C.N. Ramachandran Nair, J.
1. The question raised in the appeal filed by the assessee is whether Tribunal was justified in confirming the assessment of capital gains for the additional amount of compensation received in land acquisition proceedings by the late husband of the appellant for the assessment year 1992-93. We have heard counsel appearing for the appellant and Standing Counsel appearing for the respondents. The facts in brief are the following. An extent of 83 cents of land with building thereon was acquired by the Land Acquisition Officer from appellant's late husband on 10.7.1986 for a compensation of Rs. 4,20,970/-. The possession was taken over on 10.9.1986 and Land Acquisition reference case was instituted before the Sub Court, Kozhikode for enhancement of compensation. The Sub Court on 22.10.1990 enhanced the compensation to Rs. 17,53,887.50 with interest @ 9% for first year and @ 15% thereafter. Since there was dispute about the title of the property, the Government deposited additional compensation with interest of Rs. 23,47,886/- in the Sub Court. On 19.9.1991 the Sub Court released the additional compensation to the late husband of the appellant on his furnishing security for the amount for 3 years. According to the appellant the deceased had to fumish security to get the money released from the court and in fact he deposited the amount for 3 years in the Bank in the year 1991 to get Bank Guarantee. However, admittedly on expiry of the bank guarantee on 19.9.1994 the Bank released the amount deposited in the Bank to the late assessee. Pursuant to a raid, late assessee filed income tax return for the year 1995-1996 and eventhough the additional compensation for the acquisition of the property was received from the Bank after release by the court, the assessee filed a covering letter along with the return filed for the year 1995-96 stating that appeal is filed by the State against increase in compensation in LAA.281/92 and in view of the appeal and based on the judgment of the Supreme Court in Commissioner of Income Tax, West Bengal-II v. Hindustan Housing and Land Development Trust Ltd. Reported in : 161 ITR 524 (SC) assessee is not liable to pay tax on the additional compensation received. However based on the information furnished by the assessee about receipt of additional compensation the Assessing Officer re-opened the assessment for 1992-93 and assessed additional compensation received in that year for the reason that in terms of Section 45(5)(b) the tax on capital gains in land acquisition proceedings is payable on receipt basis and the assessee had in fact received the payment from the Court on 19.9.2001.
2. The assessee filed appeal against the assessment which the CIT (Appeal) dismissed and the Tribunal confirmed the said order. It is against this order assessee has filed this appeal.
3. Counsel for the assessee relied on the decision of the Supreme Court reported in : 161 ITR 524 (cited supra) and decision of the Karnataka High Court in Chief Commissioner of Income Tax and Anr. v. Smt. Shantavva reported in : 267 ITR 67 (Kar). Two other decisions relied On by the assessee are of the Madras High Court, one reported in Anilkumar Forma (HUF) v. Commissioner of Income Tax reported in 289 ITR 245 (Mad.) and their later decision in K. Mahender v. Commissioner of Income Tax reported in : 303 ITR 245 (Mad). Based on above decisions counsel contended that additional compensation awarded by land acquisition court in reference is assessible only in the year in which all the court proceedings came to an end which in this case is the dismissal of the State appeal by the High Court in the year 2003. The counsel for the Revenue on the other hand contended that the decision of the Supreme Court referred above is for the period prior to the introduction of Section 45(5)(b) and so much so it has no application. According to him by virtue of the provision contained in Section 45(5)(b) of the Act capital gains by way of additional compensation received is assessible on receipt basis and if there is any reduction of the same later in appeal by any court, assessment calls for modification as provided in Clause (5)(c) of Section 45 of the Act. Eventhough Section 45(5) with Sub-clauses (a) and (b) was introduced by Finance Act, 1987 and Clause (c) was introduced only in 2003, the Tribunal took the view that Clause (c), the protective clause taking care of reduction of enhanced compensation in further appeal is clarificatory in nature and so much so the additional compensation received by the late assessee in the financial 1991-1992 was rightly assessed for the assessment year 1992-1993. Since the judgments of the High Court and the decision of Supreme Court relied on by the assessee relate to the period prior to introduction of Section 45(5)(b) and (c) we extract hereunder the said subsections for easy reference.
Section 45(5)(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;
(c): Where in the assessment for any year, the capital gain arising from the transfer of a capital asset is computed by taking the compensation or consideration referred to in Clause (a) or, as the case may be, enhanced compensation or consideration referred to in Clause (b), and subsequently such compensation or consideration is reduced by any court, Tribunal or other authority, such assessed capital gain of that year shall be recomputed by taking the compensation or consideration as so reduced by such court, Tribunal or other authority to be the full value of the consideration.
4. On a plain reading of the section above referred it is very clear that through the deeming provision contained in Sub-clause (b) of Section 45(5) capital gain received by way of enhanced compensation in land acquisition proceedings shall be deemed to be income chargeable under the head 'Capital Gain' for the assessment year relevant to the previous year in which such amount is received by the assessee. Hence we are of the view that this deeming provision will justify assessment of additional compensation on receipt basis overlooking the decisions taken by different courts which are applicable for periods prior to the amendment. The legislature taking care of the possibility of higher courts reducing the additional compensation on which tax is paid by virtue of deeming provision contained in Section 45(5)(b) of the Act, introduced the specific Clause (c) by which any assessment made demanding tax on the additional compensation received will be modified if later in any proceedings the enhancement received is reduced. The provisions of Section 45(5) after the introduction of Clause (c) to it by Finance Act, 2003 with effect from 1.4.2004 provide a complete code for payment of tax in respect of compensation received in land acquisition proceedings in stages on receipt basis and by virtue of operation of Clause (c), the ultimate tax liability will be on the actual compensation determined by the final court. We notice that the decision of the Supreme Court referred above is for the period prior to the introduction of Section 45(5)(b) and that was a case where the enhanced compensation granted in reference confirmed by the High Court was cancelled by the Supreme Court in appeal and so much so the decision has no application for the purpose of interpreting the new provisions.
5. Counsel for the appellant referring to the decision of the Karnataka High Court and the two decisions of Madras High Court referred above contended that even for application of Clause (b) the receipt of the amount should be unconditional. In the first place he contended that receipt during pendency of appeal is not a receipt of additional compensation, but it is only a provisional payment subject to decision of the High Court in the appeal that was pending in the late assessee's case. This issue is no longer res Integra because the Supreme Court has in the case of C.I.T. v. Ghanshyam (HUF) reported in : 315 ITR 1 held that additional compensation could be assessed on receipt basis even if release is based on security furnished under court orders.
6. The next contention raised by the appellant is against the finding of the Tribunal that Clause (c) of Section 45(5) is clarificatory in nature. Counsel contended that the provision is substantive in nature because but for the newly introduced provision, the assessment completed on higher amount of compensation could not be revised based on subsequent court orders reducing the compensation. We find force in this contention because assessment once completed could be revised only in proceedings in appeal, revision or rectification. Therefore in a case where any higher court has subsequently reduced compensation already assessed and the assessment has attained finality, inasmuch as time for filing appeal, revision or rectification is over, then the assessee will be without statutory remedy against such an assessment. So much so, in such a situation, in our view, the newly introduced clause goes to the rescue of the assessee for getting the assessment modified after higher court reduces compensation. Even though apparently the contention of the assessee is tenable, we still feel that assessee in such cases is not without remedy even for period prior to the introduction of Clause (c) to Section 45(5) because constitutional remedy under Article 226 of the Constitution is always available to challenge the assessment on enhanced compensation which later got reduced under orders of court. In fact, this kind of eventualities are recognised by decision of this Court in C.P. Jacob v. Asst. Commissioner of Income Tax (2008 (2) KLT 925 : (2008) 174 Taxman 154 (Ker.). We therefore hold that the Tribunal was justified in holding that Clause (c) of Section 45(5) is clarificatory in nature.
7. The last question to be considered is whether the assessment on the additional compensation received by the assessee against furnishing security under court orders made for the assessment year 1991-1992 could be sustained based on the principles laid down by the Supreme Court in the latest decision above referred. Counsel for the assessee referred to the last portion of the decision, wherein the Supreme Court held that settled position should not be disturbed based on their judgment. Even in this case, the issue is pending for long and has not attained any finality by virtue of pendency of this appeal. We feel, the observations of the Supreme Court give us freedom to mould the relief in this case consistent with the judgment of the Supreme Court. We have already noticed that even though court released additional compensation to the assessee on 19.9.1991 it was against furnishing of Bank guarantee and the assessee had to deposit the entire amount in the Bank to get the Bank guarantee. In other words, the assessee did not have at his disposal the additional compensation received for payment of tax. The assessee in fact received the amount from the Bank after release of Bank guarantee in the accounting year relevant for the assessment year 1995-96. In fact the assessee had informed about receipt of the amount in the return filed for 1995-96. We therefore feel that a realistic approach in this case will be taken to treat the income in the form of additional compensation as actually received in the previous year relevant for the assessment year 1995-1996. Counsel for the assessee also submitted that assessee has no objection in assessing the amount by reopening the assessment for 1995-1996.
8. We therefore dispose of the appeal by accepting the offer made by counsel for the assessee and direct the assessing officer to reopen the assessment of late assessee for the assessment year 1995-1996, in the name of the Appellant-legal heir, assess the additional compensation, give credit for the payments already made, and demand balance tax and interest. The assessee is free to claim reduction or waiver of interest payable under various provisions of the Act.
Consequently the assessment of additional compensation confirmed by orders of the Tribunal for 1992-1993 will stand cancelled.