the consideration received and shall make the necessary amendment. This section has been omitted w.e.f. 1/4/92 by the Direct Tax Laws (Amendment) Act 1987. There is no answer to this query that what will be the fate of all such cases between the period of April 1992 to April, 2004 because Sub-section (7A) of Section 155 stood deleted from April, 1992 and Sub-clause (c) of Section 45(5) was introduced w.e.f. April, 2004. The best and the correct way is to compute the capital gain only when the enhanced compensation gets finally settled to avoid multiplicity of litigation.
Otherwise also the provisions of Section 153(3)(ii) are very much in statute to give effect of an order of any Court. The over all position emerges on perusal of various provisions of the Act that neither the revenue nor the assessee are remediless and the enhanced compensation when finally settled is always subject to tax.
13. Under the totality of the facts and circumstances and in view of the details discussion in above paras after due consideration of various provisions and case laws referred herein above, we are of the view that ld. CIT (A) went wrong to affirm the order of A.O. We hereby reverse the findings of the first appellate authority and allow the grounds raised by the appellants.