The Dy. Commissioner of Vs. Shri Bhim Singh Lather - Court Judgment

Excerpt:
1. the president, income-tax appellate tribunal has originally referred the following question for my opinion as third member on a difference of opinion between the two members : whether, on the facts and in the circumstances of the case, the enhanced compensation received by the assesses was taxable in the hands of the assessee as income despite the fact that the quantum of enhanced compensation awarded is subject matter of proceedings before the appellate forum by the state government as well as by the assessee and the quantum of enhanced compensation has not affined finality and the assessee has received a part of the enhanced compensation and interest on enhanced compensation pursuant to interim orders passed by the appellate court? 2. this question arises, in the appeal for asst. year 1995-96. there was another difference between the two members with regard to the taxability of interest received on the aforesaid disputed enhanced compensation and that arose in the appeal for asst. year 1994-95. the president, therefore, referred the following question also for my opinion as arising in the appeal for asst. year 1994-95: whether, on the facts and in the circumstances of the case, the interest received on disputed enhanced com ;; p ensation which is subject metter of litigation in appeals before appellate forum can fee taxed without affaining finality.3. the brief facts of the case are that the assessee's land -at kamal was acquired by land acquisition officer, panchkula and a compensation was awarded on 16th february1989 and the assessee received a compensation of rs. 38,03,271 in february, 1988 in two installments.thereafter, an enhanced compensation was ordered by district sessions judge on 6th may, 1993 against which order both the assessee as well as land acquisition officer went in appeal before the punjab and haryana high court. the high court by their order dated 18th february, 1984 by their order dated 18th february. 1994 declined to grant stay though directed the executing court is release the amount of enhanced compensation to she assesses against adequate security. the assessee received the following payments on different dates from 10th june, 1994 to 28th november, 1895:s.no. date of amount of assf. year to which payment compensation the amount 4. besides the assessee was paid interest of the following amounts after deducting tds thereon : 5. though the tds was deducted on various- dates, the land acquisition officer issued tds certificate only on 21st november 1996, the assessee filed voluntary returns of income for financial years 1996-97 relevant to the asst. year 1997-98 and offered the entire income of interest on receipt basis- as the tds was deducted in that year.6. for the asst. years 1994-95 and 1995-96, the assessing officer issued notices under section 148 on 11th december, 1996 in response to which the assessee declared total income of rs.56,026/- for asst. year 1994-95 and rs. 41,000/- for asst. year 1995-96 by fiting returns on 12th october 1998 repeating the income as declared during the original assessment proceedings. the assessee's contention was that it had received enhanced compensation and interest thereon amounting to rs. 20,67,441/- on 21st november,1996 and therefore, the assessee had shown the entire income received on such enhanced compensation on cash/receipt basis in the return of income filed for asst. year 1997-98. the assessing officer observed that the assesses had neither received the amount of enhanced compensation nor the amount of interest on such enhanced compensation during the financial year relevant to the asst. year 1997-98. the entire payments had been received by the assessee prior to the commencement of the financial year 1996-97 and, therefore, the assessee was not justified in declaring any income in respect of asst. year 1997-98. according to the assessing officer., under section 45(5)(b) irrespective of the method of accounting followed by the assessee the amount of enhanced compensation was assessable only in the previous year in which the enhanced compensation was received by the assessee. the assessee received total sum of rs. 22.82.660/- during the financial year relevant to the asst. year 1995-96 including interest on enhanced compensation amounting to rs. 9,42,537/-. the assessing officer came to the conclusion that the assessee was liable to capital gains tax in regard to the amount of enhanced compensation of rs.13,40,123/- under the provisions of section 45(5)(b) in asst. year 1995-96. the assessing officer also found that the assesses received interest on enhances compensation aggregating to rs. 20,67,441/- for the period 16th february, 1839 to 19th january, 1994. the assessing officer worked out the interest attributable to various asst. years and assessed a sum of rs. 3,68,384/- attributable to the period 1-4-1993 to 19th january, 1994 and assessed the same as assessee's income for asst. year 1994-85.7. the assessee carried the matters in appeal. the cit(a) in the appeal for asst. year 1994-95 deleted the addition of interest by observing that the quantum of enhanced compensation receivable was in dispute before the higher court; that if compensation was reduced the interest would also be reduced and that the interest on undisputed amount only can be brought to tax. he, accordingly directed the assessing officer to take into account only that portion of interest which related to the original, compensation granted and not on the enhanced compensation which is being disputed and is still not certain.8. in the appeal for asst. year 1995-96, he deleted the assessment of capital gain on enhanced compensation by absenting that the enhanced compensation has been disputed by the authorities before the high court and that the decision of the supreme court in the case of cit v.hindustan housing and land development trust ltd. 161 itr 524 as also in the case of p. msriappa gounder v. cit 232 itr 2 end cjt v. jivan sons 161 ctr (raj.) 242 were squarely applicable to the facts of the case. he, therefore, deleted the addition made on account of disputed enhanced compensation.9. the revenue came in appeal in both the years before the tribunal and there struck a difference of opinion between the two members on the two issues aforesaid namely whether the enhanced compensation received by the assessee was taxable, despite the fact that the quantum of enhanced compensation was subject matter of proceedings before the appellate forum by the state government as well as the assessee and secondly whether the interest received on disputed enhanced compensation is chargeable to tax before the final decision of the appellate forum. the accountant member held that the enhanced compensation is assessable in the hands of the assessee by virtue of section 45(5)(b) and the interest on the enhanced compensation is to be chargeable as worked out on the estimated value of enhanced compensation in the light of the supreme court decision in the case of mrs. khorsned shapoor chenai v.assit. controller of estate duty 122 itr 21 (supreme court).the judicial member, on the other hand, held that enhanced compensation court not be brought to tax in the years under consideration as the dispute on the quantum of enhanced compensation has not attained finality. he also held that interest on enhanced compensation would also for the very same reason, not liable to tax.10. the ld. cit-dr shri rajneesh kumar supporting the order of accountant member submitted that the matter has been examined in great detail by the tribunal in the case of trilok singh in ita nos.706 to 711(del)/200l and others order dated 18-6-2004. he distinguished the decision of karnataka high court in the case of chief cit v. smt.shantayya 267 itr 67 (kar.) by stating that in the opinion of the court the amount received by the assesses was not as enhanced compensation but interim payment pursuant to the court's order. this according to him which is not the ease in the present appeal. similarly, he submitted that in the cases of a.b.v. gowda (deceased) 157 itr 697, abdul mannen sheh mohammed 248 itr 614(bom.) and jeevan and sons (sic) ctr 242 (p&h) are the cases prier to section 45(5)(b). in hindustan (sic) decision of the supreme court there was no right to receive compensation and the issue was whether the compensation can be taxed in mercantile basis and not whether it could be taxed on receipt basis. he then referred to the decision of and also the decision in the case of jehsngir p. vazifdar 42 itd 67 and disfinguished the same by stating that it was not a case of receipt of part consideration which was unclouded and unshadowed nature. he further submitted that delhi tribunal in the case of smt. gulab sundri bapne 79 itd 455 is a case of surrender of tenancy rights having no cost of acquisition and that the pune tribunal in the case of rikhabchaad m. lslwani (huf) 81 ttj (pune) 964 was concerned with a case for exercising jurisdiction under section 263 wherein reference to clause (c) to section 45 (5) was held cannot be had to, it being the later development of law. he then submitted that the high court has not stayed the order and, therefore, the compensation had accrued to the assessee as per the decision as it stands to-day. the high court order is in rfa no. 2936 to 2977of 1993 dtd. 10th feb.1994, wherein admitting the appeal, the high court observed, "no case for stay in the execution of award in question has been made out. however, the compensation amount would be disbursed by the executing court only after obtaining adequate security. he also referred to the decision of andhra pradssh high court in the ease of cit v. m. sarojthi devi 116 taxman 613 (ap) which has not been followed by the judicial member by staling only that it was a case prior to section 45(5). he also invited attention to provisions of sub-clause (c) of section 45(5) and submitted that the cases referred to above were all before the introduction of clause (c) which was with effect from 1-4-2004 added by finance act, 2003, explanatory notes where of are reported in 263 itr 62 (st.) circular no. 7 dated 5-9-2003 at page 88 paragraph 58.2. he then submitted that the provisions of clause (c) are not substantive but procedural and clarificatory in nature as it only takes into consideration the law as it stood even prior so that, it was in any case enabling provision to reduce the rigours of the assessee. he then referred to the decision of gujarat high court in the case of cit v. niranian narofism 173 itr 683 observations at page 701 stating that rule of retrospectively has to apply to the procedural amendment. he also referred to the decision of supreme court in the case of allied motors 224 itr 677(sc) for retrospective operation to provisions which supplied the meaning to avoid unintended result. he further submitted that if clause (c) of section 45(5) was not there, there was no remedy for the assessee for rectification of reduction of compensation and that it was a provision to reduce the hardships of the assessee. he then referred to the decision of tribunal in the case of rkhanchand m. lalwani (huf) (supra) wherein reference to clause (c) of section 45(5) was made in a passing way. it was a case of section 263 order and the tribunal held that the issue was debatable.11. the ld. counsel for the assessee submitted that the provisions of clause (c) of section 45(5) are prospective and so cannot be applicable prior to 1-4-2004. supporting the order of the cit(a), he submitted that neither the additional compensation was chargeable nor the interest was taxable in the year under consideration as the matter is still sud-judice before the high court. as regards the interest, he also referred to the decision of supreme court in the case of p.mariapps gounder (supra) besides the decision of the supreme court in the case ramabai' wherein it is held that interest accrues from year to year and to be assessed accordingly.12. the parties were heard and record perused. section 4 of the act is the charging section and it provides that income-tax shall be charged for any asst. year in respect of the total income of the previous year of every person section 5 provides for the scope of total income and it provides that subject to the provision of this act the total income of any previous year of a person who is recipient includes all income from whatever sources derived which - (a) is received or deemed to be received in india in such year by or on behalf of such person; (b) accrued or arises or is deemed to accrue or arising to him in india during such year; or 13. on a combined reading of sections 4 and 5 it is apparent that an income under the act is chargeable either when it is received or deemed to be received or alternatively when it accrues or arises to him or is deemed to accrue or arising to him. the first is celled & cash system and the second is called a mercantile system. these two principles are well-known and have s marked and subtle difference under the act. under the system a record is maintained for actual receipt and actual disbursement, entries being posted when money or money's worth is actually received, collected or disbursed. there is, secondly, a mercantile system in which the entries are posted in the books of accounts on the date of transaction namely, on the date on which the rights accrued or liabilities are incurred irrespective of the date of payment. this has been held by the supreme court in the case of krisrmaswamy mudaliar 53 itr 123 at page 129. the system of accounting again came up for consideration before the supreme court in the case of indramani 35 itr 298 wherein it was observed as follows: if is well known that the mercantile system of accounting differs substantially from the cash system of bock keeping. under the cash system, it is only actual cash receipts and actual cash payments that are recorded as credits and debits; whereas, under the mercantile system, credit entries ate made in respect of amounts due immediately they become legality due and before they are actually received; similarly, the expenditure items for which legal liability has been incurred are immediately debited even before the amounts in question are actually disbursed. where accounts are kept on mercantile basis, the profits or gains are credited though they are not actually realized, and the entries thus made really show nothing mere than an accrual or arising of the said profits at the material time. the same is the position with regard to debits made.14. there are various provisions which prescribe as to how an income of the assesses is to be computed under a particular act or for a particular receipt or payment. choice is also given to the assessee under section 145 to adopt either the cash system of accounting or the mercantile system of accounting for his assessment. we are concerned in this case one of the issue with regard to the taxability of capital gain. originally for capital gain the charge is provided only on accrual basis under section. 45 of the act by stating that any profits or gains arising from transfer of a capital asset shall be chargeable is income-tax under the bead "capital gains" and shall be deemed to be income of the previous year in which the transfer took place. this was irrespective of the fact whether the assesses has received the consideration or not. the finance act, 1987r however, made a change in the system of taxation of capital gain on accrual basis by insertion of the sub-section (5) to section 45 with regard to the (sic) compensation received by the assessee pursuant to the order of the court, tribunal or other authority, by providing that such additional compensation is to be charged under the heed "capital gain" in the previous year in which such compensation or part thereof was received by the assesses.therefore, prior to the amendment capital gain tax was chargeable on the basis of accrual and there was no option to the assessee or to the revenue to make a departure there from, but from asst. year 1988-89, the finance act, 1987 made a part of the consideration received on transfer of capital asset chargeable on receipt basis if it was on account of enhancement of the compensation by any court, tribunal or other authority. here also choice is not given either to the revenue or to the assessee to adopt accrual system of accounting. section 145, however, gives an option to the assessee to adopt either of the systems but that option is only with regard to the income chargeable under the need "profits end gains of business or profession or income from other sources'". here in the present case, for assessment of interest income the assessee had exercised the option on accrual basis and assessing officer also proceeded on that basis that income from other sources is to be computed as per accrual system of accounting therefore, the cases referred to before the tribunal are to be considered in the light of the system of accounting viz. accrual or cash system. therefore, the cases arising under the head "capital gain prior to the introduction of sub-section(5) of section 45 would be of not much help in determining the taxability of enhanced compensation which is made chargeable en receipt basis as against the mercantile system of accounting prior to 1-4-1938. on the contrary, those cases would be decisive of the matter for determining the chargeability of interest income for which the assessee as well as revenue have proceeded on the basis that it is to be charged on accrual basis.15. section 45 provides for the charging of capital gain arising on transfer of a capital asset. as stated above, it provided charge originally under sub-section (1) of section 45 to be in the year of transfer. cases have arisen where the gains of compensation determined at the time of acquisition/transfer on compulsory acquisition were carried in litigation and on which determination the assessments made for the year of transfer required rectification at various stages of determination of the additional compensation. to obviate this difficulty sub-section (5) was added to section 45 by the finance act, 1987 with effect from 1-4-1988. if read as under:- (5) 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 under any law, or a transfer the consideration for which was determined or approved by the central government or the reserve bank of india, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, tribunal or other authority, the capital gain shall be dealt with in the following manner, namely:- (a) the capital gain computed with reference to the compensation, awarded in the first instance or, as the case may be the consideration determined or approved in the first instance by the central government or the reserve sank of india shall be chargeable as income under the head "capital gains" of the previous year in which such compensation or part thereof, or such consideratiors or part thereof, was first received); and (b) the amount fry which the compensation or consideration is entranced 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; 16. explanatory notes are appearing in circular no./475 dated 22-9-1987 in paras 24.5, 24.6 and 24.7 which read as under for bringing out this amendment:- 24.5 under the existing provisions where capital gains accrue or arise by way of compulsory acquisition of assets, the additional compensation is taken into consideration for determining the capital gain for the year in which the transfer took place. to provide for rectification of assessment of the year in which the capital gain was originally assessed, section 155(7a) was introduced. the additional compensation is awarded in several stages by different appellate authorities and necessitates rectification of the original assessment at each stage. this causes great difficulty in carrying out the required rectification and in effecting the recovery of additional demand. another difficulty which arises is in cases where the original transferor dies and the additional compensation is received by his legal heirs. in the falter type of cases, proceedings have to be initiated against the legal heirs. repeated rectification of assessments on account of enhancement of compensation by different courts often results in mistakes of computation of tax. 24.6 with a. view to removing these difficulties, the finance act., 1987 has inserted a new sub-section (5) in section 45 to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. the additional compensation will be deemed to fee income in the hands of the recipient even if the actual recipient happens to be a person different from the original transferor by reason of death, etc. for this purpose, the cost of acquisition in the hands of the receiver of the additional compensation will be deemed to be nil. the compensation awarded in the first instance would continue to be chargeable as income under the head "capital gains" in the previous year in which the transfer look place. 24.7 these amendments will come into force with effect from 1st april, 1988, and writ, accordingly, apply from she assessment year 1988-89 and subsequent years.17. the provision so inserted, however, did not encompass the full remedy inasmuch as there was no specific provision to provide for the rectification of the assessment downwards if the compensation is reduced except by the provisions of section 154. the finance act, 2003 inserted sub-section (16) in section 155 to provide that where such amount of compensation or consideration is subsequently reduced by any court, tribunal or other authority, capital gain of that year in which the compensation or consideration received was taxed shall be recomputed accordingly and the assessing officer shall amend the order of assessment to revise the computation of said capital gain of that year by taking the compensation or consideration so reduced by the tribunal or authority to be the full value of the consideration. this amendment is made effective from 1st april, 2004. clause (c) in sub-section (5) as inserted by the finance act, 2003 reads as under:- (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.18. sub-section (16) as also inserted by finance act, 2003 in section 155 reads as under:- (16) where in the assessment for any year, a capital gain arising from the transfer of s capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer, the consideration for which was determined or approved by the central government or the reserve bank of india, is computed by taking the compensation or consideration as referred to in clause (9) or, as the case may be, the compensation or consideration enhanced or further enhanced as referred to in clause (b) of sub-section (5) of section 45 to be the fall value of consideration deemed to be received or accruing as a result of the transfer of the asset and subsequently such compensation or consideration is reduced by any court, tribunal or oilier authority, the assessing officer shall amend the order of assessment so as to compute the capital gain by taking the compensation or consideration as so reduced by the court, tribunal or any other authority to be the full value of consideration; and the provisions of section 154 shall, so far as may be, apply thereto, and the period of four years shall be reckoned from the end of the previous year in which the order reducing the compensation was passed by the court, tribunal or other authority.19. on a combined reading of these provisions, if is apparent that whereas sub-section (1) section 45 deems the income arising on transfer of a capital asset to be assessed to be charged in the year in which the transfer has taken place; sub-section(5) provides far the charge on receipt of compensation in the first instance, as income of the year in which the said compensation is first received or the additional compensation in the year in which further enhanced compensation was received. an enabling provision was also made that if compensation is subsequently reduced, the assessment of additional compensation is to be reduced in the year of reduction. in this way there has been a shift in the process of assessment of compensation from accrual to receipt and, therefore, the cases which have been decided on the basis that additional compensation or compensation does not accrue to the assessee unit a final decision thereon is taken by the court, tribunal or any authority are of no help.20. the case of hindustan housing and land development trust (supra) was a case of assessment of capital gain on accrual basis under section 45(1) of the act. in this case, the land acquisition officer awarded a sum of rs. 24,97,249/- as compensation and on appeal preferred by the assessee, the arbitrator made an award on july 29, 1955 fixing the compensation at rs. 30,10,873/- and directed the payment of interest at 5% from the date of acquisition. the state government deposited the additional amount of rs. 7,36,651/- in the court and the assesses was permitted to withdraw the same on may 9m, 1956 only on furnishing of a security bond for refunding the amount in the even of appeal being allowed. the said receipt of rs. 7,24,915/- find balance having already been taxed was the subject matter of dispute which according to the assessee was not chargeable to tax because it was subject to litigation and according to the revenue it was chargeable to tax because it became payable pursuant to arbitrator's award. the supreme court held that the entire amount of enhanced compensation was in dispute in appeal filed by the state government find the dispute was recorded by the court, as real and substantial because the respondent was not permitted to withdraw the amount by the state government without furnishing bond for refunding the amount in the event of appeal being allowed. there was thus no absolute right to receive the amount at that stage and the question before their lordships was whether the said amounts can be said to have accrued to the assessee as income during the previous year ended on 31st march, 1956. the question of assessability on receipt basis was not an issue. in the present case, on the contrary, the additional compensation is awarded by the addt. district judge, karnal and an appeal there-against was, though admitted by the high court but as aforesaid without staying the execution of the award. in other words, the operations of award of the addt. district judge, karnal has not been stayed, it was, therefore, a right of the assessee even otherwise to receive the compensation as per the said award of the addl. district judge.21. similarly the case of a.b.v. gowda (deceased) 157 itr 697 before the karnataka high court is a case prior to insertion of sub-section (5) of section 45 and the entire discussion was on the provisions- of section 5 (1)(b) with regard to accrual of income and, therefore, this case is of no help to the assessee. again, the decision of bombay high court in the case of abdul mannan shah mohammed is a case solely resting on the ratio of the decision of supreme court in the case of hindustan housing end land development trust (supra) and there is no discussion with regard to the provisions of section 45(5) of the act.these cases, therefore, for similar reasons are of no help to the assesses.22. reliance by the assessee in the case of smt. gulab sundri bapna (supra) also does not help because in the said case compensation received by the assessee pertained to compulsory acquisition of property in tenancy right and not the ownership right and the tribunal held that compensation in respect of tenancy right is not liable to capital gains tax under section 55(2) since section 55(2)(a) was substituted by finance act, 1994 with effect from 1-4-1995 including the tenancy right infer alia within the definition of "capital asset" having cost of compensation as nil.23. it may fee mentioned that bapna's case was rendered on 13th september, 2000 and at that time clause (c) was not there in existence which was inserted by finance act, 2003. though the said clause is stated to be applicable from 1-4-2004 and might give an impression that it is applicable from 2004-05 and the cases prior to that would not fee covered by this clause. in my opinion, however, the insertion of clause (b) is only an enabling provision to reduce the rigors of the provision up or am assessee for downward rectification of the assessment in case of reduction of compensation. this is only an indication of intention of the legislature that irrespective of the finality of the litigation the compensation is chargeable in the year of receipt and if per chance the said additional compensation is reduced in further litigation the legislature has provided for a relief to be granted to the assessee.24. the decision in the case of lala ram dagar (supra) which has merely followed the aforesaid division bench decision in the case of smt.gulab sundri bapna (supra) and, therefore, nothing turns on that also.25. in the case of jehangir p. vazifdar 42 itd 67, half of the additional compensation only was received by the assessee and that too subject to furnishing of security. according to the revenue not only the amount actually received but the full amount of compensation was taxable in the year when the enhanced compensation was awarded, whereas the assessee's claim was that entire amount became vested only when the final order was passed by the high court. if may be slated that in this case, the operation of award was stayed by interim stay of execution of award decree was granted by the high court subject to the appellant depositing 50% of decreed amount within six weeks thereof, in this case, therefore, the distinguishing feature is that the amount was allowed to be withdrawn subject to furnishing of bank guarantee and the execution of the sward was stayed by the high court and only a part of the amount awarded as compensation was received by the assessee. on these facts, the tribunal held that nothing accrued to the assesses and the receipt of 50% could not be said to be "unclouded and un-shadowed".in the present case, however, the award of the add. district judge was not stayed by the high court and the amount was received by the assesses pursuant to the said award of the additional district judge.26. in the judgment of karnataka high court in the case of chief commissioner of income-tax v. smt. shantavva 266 itr 67 though the discussion was with regard to the provisions of section 45(5)(b) but the matter could not have been examined with reference to later introduction of clause (c) in section 45(5) of the act. further, in that decision, heavy reliance was placed on the decision of supreme court in the case of hindustan housing wherein the question was only for the accrual of income to the assesses and not to the receipt which as per the legislative amendment made chargeable to tax as capital gain en receipt basis.27. decision of the supreme court in the case of polyflex (india) pvt.ltd. v. cit 257 itr 343, may also be referred to here. this is a ease arising under section 41 of the i.t. act. here also, section 41(1) provides for two situations for charging the amount where an allowance or deduction has been made in the assessment of the assesses for any year in respect of a loss, expenditure or trading liability incurred by the assessee-i) where the assesses obtained a sum; or ii) he obtains some benefits in respect of a trading liability by way of remission or cessation of liability. there were cases where the courts have been taking the view that there is no remission or cessation or liability if the matter is pending in litigation and, therefore. obtaining of amount or the benefit in respect of such trading liability was not taxable without making any distinction. the supreme court considered this distinction and held that whereas in the case of obtaining the amount in respect of such trading liability the sum is chargeable in the year of receipt irrespective of the fact that litigation for the remission thereof is pending; but where the amount has not been received the court held that there was no remission or cessation of liability so long as the matter was pending in litigation and until the matter is finally settled. the following passage from the supreme court's order would be demonstrative in this respect :- the high court then held that the liability of the assessee as regards the payment of excise duty cannot be said to have ceased because the judgment of the single judge of the high court did not attain finality. though the conclusion of the high court which was affirmed by this court cannot be legally faulted, we cannot, however, approve of the following analysis of the section occurring in the judgment (page 581 of (1976) 105 itr: "in short, what this provision means is that if an assessee has been allowed a deduction in the computation of its total income of any liability on account of loss or expenditure and if, subsequently, the liability of the assesses on account of such loss or expenditure is remitted or ceases, that part of the liability which is remitted or ceases shall be treated to be the income of the assesses of the previous year in which such remission or cessation takes place". the high court proceeded on the assumption that the words "remission and cessation thereof could be transposed into the first clause which speaks of obtaining have merely said that the trading liability provided for in the books accounts and for which deduction was allowed earlier did not cease in view of the pendency of the dispute. instead, the high court referred to the expression "loss or expenditure" occurring in the first limb. as the assessee-company did not obtain any amount by way of refund on excise duty account, the first clause of section 41(1) will not be applicable; it is only the latter part that applies in which case the remission or cessation of liability would assume importance. however, in the present case, as discussed above, it is the first clause that squarely applies but not the second one. whether there was cessation or remission of liability would be an irrelevant line of enquiry here. the correct way of understanding section 41(1) would be to read the letter clause - "some benefit in respect of such trading liability by way of remission or cessation thereof as a distinct and self-contained prevision. to read the phrase "by way of remission or cessation thereof" as governing the previous clause as well, i.e. "obtained any amount in respect of such loss or expenditure", would be doing violence to the language and structure of the provision. that apart the operation of the provision which is designed to have widest amplitude will get constricted and truncated by reason of such interpretation.28. though this decision is not directly on the issue of taxability on cash system or accrual system, but it demonstrates the ambit of the concept of chargeability to tax on receipt basis and the benefit obtained because of cessation or remission of liability wherein the concept of pendency of litigation was considered to be relevant, in the present case also, the assessee had received the additional compensation in the year under consideration pursuant to thee judgment of the addl. district judge., karnal and, therefore, it would be chargeable to tax in the year of receipt as per the provisions of section 45(5) of the act irrespective of the fact that the additional/ enhanced compensation is subject matter of further litigation.29. in view of the aforesaid, in my opinion in so far as the receipt of additional compensation by the assessee is concerned it has to be charged on receipt basis and the assessing officer, in my opinion, was justified in charging the same and the cit(a) was not right in deleting the same by relying upon the decision of supreme court in the case of hindustan housing and land development trust (supra) and by stating that no right has accrued to the assessee over the said additional compensation ignoring the provisions of the act under section 45(5) which has shifted the charge of capital gain tax on receipt basis in so far as the additional compensation received is concerned.30. as regards the second question, the facts are little different.there is no specific provision for making assessment of interest on cash basis. the assessee had been given a right to adopt the system of accounting by section 145. undisputedly that system adopted by the assessee is accrual system of accounting. since the award of the addl.district judge, karnal was subject matter of appeal to the high court, there was no accrual thereof and consequently interest would also net accrue to the assesses. in view of decision of the supreme court in the cases of smt rams bai (supra) and p. mariappa gounder (supra). the direction sought on the basis of the decision of supreme court in the case of mrs. khorshed shapoor chennai (supra) is misplaced. there the question was the assessability of the value of compensation receivable by the assessee which was to be charged as value of the estate passing on death. the court held that where the lands are compulsorily acquired under land acquisition act there are no two rights, one a fight to receive the compensation and the other a right to receive extra or further compensation. the claimant has only one right which is to receive compensation of the land on the market value on the date of relevant notification and it is this right which is- quantified by the collector under section 11 and fey the civil court under section 26 of the act the collector's sward under section 11 is nothing more then an offer of compensation made fey the government to the claimant whose property is acquired. if the offer is acquiesced by the total acceptance of the right of compensation will not survive but if the offer is not accepted under protest and a reference is sought by the claimant under section 18 the right to receive compensation must be regarded as having survived and kept alive which the claimant prosecutes in civil court. it is not correct to say that no sooner had the collector made the first award under section 11 than the right to compensator is destroyed or ceases to exist or is merged in the award or what is left after the award with the claimant is a mere right to litigate the correctness of the award. the claimant can litigate the correctness of the award because his right to compensation is not fully redeemed but remsins alive, which he prosecutes in the civil court.this, however, does not mean that the valuation of this right done by the civil court subsequently would be its valuation as age the relevant date for the purpose of either the ed. act or the w.t. act. it is the duty of the assessing authority under either of those enactments to evaluate the property (the right to receive compensation at market value on the date of the relevant notification) as on the relevant date (i.e. the date of death under the e.d. act or the valuation date under the w.t. act. no such situation is appearing in this case for estimating the right of compensation and, therefore, reliance on the decision of supreme court in the case of mrs. khorshed shapoor chenai (supra) is misplaced and is of no help to the revenue. in my opinion, therefore, the interest though would be chargeable on year to year basis but only when the right disputed by the parties is finally settled by the court. tribunal or any authority and since in this case the matter is pending in the high court in the relevant year no right to receive compensation or to interest accrued to the assessee and consequently, no assessment can be made in the year under consideration until the matter is finally settled by the court.inadvertently the question arising for consideration of the third member on a difference of opinion for the a.y. 1994-95 was omitted to be referred. the following question is, therefore, being referred to the hon'ble president for the opinion of the third member relating to the a.y. 1994-95. whether on the facts and in the circumstances of the case, the interest received on disputed enhanced compensation which is subject matter of litigation in appeals before appellate forum can be taxed without attaining finality.as there is a difference of opinion between the two members, the following questions are referred to the hon'ble president for the opinion of the third member. whether on the facts and in the circumstances of the case, the enhanced compensation received by the assessee was taxable in the hands of the assessee as income despite the fact that the quantum of enhanced compensation awarded is subject - matter of proceedings before the appellate forum by the state government as well as by the assessee and the quantum of enhanced compensation has not attained finality and the assessee has received a part of the enhanced compensation and interest on enhanced compensation pursuant to interim orders passed by the appellate court? 1. these two appeals have been filed by the revenue on 14.12.2000 against the orders of the learned cit(appeals), shimla dated 18.9.2000 in the case of the assessee in relation to assessment orders under section 143(3) for assessment years 1994-95 and 1995-96.2. these two appeals were heard by us on 24.6.2004 and thereafter on account of difference of opinion arisen between us the matter was referred to hon'ble third member by way of reference under section 255(4) signed by us on 30.11.2004. the hon'ble third member has given his opinion on the reference made to him by his order dated 10.3.2005.in pursuance to the order of the hon'ble third member, we proceed to decide these two appeals in the following manner: 3. the appeal filed by the revenue in ita no. 4756(del)/2000 for assessment year 1994-95 fails and is dismissed accordingly.4. revenue's appeal in ita no. 4757(del)/2000 for assessment year 1995-96 is allowed and the assessment of capital gain amounting to rs. 13,40,123/- made by the assessing officer is restored.1. these to appeals have been filed by the revenue on 14th december, 2000 against the orders of the ld. cit(a), shimla dated 18^th september, 2000 in the case of the assessee in relation to assessment orders under section 143(3) for assessment years 1994r95 and 1995-96.2. in these appeals the revenue has disputed the orders of file ld.cit(a) deleting the addition made by the ao on account of enhanced compensation as well as on account of interest on enhanced compensation. facts of the case leading to these two appeals briefly are that the assessee's land was acquired by land acquisition officer, panchkula vide award dated 16th february, 1989. thereafter, an enhanced compensation was ordered by district sessions judge on 6th may, 1993.against that order both the assessee as well as land acquisition officer filed an appeal before punjab and haryana high court. hon'ble high court by their order dated 18th february, 1994 gave directions to the executing court to release the amount of enhanced compensation to the assessee against adequate security. the assessee received enhanced compensation along with interest on different dates from 10th june, 1994 to 28th november, 1995 as per the particulars mentioned in the impugned orders. thereafter, at the request of the assessee the land acquisition officer issued tds certificate only on 22nd november, 1996.the assessee filed voluntary returns of income for financial year 1996-97 and 1997-98 relating to assessment years 1997-98 and 98-99 for assessment year 1994-95 and 1995-96 . the ao issued notice under section 148 on 11th december, 1996. the assessee declared total income of rs. 56,026/- in relation to assessment year 1994-95 and rs. 41,000/-in relation to assessment year 1995-96 in the return filed on 12th october, 1998 in response to notice under section 148. in these returns the assessee repeated the income as declared during the original assessment proceedings. the assessee argued that had received enhanced compensation along with interest amounting to rs. 20,67,441 on 21st november, 1996 and, therefore, the assessee had shown the entire interest income received on enhanced compensation on cash/receipt basis in the return of income filed for assessment year 1997-98. the ld. ao found, that the assessee had neither received the amount of enhanced compensation nor the amount of interest on such enhanced. compensation during the financial year 1996-97 relevant to assessment year 1997-98.the entire payments had been received by the assessee prior to the commencement of the financial year 1996-97. hence, the assessee was not justified in declaring any income in this behalf in relation to assessment year 1997-98. according to the ld. ao, the provisions of section 45(5)(b) were very clear and irrespective of the method of accounting followed by the assessee. the amount of enhanced compensation was assessable only in the previous year in which the enhanced compensation was received by the assessee. the assessee had received a total sum of rs. 28,82,660/- during the financial year 1994-95 relevant to assessment year 1995-96. that amount included interest on enhanced compensation, computed at rs. 9,42,537/-. the ld.ao. therefore,, held that the assessee was liable to capital gains tax in relation to the amount of enhanced compensation of rs. 13,40,123/- under the provisions of section 45(5)(b).3. the ld. ao further found that total amount of interest received by the assesses on enhanced compensation aggregated to rs. 20,67,441/-.that interest was paid for the period 16th february, 1989 to 19th january, 1994. the ao attributed the amount of interest to various assessment years as per working given at page 5 of the assessment order for assessment year 1995-96. he attributed a sum of rs. 3,68,384/- to the period 1.4.93 to 19th january, 1994 and assessed the sum as assessee's income for 1994-95.4. during the course of hearing before the ld. cit(a) the assessee disputed the assessment of enhanced compensation and interest on enhanced compensation as enumerated in the foregoing paragraphs. the assessee argued that the payment had been made to the assessee after furnishing of adequate security and the amount of enhanced compensation was in dispute before the hon'ble punjab and haryana high court during the relevant previous years. the assessee placed reliance on the judgment of the hon'ble supreme court in the case of cit v. hindustan housing and land development trust ltd. 161 itr 524 (sc). the ld.cit(a) held that the quantum of enhanced compensation receivable was in dispute before the higher court. in the event of the amount of compensation being reduced the interest was also likely to be reduced.she, therefore, held that only interest on undisputed amount cold be brought" to tax in the assessment year 1994-95. she directed the ao accordingly. for assessment ear 1995-96 the id. cit(a) deleted the assessment of the sum of rs. 13,40,1.23/- on the ground that this amount; of enhanced compensation was in dispute. aggrieved by these orders the revenue is in appeal before us.5. during the course of hearing before us the ld. dr argued that the ld. cit(a) erred in applying the judgment to hon'ble supreme court in the case of hindustan housing and land development trust ltd (supra); because in the case of the assessee before us the payment had been made to the assessee. he strongly relied upon the judgment of the hon'ble supreme court in the case of rama bai v. cit 181 itr 400 (sc). the ld.dr also referred to page 7 of the assessment order for assessment year 1996-97 and pointed out that the assessee had agreed that the amount of enhanced compensation had been wrongly shown in the assessment year 1997-98 and had stated that the assessee intended to file a revised return. the assessee requested that the refund arising to the assessee on filing of the revised return for assessment year 1997-98 may be adjusted for the tax payment to be credited for assessment year 1995-96 which request had been accepted by the ao on the ground that the same income could not be assessed twice. the ld. dr, therefore, argued that as far as assessment year 1995-96 was concerned; the sum of rs. 13,40,123/- had been assessed on agreed basis and, therefore, the ld.cit(a) erred in deleting the same.6. the ld. authorized representative of the assessee argued that in the case of the assessee the amount of enhanced compensation had been disputed by the state government and their appeal was pending before the hon'ble high court. on such facts the judgment of hon'ble supreme court in the case of hindustan housing development trust squarely applied. the ld. ar of the assessee also referred to cbdt circular no.495 dated 22nd september, 1987 being explanatory notice to the finance act, 1987. the ld. ar referred to the following paragraphs of the aforesaid cbdt circular:- 24.5. under the existing provisions; where capital gains accrue or arise by way of compulsory acquisition of assets, the additional compensation is taken into consideration for determining the capital gain for the year in which the transfer took place. to provide for rectification of assessment of the year in which the capital gain was originally assessed section 155(7a) was in tax reduced. the additional compensation is awarded: in several stages by different appellate authorities and necessitates rectification of the original assessment at each stage. this causes great difficulty in carrying out the required notification and in effecting the recovery of additional demand. another difficulty which arises is in cases where the original transferor dies and the additional compensation is, received by his legal heirs. in the latter type of cases, proceedings have to he initiated against the legal heirs. repeated rectification of assessments on account of enhancement of compensation by different courts often results? in mistakes of computation of tax. 24.6. with a view to removing the difficulties, the finance act. 1987 has inserted a new sub-section (5) in section 45 to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. the additional compensation will be deemed to be income in the hands of the recipient even if the actual recipient happens to be a person different from the original transferor by reason of death, etc. for this purpose the cost of acquisition in the hands of the receiver of the additional compensation will be deemed to be nil. the compensation awarded in the first instance would continue to be chargeable as income under the head "capital gains" in the previous year in which the transfer took place.7. according to the ld. ar. these paragraphs suggested that provisions of section 45(5) had been introduced so as to exclude the requirement of rectification. hence, the provisions of section 45(5) applied only when the amount of additional compensation had become final.8. we have carefully considered the rival submissions. as far as the revenue's appeal for assessment year 1995-96 is concerned, the ld. dr has rightly pointed out to the remarks of the ld. ao at page 7 of the assessment order that it follows that the assessee agreed to assessment of sum of rs. 13,40,123/- as income from capital gains under section 45(5)b) for assessment year 3995-96 subject to the assessee being allowed to revise the return for assessment year 1997-98 and the refund arising on such revised return being adjusted against the tax payment for assessment year 1995-96. it appears that this aspect of the matter escaped the attention of the ld. cit(a). even otherwise we find that after enactment of the provisions of section 45(5) the judgment in the case of hindustan housing development trust ltd. (supra) cannot be applied. we arc supported in this view by the order of the tribunal 9. as far as assessment year 1994-95 is concerned, the ld. dr has rightly pointed out that in view of the judgment of hon'ble supreme court in the case of rama bai v. cit 181 itr 400 (sc), the amount of interest on enhanced compensation has to be assessed on accrual basis for each year to which it pertains. at the same time, there is merit in the contention of the ld. ar of the assessee that the quantum of additional compensation awarded by the district sessions judge was in dispute before hon'ble high court in the appeals filed by both the assessee and the state government. in our opinion, the answer to this problem is provided by the judgment of hon'ble supreme. court in the case of mrs. khorshed shapoor chenai v. asstt. controller of estate duty, ap 122 itr 21 (sc). in: that judgment given in the context of estate duty hon'ble supreme court held that where the amount of compensation was not final the assessee's right to receive compensation will have to be estimated value having regard to the peculiar nature of the property, its marketability and the surrounding circumstances including the risk or hazard of litigation looming large at the relevant date. in that judgment hon'ble supreme court also observed that while the estimated value cannot be fully the amount awarded by the collector, it can never be equal to the tall claim made by the claimant nor equal to the claim actually awarded by the civil court in as much as the risk or hazard of litigation would be a detracting factor. in our view the guidelines laid down in the aforesaid judgment should fairly be applied for assessment of amount of interest on additional compensation in the cases where the amount of enhanced compensation itself is in dispute. we, therefore, restore this issue to the file of the ld. ao for determination of interest on enhanced compensation in accordance with the guidelines laid down by hon'ble supreme court in the case of mrs. khorshed shapoor chenai v. asstt.controller of estate duty, ap 10. in the result, while the revenues appeal for assessment year 1994-95 is allowed, for statistical purposes revenue's appeal for assessment year 1995-96 shall be treated as partly allowed.11. i have gone through the order proposed by my id. brother. i an unable to persuade myself to agree with the conclusions arrived at by my ld.brother. i would however like to highlight the fact that the assessee in the present case follows a mercantile system of accounting.the questions for consideration on the facts of the present case are; a) whether the enhanced compensation received by the assessee was taxable in the hands of the assessee as income despite the fact that the quantum of enhanced compensation awarded is subject matter of proceedings before the appellate forum by the state government as well as by the assessee and the quantum of enhanced compensation has not attained finality and the assessee has received a part of the enhanced compensation and interest on enhanced compensation pursuant to interim orders passed by the appellate court? b) whether the fact that the assessee has offered the income for taxation though in a different assessment year would be sufficient to bring the amount to tax? 12. as far as question(b) is concerned, the law is well settled that an assessee is entitled to resile from a position erroneously taken when filing the return, an admission or acquiescence cannot be the foundation for an assessment, and it is always open to an assesses to demonstrate and satisfy the assessing officer that a particular income was not taxable in his hands and that it was returned under an erroneous impression of law." the following decided cases are on the point.13. article 256 of the constitution mandates that no tax can be levied and collected except by authority of law. it would therefore be necessary that there must be a legal liability to pay tax in accordance with law. as whether there was a liability on the part of the assessee to pay tax on the receipt in question would therefore depend on the answer to question (a), above.14. the honourable karnataka high court had an occasion to examine a similar question in the case of chief commissioner of income-tax and anr. v. smt. shantavva. 2004-(267)-itr -0067 -kar. the following three questions of law were considered by the honorable high court: (i) whether the tribunal was correct in holding that the amount received by the assessee does not fall within the ambit of section 45(5)(b) of the act (ii) whether the tribunal was correct in applying the principle laid down in cit v. a. b. v. gowda in spite of the (iii) whether the tribunal was correct in holding that the words 'received' and 'deemed' used in section 45(5)(b) will not apply to receipt of amounts in pursuance of the interim orders after making reference to the provisions of section 45(5)(b) the honourable court has held as follows: 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" contemplated under section 45(5)(b), but only an interim payment received subject to final decision. it will attract section 45(5)(b) only when the final decision is rendered. we are supported in the said view by a decision of the supreme court and a decision of this court. in cit v. hindustan housing and land development trust ltd. , the supreme court held : in the present case, although the award was made by the arbitrator on july 29, 1955, enhancing the amount of compensation payable to the assessee, the entire amount was in dispute in the appeal filed by the state government. indeed, the dispute was regarded by the court as real and substantial, because the assessee was not permitted to withdraw the sum of rs. 7,36,691 deposited by the state government on april 25, 1956, without furnishing a security bond for refunding the amount in the event of the appeal being allowed. there was no absolute right to receive the amount at that stage. if the appeal was allowed in its entirety, the right to payment of the enhanced compensation would have fallen altogether. in cit v. a.b.v. gowda , this court held as follows : a mere claim to income without an enforceable right thereto cannot, therefore, be regarded as an accrued income for the purpose of the income-tax act. the above principles are squarely applicable and section 45(5)(b) does not change the position in any manner. section 45(5)(b) shifts the date of "income" from the date of acquisition and from the date of determination of compensation by a court/tribunal/authority, to the date of receipt of the compensation in pursuance of an enhancement by the court/tribunal/authority. two conditions have to be satisfied for applicability of section 45(5)(b) : (i) there should be enhancement of compensation by a court/tribunal/authority. (ii) the assessee should receive payment of such enhanced compensation. when the award of the reference court enhancing the compensation is stayed and an interim payment is ordered as condition of such stay or otherwise and is paid, pending final decision, neither of the two conditions are satisfied. the amount received in pursuance of an interim order by furnishing security, not being an amount payable in pursuance of an enforceable order or decree increasing the compensation, cannot be considered as receipt of enhanced compensation. therefore all the three questions have to be answered against the revenue. we find no error in the order of the tribunal and the appeal is dismissed as having no merit.15. besides the above, identical views of the tribunals of mumbai and jaipur benches in the context of the provisions of section 45(5) of the act had come up for consideration before the honourable bombay high court and honourable rajasthan high court respectively in the case of cit v. abdul mannna shah mohammed 248 itr 614 (bom) and cit v. jeeva & sons 161 ctr 242 (raj) and the honorable high courts have agreed with the view of the tribunal holding that no substantial question of law arises. the mumbai bench, delhi bench as well as the pune bench (which was authored by me) of the tribunal have also taken identical views in the context of section 45(5) of the act in the following cases:jehangir p. vazifdar v. ito 16. my learned brother however in taking a contrary view has followed the decision of are delhi bench of the tribunal in the case of acit v.trilok singh in ita no. 708 to 71l/del/01 dated 18.6.2004. i have perused the said order of the tribunal and i find that the view expressed by the tribunal is contrary to the preponderance of judicial opinion on the issue expressed by the decisions of the tribunal as well as the decisions of the honourable high courts. there is however a decision of the honourable a.p. high court in the case of cit v. m.saroini devi 116 taxman 613 (ap) in which there appears to be a contrary view expressed. i shall therefore refer to the said decision.the facts in the aforesaid case were that the lands belonging to the assessee were acquired by the government in the year 1966 and compensation was awarded by the lao. on reference, compensation at higher rate was awarded. the assessee was held to be entitled to an interest of rs. 43,642 for the period 18-5-1966 to 9-12-1975. the state government went in appeal against the enhancement made in the appeal.the appeal before the supreme court was pending. the ito held that the entire amount of interest on enhanced compensation should be brought to tax for the assessment year 1976-77. the order was challenged by way of appeal. the aac held that as the matter had not become final and an appeal was before the supreme court, the amount of interest received by the assessee could not be taxed. he relied on a judgment of this court in cit v. smt. sankari manickyamma . on further appeal before the tribunal, the same view was upheld relying upon the same judgment. thereafter at the instance of the revenue, the following question was framed and referred to the court: whether, on the facts and in the circumstances of the case, the interest on compensation for the assessment year for which the interest should be brought to tax is the one in which it was awarded or the year in which issue of quantum of compensation becomes final the question, which needed to be answered, is 'whether the assessing officer has to wait tiil the final disposal by the final court in an acquisition matter before the interest accrued is taxed ?' therefore, we are refraining the question in the above-mentioned phraseology and we find that the question is already answered by the supreme court in rama bai v. cit . the fact that the compensation was enhanced by the high court in an appeal and the interest accruing to it was received by the assessee makes him liable to pay the tax. however, it will be spread over the period for which it accrued to him, in accordance with the supreme court judgment. in any case, if the judgment enhancing the compensation in favour of the assessee is reversed by the supreme court, then the assessee, even after payment of the tax on the accrued interest, would not be remediless. he can always seek the refund of the tax so paid, by making appropriate application for rectification of the assessment. the tribunal relied on judgment in smt. sankari manickyamma's case (supra) that obviously stands reversed in view of the judgment of the supreme court judgment in rama bai's case (supra). for all these reasons, we answer the question in favour of the revenue as indicated above and against the assessee.17. as can be seen from the facts in the aforesaid case, the assessment year was 1976-77 prior to the introduction of section 45(5) in the it act. the provisions of section 45(5) of the act as introduced by the finance act, 1987 came into effect only from 1-4-88. the decision of the honourable a.p. high court therefore runs contrary to the decision of the honourable supreme court in the case of hindusthan housing and land development trust ltd. 161 itr 524 (sc).18. i would therefore, respectfully following the decision of the honourable karnataka high court as well as the honourable bombay high court and rajasthan high court and the view expressed by the various benches of the tribunal, hold that the enhanced compensation could not be brought to tax in the years under consideration as the dispute on the quantum of enhanced compensation had not attained finality. the interest on enhanced compensation would also for the very same reason not be liable to tax. the cit(a) in my view had rightly allowed the appeal of the assessee and directed the addition made by the ao to be deleted. i would therefore dismiss both the appeals by the revenue. the appeals by the revenue are therefore dismissed.

Judgment:
1. The President, Income-tax Appellate Tribunal has originally referred the following question for my opinion as Third Member on a difference of opinion between the two Members : Whether, on the facts and in the circumstances of the case, the enhanced compensation received by the assesses was taxable in the hands of the assessee as income despite the fact that the quantum of enhanced compensation awarded is subject matter of proceedings before the appellate forum by the State Government as well as by the assessee and the quantum of enhanced compensation has not affined finality and the assessee has received a part of the enhanced compensation and interest on enhanced compensation pursuant to interim orders passed by the appellate court? 2. This question arises, in the appeal for Asst. Year 1995-96. There was another difference between the two Members with regard to the taxability of interest received on the aforesaid disputed enhanced compensation and that arose in the appeal for Asst. Year 1994-95. The President, therefore, referred the following question also for my opinion as arising in the appeal for Asst. Year 1994-95: Whether, on the facts and in the circumstances of the case, the interest received on disputed enhanced com ;; p ensation which is subject metter of litigation in appeals before appellate forum can fee taxed without affaining finality.

3. The brief facts of the case are that the assessee's land -at Kamal was acquired by Land Acquisition Officer, Panchkula and a compensation was awarded on 16th February1989 and the assessee received a compensation of Rs. 38,03,271 in February, 1988 in two installments.

Thereafter, an enhanced compensation was ordered by District Sessions Judge on 6th May, 1993 against which order both the assessee as well as Land Acquisition Officer went in appeal before the Punjab and Haryana High Court. The High Court by their order dated 18th February, 1984 by their order dated 18th February. 1994 declined to grant stay though directed the executing court is release the amount of enhanced compensation to She assesses against adequate security. The assessee received the following payments on different dates from 10th June, 1994 to 28th November, 1895:S.No. Date of Amount of Assf. Year to which payment compensation the amount 4. Besides the assessee was paid interest of the following amounts after deducting TDS thereon : 5. Though the TDS was deducted on various- dates, the Land Acquisition Officer issued TDS certificate only on 21st November 1996, The assessee filed voluntary returns of income for financial years 1996-97 relevant to the asst. year 1997-98 and offered the entire income of interest on receipt basis- as the TDS was deducted in that year.

6. For the Asst. Years 1994-95 and 1995-96, the Assessing Officer issued notices Under Section 148 on 11th December, 1996 in response to which the assessee declared total income of Rs.56,026/- for Asst. Year 1994-95 and Rs. 41,000/- for Asst. Year 1995-96 by fiting returns on 12th October 1998 repeating the income as declared during the original assessment proceedings. The assessee's contention was that it had received enhanced compensation and interest thereon amounting to Rs. 20,67,441/- on 21st November,1996 and therefore, the assessee had shown the entire income received on such enhanced compensation on cash/receipt basis in the return of income filed for Asst. year 1997-98. The assessing Officer observed that the assesses had neither received the amount of enhanced compensation nor the amount of interest on such enhanced compensation during the financial year relevant to the asst. year 1997-98. The entire payments had been received by the assessee prior to the commencement of the financial year 1996-97 and, therefore, the assessee was not justified in declaring any income in respect of Asst. Year 1997-98. According to the Assessing Officer., Under Section 45(5)(b) irrespective of the method of accounting followed by the assessee the amount of enhanced compensation was assessable only in the previous year in which the enhanced compensation was received by the assessee. The assessee received total sum of Rs. 22.82.660/- during the financial year relevant to the asst. year 1995-96 including interest on enhanced compensation amounting to Rs. 9,42,537/-. The Assessing Officer came to the conclusion that the assessee was liable to capital gains tax in regard to the amount of enhanced compensation of Rs.13,40,123/- under the provisions of Section 45(5)(b) in Asst. Year 1995-96. The Assessing Officer also found that the assesses received interest on enhances compensation aggregating to Rs. 20,67,441/- for the period 16th February, 1839 to 19th January, 1994. The Assessing Officer worked out the interest attributable to various Asst. Years and assessed a sum of Rs. 3,68,384/- attributable to the period 1-4-1993 to 19th January, 1994 and assessed the same as assessee's income for Asst. Year 1994-85.

7. The assessee carried the matters in appeal. The CIT(A) in the appeal for Asst. Year 1994-95 deleted the addition of interest by observing that the quantum of enhanced compensation receivable was in dispute before the higher court; that if compensation was reduced the interest would also be reduced and that the interest on undisputed amount only can be brought to tax. He, accordingly directed the Assessing Officer to take into account only that portion of interest which related to the original, compensation granted and not on the enhanced compensation which is being disputed and is still not certain.

8. In the appeal for Asst. Year 1995-96, he deleted the assessment of capital gain on enhanced compensation by absenting that the enhanced compensation has been disputed by the authorities before the High Court and that the decision of the Supreme Court in the case of CIT v.Hindustan Housing and Land Development Trust Ltd. 161 ITR 524 as also in the case of P. Msriappa Gounder v. CIT 232 ITR 2 end CJT v. Jivan Sons 161 CTR (Raj.) 242 were squarely applicable to the facts of the case. He, therefore, deleted the addition made on account of disputed enhanced compensation.

9. The revenue came in appeal in both the years before the Tribunal and there struck a difference of opinion between the two Members on the two issues aforesaid namely whether the enhanced compensation received by the assessee was taxable, despite the fact that the quantum of enhanced compensation was subject matter of proceedings before the appellate forum by the State Government as well as the assessee and secondly whether the interest received on disputed enhanced compensation is chargeable to tax before the final decision of the appellate forum. The Accountant Member held that the enhanced compensation is assessable in the hands of the assessee by virtue of Section 45(5)(b) and the interest on the enhanced compensation is to be chargeable as worked out on the estimated value of enhanced compensation in the light of the Supreme Court decision in the case of Mrs. Khorsned Shapoor Chenai v.Assit. Controller of Estate Duty 122 ITR 21 (Supreme Court).The Judicial Member, on the other hand, held that enhanced compensation court not be brought to tax in the years under consideration as the dispute on the quantum of enhanced compensation has not attained finality. He also held that interest on enhanced compensation would also for the very same reason, not liable to tax.

10. The ld. CIT-DR Shri Rajneesh Kumar supporting the order of Accountant Member submitted that the matter has been examined in great detail by the Tribunal in the case of Trilok Singh in ITA Nos.706 to 711(Del)/200l and others order dated 18-6-2004. He distinguished the decision of Karnataka High Court in the case of Chief CIT v. Smt.

Shantayya 267 ITR 67 (Kar.) by stating that in the opinion of the Court the amount received by the assesses was not as enhanced compensation but interim payment pursuant to the Court's order. This according to him which is not the ease in the present appeal. Similarly, he submitted that in the cases of A.B.V. Gowda (deceased) 157 ITR 697, Abdul Mannen Sheh Mohammed 248 ITR 614(Bom.) and Jeevan and Sons (sic) CTR 242 (P&H) are the cases prier to Section 45(5)(b). In Hindustan (sic) decision of the Supreme Court there was no right to receive compensation and the issue was whether the compensation can be taxed in mercantile basis and not whether it could be taxed on receipt basis. He then referred to the decision of and also the decision in the case of Jehsngir P. Vazifdar 42 ITD 67 and disfinguished the same by stating that it was not a case of receipt of part consideration which was unclouded and unshadowed nature. He further submitted that Delhi Tribunal in the case of Smt. Gulab Sundri Bapne 79 ITD 455 is a case of surrender of tenancy rights having no cost of acquisition and that the Pune Tribunal in the case of Rikhabchaad M. Lslwani (HUF) 81 TTJ (Pune) 964 was concerned with a case for exercising jurisdiction under Section 263 wherein reference to Clause (c) to Section 45 (5) was held cannot be had to, it being the later development of law. He then submitted that the High Court has not stayed the order and, therefore, the compensation had accrued to the assessee as per the decision as it stands to-day. The High Court order is in RFA No. 2936 to 2977of 1993 dtd. 10th Feb.1994, wherein admitting the appeal, the High Court observed, "no case for stay in the execution of award in question has been made out. However, the compensation amount would be disbursed by the executing court only after obtaining adequate security. He also referred to the decision of Andhra Pradssh High Court in the ease of CIT v. M. Sarojthi Devi 116 Taxman 613 (AP) which has not been followed by the Judicial Member by staling only that it was a case prior to Section 45(5). He also invited attention to provisions of Sub-clause (c) of Section 45(5) and submitted that the cases referred to above were all before the introduction of Clause (c) Which was with effect from 1-4-2004 added by Finance Act, 2003, Explanatory notes where of are reported in 263 ITR 62 (St.) Circular No. 7 dated 5-9-2003 at page 88 paragraph 58.2. He then submitted that the provisions of clause (c) are not substantive but procedural and clarificatory in nature as it only takes into consideration the law as it stood even prior So that, it was in any case enabling provision to reduce the rigours of the assessee. He then referred to the decision of Gujarat High Court in the case of CIT v. Niranian Narofism 173 ITR 683 observations at page 701 stating that rule of retrospectively has to apply to the procedural amendment. He also referred to the decision of Supreme Court in the case of Allied Motors 224 ITR 677(sc) for retrospective operation to provisions which supplied the meaning to avoid unintended result. He further submitted that if Clause (c) of Section 45(5) was not there, there was no remedy for the assessee for rectification of reduction of compensation and that it was a provision to reduce the hardships of the assessee. He then referred to the decision of Tribunal in the case of Rkhanchand M. Lalwani (HUF) (supra) wherein reference to Clause (c) of Section 45(5) was made in a passing way. It was a case of Section 263 order and the Tribunal held that the issue was debatable.

11. The ld. counsel for the assessee submitted that the provisions of Clause (c) of Section 45(5) are prospective and so cannot be applicable prior to 1-4-2004. Supporting the order of the CIT(A), he submitted that neither the additional compensation was chargeable nor the interest was taxable in the year under consideration as the matter is still sud-judice before the High Court. As regards the interest, he also referred to the decision of Supreme Court in the case of P.Mariapps Gounder (supra) besides the decision of the Supreme Court in the case Ramabai' wherein it is held that interest accrues from year to year and to be assessed accordingly.

12. The parties were heard and record perused. Section 4 of the Act is the charging section and it provides that income-tax shall be charged for any Asst. Year in respect of the total income of the previous year of every person Section 5 provides for the scope of total income and it provides that subject to the provision of this Act the total income of any previous year of a person who is recipient includes all income from whatever sources derived which - (a) is received or deemed to be received in India in such year by or on behalf of such person; (b) accrued or arises or is deemed to accrue or arising to him in India during such year; or 13. On a combined reading of Sections 4 and 5 it is apparent that an income under the Act is chargeable either when it is received or deemed to be received or alternatively when it accrues or arises to him or is deemed to accrue or arising to him. The first is celled & cash system and the second is called a mercantile system. These two principles are well-known and have s marked and subtle difference under the Act. Under the system a record is maintained for actual receipt and actual disbursement, entries being posted when money or money's worth is actually received, collected or disbursed. There is, secondly, a mercantile system in which the entries are posted in the books of accounts on the date of transaction namely, on the date on which the rights accrued or liabilities are incurred irrespective of the date of payment. This has been held by the Supreme Court in the case of Krisrmaswamy Mudaliar 53 ITR 123 at page 129. The system of accounting again came up for consideration before the Supreme Court in the case of indramani 35 ITR 298 wherein it was observed as follows: If is well known that the mercantile system of accounting differs substantially from the cash system of bock keeping. Under the cash system, it is only actual cash receipts and actual cash payments that are recorded as credits and debits; whereas, under the mercantile system, credit entries ate made in respect of amounts due immediately they become legality due and before they are actually received; similarly, the expenditure items for which legal liability has been incurred are immediately debited even before the amounts in question are actually disbursed. Where accounts are kept on mercantile basis, the profits or gains are credited though they are not actually realized, and the entries thus made really show nothing mere than an accrual or arising of the said profits at the material time. The same is the position with regard to debits made.

14. There are various provisions which prescribe as to how an income of the assesses is to be computed under a particular Act or for a particular receipt or payment. Choice is also given to the assessee under Section 145 to adopt either the cash system of accounting or the mercantile system of accounting for his assessment. We are concerned in this case one of the issue with regard to the taxability of capital gain. Originally for capital gain the charge is provided only on accrual basis under Section. 45 of the Act by stating that any profits or gains arising from transfer of a capital asset shall be chargeable is income-tax under the bead "capital gains" and shall be deemed to be income of the previous year in which the transfer took place. This was irrespective of the fact whether the assesses has received the consideration or not. The Finance Act, 1987r however, made a change in the system of taxation of capital gain on Accrual basis by insertion of the Sub-section (5) to Section 45 with regard to the (SIC) compensation received by the assessee pursuant to the order of the court, Tribunal or other authority, by providing that such additional compensation is to be charged under the heed "capital gain" in the previous year in which such compensation or part thereof was received by the assesses.

Therefore, prior to the amendment capital gain tax was chargeable on the basis of accrual and there was no option to the assessee or to the Revenue to make a departure there from, but from Asst. Year 1988-89, the Finance Act, 1987 made a part of the consideration received on transfer of capital asset chargeable on receipt basis if it was on account of enhancement of the compensation by any court, Tribunal or other authority. Here also choice is not given either to the revenue or to the assessee to adopt accrual system of accounting. Section 145, however, gives an option to the assessee to adopt either of the systems but that option is only with regard to the income chargeable under the need "profits end gains of business or profession or income from other sources'". Here in the present case, for assessment of interest income the assessee had exercised the option on accrual basis and Assessing Officer also proceeded on that basis that income from other sources is to be computed as per accrual system of accounting Therefore, the cases referred to before the Tribunal are to be considered in the light of the system of accounting viz. accrual or cash system. Therefore, the cases arising under the head "capital gain prior to the introduction of Sub-section(5) of Section 45 would be of not much help in determining the taxability of enhanced compensation which is made chargeable en receipt basis as against the mercantile system of accounting prior to 1-4-1938. On the contrary, those cases would be decisive of the matter for determining the chargeability of interest income for which the assessee as well as Revenue have proceeded on the basis that it is to be charged on accrual basis.

15. Section 45 provides for the charging of capital gain arising on transfer of a capital asset. As stated above, it provided charge originally under Sub-section (1) of Section 45 to be in the year of transfer. Cases have arisen where the gains of compensation determined at the time of acquisition/transfer on compulsory acquisition were carried in litigation and on which determination the assessments made for the year of transfer required rectification at various stages of determination of the additional compensation. To obviate this difficulty Sub-section (5) was added to Section 45 by the Finance Act, 1987 with effect from 1-4-1988. If read as under:- (5) 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 under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, and the compensation or the consideration for such transfer is enhanced or further enhanced by any court, Tribunal or other authority, the capital gain shall be dealt with in the following manner, namely:- (a) the capital gain computed with reference to the compensation, awarded in the first instance or, as the case may be the consideration determined or approved in the first instance by the Central Government or the Reserve Sank of India shall be chargeable as income under the head "Capital gains" of the previous year in which such compensation or part thereof, or such consideratiors or part thereof, was first received); and (b) the amount fry which the compensation or consideration is entranced 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; 16. Explanatory Notes are appearing in Circular No./475 dated 22-9-1987 in paras 24.5, 24.6 and 24.7 which read as under for bringing out this amendment:- 24.5 Under the existing provisions where capital gains accrue or arise by way of compulsory acquisition of assets, the additional compensation is taken into consideration for determining the capital gain for the year in which the transfer took place. To provide for rectification of assessment of the year in which the capital gain was originally assessed, Section 155(7A) was introduced. The additional compensation is awarded in several stages by different appellate authorities and necessitates rectification of the original assessment at each stage. This causes great difficulty in carrying out the required rectification and in effecting the recovery of additional demand. Another difficulty which arises is in cases where the original transferor dies and the additional compensation is received by his legal heirs. In the falter type of cases, proceedings have to be initiated against the legal heirs. Repeated rectification of assessments on account of enhancement of compensation by different courts often results in mistakes of computation of tax.

24.6 With a. view to removing these difficulties, the Finance Act., 1987 has inserted a new Sub-section (5) in Section 45 to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. The additional compensation will be deemed to fee income in the hands of the recipient even if the actual recipient happens to be a person different from the original transferor by reason of death, etc. For this purpose, the cost of acquisition in the hands of the receiver of the additional compensation will be deemed to be nil. The compensation awarded in the first instance would continue to be chargeable as income under the head "Capital gains" in the previous year in which the transfer look place.

24.7 These amendments will come into force with effect from 1st April, 1988, and writ, accordingly, apply from She assessment year 1988-89 and subsequent years.

17. The provision so inserted, however, did not encompass the full remedy inasmuch as there was no specific provision to provide for the rectification of the assessment downwards if the compensation is reduced except by the provisions of Section 154. The Finance Act, 2003 inserted Sub-section (16) in Section 155 to provide that where such amount of compensation or consideration is subsequently reduced by any Court, Tribunal or other authority, capital gain of that year in which the compensation or consideration received was taxed shall be recomputed accordingly and the Assessing Officer shall amend the order of assessment to revise the computation of said capital gain of that year by taking the compensation or consideration so reduced by the Tribunal or authority to be the full value of the consideration. This amendment is made effective from 1st April, 2004. Clause (c) in Sub-section (5) as inserted by the Finance Act, 2003 reads as under:- (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.

18. Sub-section (16) as also inserted by Finance Act, 2003 in Section 155 reads as under:- (16) Where in the assessment for any year, a capital gain arising from the transfer of s capital asset, being a transfer by way of compulsory acquisition under any law, or a transfer, the consideration for which was determined or approved by the Central Government or the Reserve Bank of India, is computed by taking the compensation or consideration as referred to in Clause (9) or, as the case may be, the compensation or consideration enhanced or further enhanced as referred to in Clause (b) of Sub-section (5) of Section 45 to be the fall value of consideration deemed to be received or accruing as a result of the transfer of the asset and subsequently such compensation or consideration is reduced by any court, Tribunal or oilier authority, the Assessing Officer shall amend the order of assessment so as to compute the capital gain by taking the compensation or consideration as so reduced by the court, Tribunal or any other authority to be the full value of consideration; and the provisions of Section 154 shall, so far as may be, apply thereto, and the period of four years shall be reckoned from the end of the previous year in which the order reducing the compensation was passed by the court, Tribunal or other authority.

19. On a combined reading of these provisions, if is apparent that whereas Sub-section (1) Section 45 deems the income arising on transfer of a capital asset to be assessed to be charged in the year in which the transfer has taken place; Sub-section(5) provides far the charge on receipt of compensation in the first instance, as income of the year in which the said compensation is first received or the additional compensation in the year in which further enhanced compensation was received. An enabling provision was also made that if compensation is subsequently reduced, the assessment of additional compensation is to be reduced in the year of reduction. In this way there has been a shift in the process of assessment of compensation from accrual to receipt and, therefore, the cases which have been decided on the basis that additional compensation or compensation does not accrue to the assessee unit a final decision thereon is taken by the court, Tribunal or any authority are of no help.

20. The case of Hindustan Housing and Land Development Trust (supra) was a case of assessment of capital gain on accrual basis Under Section 45(1) of the Act. in this case, the Land Acquisition Officer awarded a sum of Rs. 24,97,249/- as compensation and on appeal preferred by the assessee, the arbitrator made an award on July 29, 1955 fixing the compensation at Rs. 30,10,873/- and directed the payment of interest at 5% from the date of acquisition. The State Government deposited the additional amount of Rs. 7,36,651/- in the court and the assesses was permitted to withdraw the same on May 9m, 1956 only on furnishing of a security bond for refunding the amount in the even of appeal being allowed. The said receipt of Rs. 7,24,915/- find balance having already been taxed was the subject matter of dispute which according to the assessee was not chargeable to tax because it was subject to litigation and according to the revenue it was chargeable to tax because it became payable pursuant to arbitrator's award. The Supreme Court held that the entire amount of enhanced compensation was in dispute in appeal filed by the State Government find the dispute was recorded by the court, as real and substantial because the respondent was not permitted to withdraw the amount by the State Government without furnishing bond for refunding the amount in the event of appeal being allowed. There was thus no absolute right to receive the amount at that stage and the question before Their Lordships was whether the said amounts can be said to have accrued to the assessee as income during the previous year ended on 31st March, 1956. The question of assessability on receipt basis was not an issue. In the present case, on the contrary, the additional compensation is awarded by the Addt. District Judge, Karnal and an appeal there-against was, though admitted by the High Court but as aforesaid without staying the execution of the award. In other words, the operations of award of the Addt. District Judge, Karnal has not been stayed, it was, therefore, a right of the assessee even otherwise to receive the compensation as per the said award of the Addl. District Judge.

21. Similarly the case of A.B.V. Gowda (deceased) 157 ITR 697 before the Karnataka High Court is a case prior to insertion of Sub-section (5) of Section 45 and the entire discussion was on the provisions- of Section 5 (1)(b) with regard to accrual of income and, therefore, this case is of no help to the assessee. Again, the decision of Bombay High Court in the case of Abdul Mannan Shah Mohammed is a case solely resting on the ratio of the decision of Supreme Court in the case of Hindustan Housing end Land Development Trust (supra) and there is no discussion with regard to the provisions of Section 45(5) of the Act.

These cases, therefore, for similar reasons are of no help to the assesses.

22. Reliance by the assessee in the case of Smt. Gulab Sundri Bapna (supra) also does not help because in the said case compensation received by the assessee pertained to compulsory acquisition of property in tenancy right and not the ownership right and the Tribunal held that compensation in respect of tenancy right is not liable to capital gains tax Under Section 55(2) since Section 55(2)(a) was substituted by Finance Act, 1994 with effect from 1-4-1995 including the tenancy right infer alia within the definition of "capital asset" having cost of compensation as Nil.

23. It may fee mentioned that Bapna's case was rendered on 13th September, 2000 and at that time Clause (c) was not there in existence which was inserted by Finance Act, 2003. Though the said clause is stated to be applicable from 1-4-2004 and might give an impression that It is applicable from 2004-05 and the cases prior to that would not fee covered by this clause. In my opinion, however, the insertion of Clause (B) is only an enabling provision to reduce the rigors of the provision up or am assessee for downward rectification of the assessment in case of reduction of compensation. This is only an indication of intention of the Legislature that irrespective of the finality of the litigation the compensation is chargeable in the year of receipt and if per chance the said additional compensation is reduced in further litigation the Legislature has provided for a relief to be granted to the assessee.

24. The decision in the case of Lala Ram Dagar (supra) which has merely followed the aforesaid Division Bench decision in the case of Smt.

Gulab Sundri Bapna (supra) and, therefore, nothing turns on that also.

25. In the case of Jehangir P. Vazifdar 42 ITD 67, half of the additional compensation only was received by the assessee and that too subject to furnishing of security. According to the Revenue not only the amount actually received but the full amount of compensation was taxable in the year when the enhanced compensation was awarded, whereas the assessee's claim was that entire amount became vested only when the final order was passed by the High Court. If may be slated that in this case, the operation of award was stayed by interim stay of execution of award decree was granted by the High Court subject to the appellant depositing 50% of decreed amount within six weeks thereof, in this case, therefore, the distinguishing feature is that the amount was allowed to be withdrawn subject to furnishing of bank guarantee and the execution of the sward Was stayed by the High Court and only a part of the amount awarded as compensation was received by the assessee. On these facts, the Tribunal held that nothing accrued to the assesses and the receipt of 50% could not be said to be "unclouded and un-shadowed".

In the present case, however, the award of the Add. District Judge was not stayed by the High Court and the amount was received by the assesses pursuant to the said award of the Additional District Judge.

26. In the judgment of Karnataka High Court in the case of Chief Commissioner of Income-tax v. Smt. Shantavva 266 ITR 67 though the discussion was with regard to the provisions of Section 45(5)(b) but the matter could not have been examined with reference to later introduction of Clause (c) in Section 45(5) of the Act. Further, in that decision, heavy reliance was placed on the decision of Supreme Court in the case of Hindustan Housing wherein the question was only for the accrual of income to the assesses and not to the receipt which as per the legislative amendment made chargeable to tax as capital gain en receipt basis.

27. decision of the Supreme Court in the case of Polyflex (India) Pvt.

Ltd. v. CIT 257 ITR 343, may also be referred to here. This is a ease arising Under Section 41 of the I.T. Act. Here also, Section 41(1) provides for two situations for charging the amount where an allowance or deduction has been made in the assessment of the assesses for any year in respect of a loss, expenditure or trading liability incurred by the assessee-i) where the assesses obtained a sum; or ii) he obtains some benefits in respect of a trading liability by way of remission or cessation of liability. There were cases where the courts have been taking the view that there is no remission or cessation or liability if the matter is pending in litigation and, therefore. obtaining of amount or the benefit in respect of such trading liability was not taxable without making any distinction. The Supreme Court considered this distinction and held that whereas in the case of obtaining the amount in respect of such trading liability the sum is chargeable in the year of receipt irrespective of the fact that litigation for the remission thereof is pending; but where the amount has not been received the court held that there was no remission or cessation of liability so long as the matter was pending in litigation and until the matter is finally settled. The following passage from the Supreme Court's order would be demonstrative in this respect :- The High Court then held that the liability of the assessee as regards the payment of excise duty cannot be said to have ceased because the judgment of the single judge of the High Court did not attain finality.

Though the conclusion of the High Court which was affirmed by this Court cannot be legally faulted, we cannot, however, approve of the following analysis of the section occurring in the judgment (page 581 of (1976) 105 ITR: "in short, what this provision means is that if an assessee has been allowed a deduction in the computation of its total income of any liability on account of loss or expenditure and if, subsequently, the liability of the assesses on account of such loss or expenditure is remitted or ceases, that part of the liability which is remitted or ceases shall be treated to be the income of the assesses of the previous year in which such remission or cessation takes place". The High Court proceeded on the assumption that the words "remission and cessation thereof could be transposed into the first clause which speaks of obtaining have merely said that the trading liability provided for in the books accounts and for which deduction was allowed earlier did not cease in view of the pendency of the dispute. Instead, the High Court referred to the expression "loss or expenditure" occurring in the first limb. As the assessee-company did not obtain any amount by way of refund on excise duty account, the first clause of Section 41(1) will not be applicable; it is only the latter part that applies in which case the remission or cessation of liability would assume importance. However, in the present case, as discussed above, it is the first clause that squarely applies but not the second one.

Whether there was cessation or remission of liability would be an irrelevant line of enquiry here. The correct way of understanding Section 41(1) would be to read the letter clause - "some benefit in respect of such trading liability by way of remission or cessation thereof as a distinct and self-contained prevision. To read the phrase "by way of remission or cessation thereof" as governing the previous clause as well, i.e. "obtained any amount in respect of such loss or expenditure", would be doing violence to the language and structure of the provision. That apart the operation of the provision which is designed to have widest amplitude will get constricted and truncated by reason of such Interpretation.

28. Though this decision is not directly on the issue of taxability on cash system or accrual system, but it demonstrates the ambit of the concept of chargeability to tax on receipt basis and the benefit obtained because of cessation or remission of liability wherein the concept of pendency of litigation was considered to be relevant, in the present case also, the assessee had received the additional compensation in the year under consideration pursuant to thee judgment of the Addl. District Judge., Karnal and, therefore, it would be chargeable to tax in the year of receipt as per the provisions of Section 45(5) of the Act irrespective of the fact that the additional/ enhanced compensation is subject matter of further litigation.

29. In view of the aforesaid, in my opinion in so far as the receipt of additional compensation by the assessee is concerned it has to be charged on receipt basis and the Assessing Officer, in my opinion, was justified in charging the same and the CIT(A) was not right in deleting the same by relying upon the decision of Supreme Court in the case of Hindustan Housing and Land Development Trust (supra) and by stating that no right has accrued to the assessee over the said additional compensation ignoring the provisions of the Act Under Section 45(5) which has shifted the charge of capital gain tax on receipt basis in so far as the additional compensation received is concerned.

30. As regards the second question, the facts are little different.

There is no specific provision for making assessment of interest on cash basis. The assessee had been given a right to adopt the system of accounting by Section 145. Undisputedly that system adopted by the assessee is accrual system of accounting. Since the award of the Addl.

District Judge, Karnal was subject matter of appeal to the High Court, there was no accrual thereof and consequently interest would also net accrue to the assesses. In view of decision of the Supreme Court in the cases of Smt Rams Bai (supra) and P. Mariappa Gounder (Supra). The direction sought on the basis of the decision of Supreme Court in the case of Mrs. Khorshed Shapoor Chennai (supra) is misplaced. There the question was the assessability of the value of compensation receivable by the assessee which was to be charged as value of the estate passing on death. The court held that where the lands are compulsorily acquired under Land Acquisition Act there are no two rights, one a fight to receive the compensation and the other a right to receive extra or further compensation. The claimant has only one right which is to receive compensation of the land on the market value on the date of relevant Notification and it is this right which is- quantified by the Collector Under Section 11 and fey the Civil Court Under Section 26 of the Act The collector's sward Under Section 11 is nothing more then an offer of compensation made fey the government to the claimant whose property is acquired. If the offer is acquiesced by the total acceptance of the right of compensation will not survive but if the offer is not accepted under protest and a reference is sought by the claimant Under Section 18 the right to receive compensation must be regarded as having survived and kept alive which the claimant prosecutes in civil court. It is not correct to say that no sooner had the collector made the first award Under Section 11 than the right to compensator is destroyed or ceases to exist or is merged in the award or what is left after the award with the claimant is a mere right to litigate the correctness of the award. The claimant can litigate the correctness of the award because his right to compensation is not fully redeemed but remsins alive, which he prosecutes in the civil court.

This, however, does not mean that the valuation of this right done by the civil court subsequently would be its valuation as age the relevant date for the purpose of either the ED. Act or the W.T. Act. it is the duty of the Assessing authority under either of those enactments to evaluate the property (the right to receive compensation at market value on the date of the relevant notification) as on the relevant date (i.e. the date of death under the E.D. Act or the valuation date under the W.T. Act. No such situation is appearing in this case for estimating the right of compensation and, therefore, reliance on the decision of Supreme Court in the case of Mrs. Khorshed Shapoor Chenai (supra) is misplaced and is of no help to the Revenue. In my opinion, therefore, the interest though would be chargeable on year to year basis but only when the right disputed by the parties is finally settled by the court. Tribunal or any authority and since in this case the matter is pending in the High Court in the relevant year no right to receive compensation or to interest accrued to the assessee and consequently, no assessment can be made in the year under consideration until the matter is finally settled by the court.

Inadvertently the question arising for consideration of the third Member on a difference of opinion for the A.Y. 1994-95 was omitted to be referred. The following question is, therefore, being referred to the Hon'ble President for the opinion of the Third Member relating to the A.Y. 1994-95.

Whether on the facts and in the circumstances of the case, the interest received on disputed enhanced compensation which is subject matter of litigation in appeals before appellate forum can be taxed without attaining finality.

As there is a difference of opinion between the two Members, the following questions are referred to the Hon'ble President for the opinion of the Third Member.

Whether on the facts and in the circumstances of the case, the enhanced compensation received by the assessee was taxable in the hands of the assessee as income despite the fact that the quantum of enhanced compensation awarded is subject - matter of proceedings before the appellate forum by the State Government as well as by the assessee and the quantum of enhanced compensation has not attained finality and the assessee has received a part of the enhanced compensation and interest on enhanced compensation pursuant to interim orders passed by the appellate Court? 1. These two appeals have been filed by the revenue on 14.12.2000 against the orders of the learned CIT(Appeals), Shimla dated 18.9.2000 in the case of the assessee in relation to assessment orders Under Section 143(3) for assessment years 1994-95 and 1995-96.

2. These two appeals were heard by us on 24.6.2004 and thereafter on account of difference of opinion arisen between us the matter was referred to Hon'ble Third Member by way of reference Under Section 255(4) signed by us on 30.11.2004. The Hon'ble Third Member has given his opinion on the reference made to him by his order dated 10.3.2005.

In pursuance to the order of the Hon'ble Third Member, we proceed to decide these two appeals in the following manner: 3. The appeal filed by the revenue in ITA No. 4756(Del)/2000 for assessment year 1994-95 fails and is dismissed accordingly.

4. Revenue's appeal in ITA No. 4757(Del)/2000 for assessment year 1995-96 is allowed and the assessment of capital gain amounting to Rs. 13,40,123/- made by the Assessing Officer is restored.

1. These to appeals have been filed by the Revenue on 14th December, 2000 against the orders of the Ld. CIT(A), Shimla dated 18^th September, 2000 in the case of the assessee in relation to assessment orders Under Section 143(3) for assessment years 1994r95 and 1995-96.

2. In these appeals the Revenue has disputed the orders of file Ld.

CIT(A) deleting the addition made by the AO on account of enhanced compensation as well as on account of interest on enhanced compensation. Facts of the case leading to these two appeals briefly are that the assessee's land was acquired by Land Acquisition Officer, Panchkula vide award dated 16th February, 1989. Thereafter, an enhanced compensation was ordered by District Sessions Judge on 6th May, 1993.

Against that order both the assessee as well as Land Acquisition Officer filed an appeal before Punjab and Haryana High Court. Hon'ble High Court by their order dated 18th February, 1994 gave directions to the executing court to release the amount of enhanced compensation to the assessee against adequate security. The assessee received enhanced compensation along with interest on different dates from 10th June, 1994 to 28th November, 1995 as per the particulars mentioned in the impugned orders. Thereafter, at the request of the assessee the Land Acquisition Officer issued TDS Certificate only on 22nd November, 1996.

The assessee filed voluntary returns of income for financial year 1996-97 and 1997-98 relating to assessment years 1997-98 and 98-99 for assessment year 1994-95 and 1995-96 . The AO issued notice Under Section 148 on 11th December, 1996. The assessee declared total income of Rs. 56,026/- in relation to assessment year 1994-95 and Rs. 41,000/-in relation to assessment year 1995-96 in the return filed on 12th October, 1998 in response to notice Under Section 148. In these returns the assessee repeated the income as declared during the original assessment proceedings. The assessee argued that had received enhanced compensation along with interest amounting to Rs. 20,67,441 on 21st November, 1996 and, therefore, the assessee had shown the entire interest income received on enhanced compensation on cash/receipt basis in the return of income filed for assessment year 1997-98. The Ld. AO found, that the assessee had neither received the amount of enhanced compensation nor the amount of interest on such enhanced. compensation during the financial year 1996-97 relevant to assessment year 1997-98.

The entire payments had been received by the assessee prior to the commencement of the financial year 1996-97. Hence, the assessee was not justified in declaring any income in this behalf in relation to assessment year 1997-98. According to the Ld. AO, the provisions of Section 45(5)(b) were very clear and irrespective of the method of accounting followed by the assessee. The amount of enhanced compensation was assessable only in the previous year in which the enhanced compensation was received by the assessee. The assessee had received a total sum of Rs. 28,82,660/- during the financial year 1994-95 relevant to assessment year 1995-96. That amount included interest on enhanced Compensation, computed at Rs. 9,42,537/-. The Ld.

AO. therefore,, held that the assessee was liable to capital gains tax in relation to the amount of enhanced compensation of Rs. 13,40,123/- under the provisions of Section 45(5)(b).

3. The Ld. AO further found that total amount of interest received by the assesses on enhanced compensation aggregated to Rs. 20,67,441/-.

That interest was paid for the period 16th February, 1989 to 19th January, 1994. The AO attributed the amount of interest to various assessment years as per working given at page 5 of the assessment order for assessment year 1995-96. He attributed a sum of Rs. 3,68,384/- to the period 1.4.93 to 19th January, 1994 and assessed the sum as assessee's income for 1994-95.

4. During the course of hearing before the Ld. CIT(A) the assessee disputed the assessment of enhanced compensation and interest on enhanced compensation as enumerated in The foregoing paragraphs. The assessee argued that the payment had been made to the assessee after furnishing of adequate Security and the amount of enhanced compensation was in dispute before the Hon'ble Punjab and Haryana High Court during the relevant previous years. The assessee placed reliance on the judgment of the Hon'ble Supreme Court in the case of CIT v. Hindustan Housing and Land Development Trust Ltd. 161 ITR 524 (SC). The Ld.

CIT(A) held that the quantum of enhanced compensation receivable was in dispute before the higher court. In the event of the amount of compensation being reduced the interest was also likely to be reduced.

She, therefore, held that only interest on undisputed Amount cold be brought" to tax in the assessment year 1994-95. She directed the AO accordingly. For assessment ear 1995-96 the Id. CIT(A) deleted the assessment of the sum of Rs. 13,40,1.23/- on the ground that this amount; of enhanced compensation was in dispute. Aggrieved by these orders the Revenue is in appeal before us.

5. During the course of hearing before us the Ld. DR argued that the Ld. CIT(A) erred in applying the judgment to Hon'ble Supreme Court in the case of Hindustan Housing and Land Development Trust Ltd (Supra); because in the case of the assessee before us the payment had been made to the assessee. He strongly relied upon the judgment of the Hon'ble Supreme Court in the case of Rama Bai v. CIT 181 ITR 400 (SC). The Ld.

DR also referred to page 7 of the assessment order for assessment year 1996-97 and pointed out that the assessee had agreed that the amount of enhanced compensation had been wrongly shown in the assessment year 1997-98 and had stated that the assessee intended to file a revised return. The assessee requested that the refund arising to the assessee on filing of the revised return for assessment year 1997-98 may be adjusted for the tax payment to be credited for assessment year 1995-96 which request had been accepted by the AO on the ground that the same income could not be assessed twice. The ld. DR, therefore, argued that as far as assessment year 1995-96 was concerned; the sum of Rs. 13,40,123/- had been assessed on agreed basis and, therefore, the Ld.

CIT(A) erred in deleting the same.

6. The Ld. Authorized Representative of the assessee argued that in the case of the assessee the amount of enhanced compensation had been disputed by the State Government and their appeal was pending before the Hon'ble High Court. On such facts the judgment of Hon'ble Supreme Court in the case of Hindustan Housing Development Trust squarely applied. The Ld. AR of the assessee also referred to CBDT Circular No.495 dated 22nd September, 1987 being explanatory notice to the Finance Act, 1987. The Ld. AR referred to the following paragraphs of the aforesaid CBDT Circular:- 24.5. Under the existing provisions; where capital gains accrue or arise by way of compulsory acquisition of assets, the additional compensation is taken into consideration for determining the capital gain for the year in which the transfer took place. To provide for rectification of assessment of the year in which the capital gain was originally assessed Section 155(7A) was in tax reduced. The additional compensation is awarded: in several stages by different appellate authorities and necessitates rectification of the original assessment at each stage. This causes great difficulty in carrying out the required notification and in effecting the recovery of additional demand. Another difficulty which arises is in cases where the original transferor dies and the additional compensation is, received by his legal heirs. In the latter type of cases, proceedings have to he initiated against the legal heirs. Repeated rectification of assessments on account of enhancement of compensation by different Courts often results? in mistakes of computation of tax.

24.6. With a view to removing the difficulties, the Finance Act.

1987 has inserted a new Sub-section (5) in Section 45 to provide for taxation of additional compensation in the year of receipt instead of in the year of transfer of the capital asset. The additional compensation will be deemed to be income in the hands of the recipient even if the actual recipient happens to be a person different from the original transferor by reason of death, etc. For this purpose the cost of acquisition in the hands of the receiver of the additional compensation will be deemed to be nil. The compensation awarded in the first instance would continue to be chargeable as income under the head "Capital gains" in the previous year in which the transfer took place.

7. According to the Ld. AR. these paragraphs suggested that provisions of Section 45(5) had been introduced so as to exclude the requirement of rectification. Hence, the provisions of Section 45(5) applied only when the amount of additional compensation had become final.

8. We have carefully considered the rival submissions. As far as the Revenue's appeal for assessment year 1995-96 is concerned, the Ld. DR has rightly pointed out to the remarks of the Ld. AO at page 7 of the assessment order that it follows that the assessee agreed to assessment of sum of Rs. 13,40,123/- as income from capital gains Under Section 45(5)b) for assessment year 3995-96 subject to the assessee being allowed to revise the return for assessment year 1997-98 and the refund arising on such revised return being Adjusted against the tax payment for assessment year 1995-96. It appears that this aspect of the matter escaped the attention of the Ld. CIT(A). Even otherwise we find that after enactment of the provisions of Section 45(5) the Judgment in the case of Hindustan Housing Development Trust Ltd. (Supra) cannot be applied. We arc supported in this view by the order of the Tribunal 9. As far as assessment year 1994-95 is concerned, the Ld. DR has rightly pointed out that in view of the judgment of Hon'ble Supreme Court in the case of Rama Bai v. CIT 181 ITR 400 (SC), the amount of interest on enhanced compensation has to be assessed on accrual basis for each year to which it pertains. At the same time, there is merit in the contention of the Ld. AR of the assessee that the quantum of additional compensation awarded by the District Sessions Judge was in dispute before Hon'ble High Court in the appeals filed by both the assessee and the State Government. In our opinion, the answer to this problem is provided by the judgment of Hon'ble Supreme. Court in the case of Mrs. Khorshed Shapoor Chenai v. Asstt. Controller of Estate Duty, AP 122 ITR 21 (SC). In: that judgment given in the context of Estate Duty Hon'ble Supreme Court held that where the amount of compensation was not final the assessee's right to receive compensation will have to be estimated value having regard to the peculiar nature of the property, its marketability and the surrounding circumstances including the risk or hazard of litigation looming large at the relevant date. In that judgment Hon'ble Supreme Court also observed that while the estimated value cannot be fully the amount awarded by the Collector, it can never be equal to the tall claim made by the claimant nor equal to the claim actually awarded by the Civil Court in as much as the risk or hazard of litigation would be a detracting factor. In our view the guidelines laid down in the aforesaid judgment should fairly be applied for assessment of amount of interest on additional compensation in the cases where the amount of enhanced compensation itself is in dispute. We, therefore, restore this issue to the file of the Ld. AO for determination of interest on enhanced compensation in accordance with the guidelines laid down by Hon'ble Supreme Court in the case of Mrs. Khorshed Shapoor Chenai v. Asstt.

Controller of Estate Duty, AP 10. In the result, while the Revenues appeal for assessment year 1994-95 is allowed, for statistical purposes Revenue's appeal for assessment year 1995-96 shall be treated as partly allowed.

11. I have gone through the order proposed by my Id. Brother. I an unable to persuade myself to agree with the conclusions arrived at by my ld.brother. I would however like to highlight the fact that the assessee in the present case follows a mercantile system of accounting.

The questions for consideration on the facts of the present case are; a) Whether the enhanced compensation received by the assessee was taxable in the hands of the assessee as income despite the fact that the quantum of enhanced compensation awarded is subject matter of proceedings before the appellate forum by the State Government as well as by the assessee and the quantum of enhanced compensation has not attained finality and the assessee has received a part of the enhanced compensation and interest on enhanced compensation pursuant to interim orders passed by the appellate Court? b) Whether the fact that the assessee has offered the income for taxation though in a different assessment year would be sufficient to bring the amount to tax? 12. As far as question(b) is concerned, the law is well settled that an assessee is entitled to resile from a position erroneously taken when filing the return, An admission or acquiescence cannot be the foundation for an assessment, and it is always open to an assesses to demonstrate and satisfy the Assessing Officer that a particular income was not taxable in his hands and that it was returned under an erroneous impression of law." The following decided cases are on the point.

13. Article 256 of the Constitution mandates that no tax can be levied and collected except by authority of law. It would therefore be necessary that there must be a legal liability to pay tax in accordance with law. As Whether there was a liability on the part of the assessee to pay tax on the receipt in question would therefore depend on the answer to question (a), above.

14. The Honourable Karnataka High Court had an occasion to examine a similar question in the case of Chief Commissioner Of Income-tax and Anr. v. Smt. Shantavva. 2004-(267)-ITR -0067 -KAR. The following three questions of law were considered by the Honorable High Court: (i) Whether the Tribunal was correct in holding that the amount received by the assessee does not fall within the ambit of Section 45(5)(b) of the Act (ii) Whether the Tribunal was correct in applying the principle laid down in CIT v. A. B. V. Gowda in spite of the (iii) Whether the Tribunal was correct in holding that the words 'received' and 'deemed' used in Section 45(5)(b) will not apply to receipt of amounts in pursuance of the interim orders After making reference to the provisions of Section 45(5)(b) the Honourable Court has held as follows: 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" contemplated under Section 45(5)(b), but only an interim payment received subject to final decision. It will attract Section 45(5)(b) only when the final decision is rendered. We are supported in the said view by a decision of the Supreme Court and a decision of this Court. In CIT v. Hindustan Housing and Land Development Trust Ltd. , the Supreme Court held : In the present case, although the award was made by the arbitrator on July 29, 1955, enhancing the amount of compensation payable to the assessee, the entire amount was in dispute in the appeal filed by the State Government. Indeed, the dispute was regarded by the court as real and substantial, because the assessee was not permitted to withdraw the sum of Rs. 7,36,691 deposited by the State Government on April 25, 1956, without furnishing a security bond for refunding the amount in the event of the appeal being allowed. There was no absolute right to receive the amount at that stage. If the appeal was allowed in its entirety, the right to payment of the enhanced compensation would have fallen altogether.

In CIT v. A.B.V. Gowda , this Court held as follows : A mere claim to income without an enforceable right thereto cannot, therefore, be regarded as an accrued income for the purpose of the Income-tax Act.

The above principles are squarely applicable and Section 45(5)(b) does not change the position in any manner. Section 45(5)(b) shifts the date of "income" from the date of acquisition and from the date of determination of compensation by a court/Tribunal/authority, to the date of receipt of the compensation in pursuance of an enhancement by the court/Tribunal/authority. Two conditions have to be satisfied for applicability of Section 45(5)(b) : (i) There should be enhancement of compensation by a court/Tribunal/authority.

(ii) The assessee should receive payment of such enhanced compensation.

When the award of the reference court enhancing the compensation is stayed and an interim payment is ordered as condition of such stay or otherwise and is paid, pending final decision, neither of the two conditions are satisfied. The amount received in pursuance of an interim order by furnishing security, not being an amount payable in pursuance of an enforceable order or decree increasing the compensation, cannot be considered as receipt of enhanced compensation.

Therefore all the three questions have to be answered against the Revenue. We find no error in the order of the Tribunal and the appeal is dismissed as having no merit.

15. Besides the above, identical views of the Tribunals of Mumbai and Jaipur Benches in the context of the provisions of Section 45(5) of the Act had come up for consideration before the Honourable Bombay High Court and Honourable Rajasthan High Court respectively in the case of CIT v. Abdul Mannna Shah Mohammed 248 ITR 614 (Bom) and CIT v. Jeeva & Sons 161 CTR 242 (Raj) and the Honorable High Courts have agreed with the view of the Tribunal holding that no substantial question of law arises. The Mumbai Bench, Delhi Bench as well as the Pune Bench (which was authored by me) of the Tribunal have also taken identical views in the context of Section 45(5) of the Act in the following cases:Jehangir P. Vazifdar v. ITO 16. My learned brother however in taking a contrary view has followed the decision of are Delhi Bench of the Tribunal in the case of ACIT v.Trilok Singh in ITA No. 708 to 71l/Del/01 dated 18.6.2004. I have perused the said order of the Tribunal and I find that the view expressed by the Tribunal is contrary to the preponderance of judicial opinion on the issue expressed by the decisions of the Tribunal as well as the decisions of the Honourable High Courts. There is however a decision of the Honourable A.P. High Court in the case of CIT v. M.Saroini Devi 116 Taxman 613 (AP) in which there appears to be a contrary view expressed. I shall therefore refer to the said decision.

The facts in the aforesaid case were that the Lands belonging to the assessee were acquired by the Government in the year 1966 and compensation was awarded by the LAO. On reference, compensation at higher rate was awarded. The assessee was held to be entitled to an interest of Rs. 43,642 for the period 18-5-1966 to 9-12-1975. The State Government went in appeal against the enhancement made in the appeal.

The appeal before the Supreme Court was pending. The ITO held that the entire amount of interest on enhanced compensation should be brought to tax for the assessment year 1976-77. The order was challenged by way of appeal. The AAC held that as the matter had not become final and an appeal was before the Supreme Court, the amount of interest received by the assessee could not be taxed. He relied on a judgment of this Court in CIT v. Smt. Sankari Manickyamma . On further appeal before the Tribunal, the same view was upheld relying upon the same judgment. Thereafter at the instance of the revenue, the following question was framed and referred to the Court: Whether, on the facts and in the circumstances of the case, the interest on compensation for the assessment year for which the interest should be brought to tax is the one in which it was awarded or the year in which issue of quantum of compensation becomes final The question, which needed to be answered, is 'whether the Assessing Officer has to wait tiil the final disposal by the final Court in an acquisition matter before the interest accrued is taxed ?' Therefore, we are refraining the question in the above-mentioned phraseology and we find that the question is already answered by the Supreme Court in Rama Bai v. CIT . The fact that the compensation was enhanced by the High Court in an appeal and the interest accruing to it was received by the assessee makes him liable to pay the tax. However, it will be spread over the period for which it accrued to him, in accordance with the Supreme Court judgment. In any case, if the judgment enhancing the compensation in favour of the assessee is reversed by the Supreme Court, then the assessee, even after payment of the tax on the accrued interest, would not be remediless. He can always seek the refund of the tax so paid, by making appropriate application for rectification of the assessment. The Tribunal relied on judgment in Smt. Sankari Manickyamma's case (supra) that obviously stands reversed in view of the judgment of the Supreme Court judgment in Rama Bai's case (supra). For all these reasons, we answer the question in favour of the revenue as indicated above and against the assessee.

17. As can be seen from the facts in the aforesaid case, the assessment year was 1976-77 prior to the introduction of Section 45(5) in the IT Act. The provisions of Section 45(5) of the Act as introduced by the Finance Act, 1987 came into effect only from 1-4-88. The decision of the Honourable A.P. High Court therefore runs contrary to the decision of the Honourable Supreme Court in the case of Hindusthan Housing and Land Development Trust Ltd. 161 ITR 524 (SC).

18. I would therefore, respectfully following the decision of the Honourable Karnataka High Court as well as the Honourable Bombay High Court and Rajasthan High Court and the view expressed by the various Benches of the Tribunal, hold that the enhanced compensation could not be brought to tax in the years under consideration as the dispute on the quantum of enhanced compensation had not attained finality. The interest on enhanced compensation would also for the very same reason not be liable to tax. The CIT(A) in my view had rightly allowed the appeal of the Assessee and directed the addition made by the AO to be deleted. I would therefore dismiss both the appeals by the Revenue. The appeals by the revenue are therefore dismissed.