Delhi High Court
Bharat Bhushan (Huf) vs Addl. Cit on 4 November, 2003
Equivalent citations: (2004)91TTJ(DEL)82
ORDER
K.C. Singral, J.M.:
This appeal is directed against the order of CIT, dated 4-1-2002, under section 263 pertaining to. Assessment Year 1993-94., The issue arising out of this appeal relates to the validity of the jurisdiction assumed by the CIT.
2. Brief facts of the case giving rise to this appeal are these : Original return of income was filed on 31-3-1996 declaring income of Rs. 2,66,008 which consisted of business income nil, property income at Rs. 8,356 and income from other sources at Rs. 2,62,652, agricultural income at Rs. 2,000. The assessed by way of annexures annexed along with the return, stated that the assessed’s alleged land situated at village Dasna and Sadarpur were subject to acquisition. The said amounts were received as under:
Date of deposit Amount deposited in the court Compensation amount Interest amount 8-6-1992 15,28,945 13,96,567 1,32,378 20-8-1992 4,95,503
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4,95,503 19-1-1993 8,77,082 5,64,115 3,12,849 29,01,531 19,60,682 9,40,849 The said amounts were not offered for taxation stating that the acquisition proceedings were challenged before different courts. It was contended that, if the acquisition proceedings were held illegal, the entire receipts will have to be returned by the assessed. The assessed claimed that at the time of filing of return, the compensation as well as interest was nothing but liability of the assessed and no part of it was income. The same was processed under section 143(l)(a) on 29-3-1996.
3. Proceedings under section 148 were initiated and notice under section 148 issued on 3-4-1996 since the assessed failed to offer compensation as well as interest received on it for taxation. A revised return was filed in response to notice under section 148 on 5-7-1996 at the same income as disclosed in the original return. Subsequently, assessment proceedings were initiated. Assessment order under section 147 read with section 143(3) was passed on 27-3-1998 wherein the interest on compensation amounting to Rs. 9,40,849 was added as income as per the directions under section 144A.
4. The matter was carried in appeal and the following facts were brought to the notice of Commissioner (Appeals)
(i) The lands of assessed were compulsorily acquired by the State Government by issuing notifications under sections 4 and 6 of Land Acquisition Act (hereinafter referred to as LAA), dated 16-8-1988 and 3-10-1988, respectively. A notice tinder section 9(l) of LAA was published on 9th/10-12-1988 and the possession under section 17 was taken on 14-12-1988.
(ii) The order of the Collector under section 17(l) was stayed on 23-12-1988 by Hon’ble Allahabad High Court.
(iii) During the pendency of the writ petition, the Collector made an award dated 7-12-1990 under section 11 of LAA which was also challenged by the assessed by another writ petn. No. 10931 of 1991 in the Allahabad High Court. An interim order dated 24-4-1991 was issued prohibiting construction on the said land.
(iv) A civil suit No. 480/1991 was also filed by the assessed and under the orders of the court, the Amin surveyed the lands and reported to the effect that no developmental or constructional activities were being carried thereon and thereafter, the civil suit was withdrawn.
(v) The interim order dated 23-12-1988 was also vacated by the High Court vide order dated 10-5-1993. The assessed moved a review petition against the aforesaid order which was still pending.
(vi) The second writ petn. No. 10931 of 1991 was also dismissed similarly on 16-12-1993 and the interim order dated 24-4-1091 was also vacated.
(vii) A Special Leave Petition was also filed before the Supreme Court but that was dismissed on the ground that the assessed should have moved the High Court for a review. As a result thereof a review petition was filed before the High Court but the same was rejected. Thereafter, the assessed again moved an SLP before the Apex Court in October, 1995, but this was also dismissed on 28-11-1997.
(viii) At the time of hearing before the Commissioner (Appeals) only review petition was pending before the Allahabad High Court in writ petn. No. 25101 of 1988.
On the basis of these facts, it was argued that the possession taken by the Collector under section 17 of LAA was outside the scope of such section since the possession of the land was taken before the expiry of 15 days while, as per the provisions of that section, such possession could be taken only after the expiry of 15 days from the publication of notice under section 9. Further, this section provided that 80 per cent of the estimated compensation should be paid on or before taking the possession. Since no such payment was made, the possession taken by the Collector was unauthorised. Reliance was placed on the Supreme Court judgment in the case of Jetmull Bhoj Raj, v. State of Bihar . Secondly, it was contended that the stay order dated 12-3-1988 issued by the High Court was still pending at the end of the financial year 1992-93 relevant to assessment year 1993-94 and: therefore, the land had not vested in the Government throughout the relevant period. Hence, any payment including interest received by the assessed was in the nature of compensation in lieu of his right to retain the possession and consequently, it was a capital receipt not chargeable to tax. Reliance was placed on the Supreme Court judgment in the case of Dr. Sham Lal Narula v. CIT . Reliance was also placed on the Kerala High Court judgment in the case of CIT v. Periyar & Pareekanni Rubbers Ltd. . Alternatively, it was also contended that award and interest was contingent one in view of the facts stated above and, therefore, no income had accrued to the assessed in view of Supreme Court judgment in the case of CIT v. Hindustan Housing & Land Development Trust .
5. After considering the above submissions and the facts of the case, the Commissioner (Appeals) was of the view that the matter was not examined properly at the assessment stage inasmuch as the assessing officer had (not) discussed the implications of the litigations at various stages as well as not appreciated and examined the facts properly. He also observed that taxability of interest would arise only after careful examination of various decisions of Supreme Court and High Court relied upon by the counsel for the assessed. Hence, he set aside the order of assessing officer by observing as under :
“It is, therefore, necessary in the interest of justice that the assessment so framed by the assessing officer is set aside to be reframed de novo after considering all the aspects of the case and after giving opportunity of being heard to the assessed and after examining the various decisions given by the Hon’ble High Court and Supreme Court in this regard and in the case of the assessed. ”
6. In pursuance of the above order, fresh proceedings of assessment were started by the assessing officer, who took into consideration the various events of litigation, the relevant provisions of LAA as well as case law referred to. After considering the same, particularly the provisions of sections 16, 17, 31 32A of LAA and the ratio of Supreme Court judgment in the case of Dr. Sham Lal Narula (supra) and the judgment of Kerala High Court reported as (supra), it was held by him vide order dated 27-11-2000 that the entire amount received by the assessed was capital receipt.
7. The assessment record was examined by the CIT, Ghaziabad. After examining the same, it was found by him that the notification for acquisition under the provisions of LAA was published on 9/10-12-1988 and the possession of land was taken on 14-12-1988. Accordingly, he was of the view that ownership of the land vested in the Government on 14-12-1988. According to him, the fact that possession was taken before the expiry of statutory period would not alter the character of interest from revenue to capital inasmuch as it was only procedural violation. On the facts of the case, he was of the view that interest paid to the assessed was revenue receipt liable to tax. Hence, notice under section 263 was issued to the assessed on 30-10-2001. A detailed reply was given by the assessed on 13-12-2001 objecting to the proposed actiori under section 263 and reiterated that the so-called possession by the Collector was unauthorised beyond the scope of section 17 of LAA and, therefore, the amount received by way of interest was only part of the compensation which was a capital receipt.
8. The reply given by the assessed was considered by the CIT in the light of material placed before him. He noted that Commissioner (Appeals), Ghaziabad, had considered this issue in -the case of co-owners as well as in assessed’s own case in individual capacity. He noted that Commissioner (Appeals) had decided the issue in favor of the assesseds. According to the CIT, the Commissioner (Appeals) had relied upon only part observations of the judgment of Hon’ble Supreme Court in the case of Sham Lal Narula (supra) and failed to consider the following observations “But in case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of land might have made if he had the use of the money or the loss he suffered because he had not that use. In no sense of the term can it be described as damages or compensation for the owner’s right to retain the possession for he has no right to retain possession after possession was taken under section 16 or 17 of the Act. We, therefore, hold that the statutory interest paid under section 34 of the Act is the interest paid for delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income Tax Act. The order of the High Court is, therefore, correct.”
In view of the above observations, he opined as under :
“As the land acquired vests absolutely in the Government only, after the Collector has taken possession of it, no interest therein will be outstanding in the claimant after taking of such possession. He is divested of his title to land and his right of possession thereof and both of them thereafter vest in the Government. Thereafter he will be entitled only to be paid compensation that has been or will be awarded to him. He will be entitled to compensation though its ascertainment may be postponed from the date of his title to the land and the right to possession thereof have been divested and vested in the Government. Therefore, a statutory liability has been imposed upon the Collector to pay interest on the amount awarded from the time of his taking possession until the amount is paid or deposited. This amount is not, therefore, compensation for the land acquired or for depriving of claimant of his rights to possession but is paid to the claimant for the u:se of his money by the State. In his view there cannot be any difference in the legal position between a case where possession has been taken before and that where possession taken after the award, for in either case, the title vests in the Government only after the possession has been taken.”
Considering the legal position mentioned above and in the absence of any verdict of Allahabad High Court on review petition filed by the assessed, it was held by CIT that decision of Commissioner (Appeals) was not acceptable. The decisions relied on by the assessed were held to be distinguishable. Finally, it was held that interest received by assessed was revenue in character. Accordingly, it was further held that order of assessing officer was erroneous and prejudicial to the interest of revenue. The order of assessing officer was modified by directing the assessing officer to enhance the assessment by Rs. 9,40,849.
9. The learned counsel for the assessed, Mr. Anand Prakash, has vehemently assailed the order of CIT by contending that assumption of jurisdiction under section 263 was bad in law inasmuch as the view expressed by the assessing officer is a possible view in view of various judgments. Reliance was placed on the judgment of Hon’ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT (2000) 243 ITR 83 (SC), wherein it has been held that order of the assessing officer cannot be considered as erroneous if the view taken by him is a possible view. Proceeding further, he took us through all the events of acquisition and litigation at various stages and then pointed out that possession of the land taken by the Collector was in violation of the provisions of section 17 of LAA inasmuch as notice under section 9(1) of that Act was published on 9th/10-12-1988 while the possession was taken on 14-12-1988, i.e., much before the expiry of 15 days from the date of publication. Further, 80 per cent of the estimated compensation was required to be made by the Collector under section 17(3A) of that Act before taking possession under section 17(l) but no such payment was made to the assessed. Hence, according to the assessed’s counsel, there was complete violation of the provisions of section 17 and, therefore, possession of land taken by the Collector was unauthorised and beyond the scope of section 17. Hence, whatever amount including interest was paid to the assessed was on account of deprivation of their right to retain the possession and consequently, the payment of such amount was capital receipt. It was further submitted by him that Hon’ble Supreme Court in the case of Dr. Sham Lal Narula (supra), has made a distinction between a case where interest is paid for deprivation of use of money against the valid possession/award and a case where interest is paid for deprivation of the right to retain the possession of a land. In the former case, it was held to be a revenue receipt while in the latter case, a capital receipt. He has also relied on the decision of Kerala High Court in the case of Periyar & Pareekanni Rubbers Ltd. (supra) wherein such receipt was held to be capital receipt. Similarly, reliance was placed on the decision of the Tribunal in the case of J.D. Singhal (ITA Nos. 8259 to 8262/Del/1992), copy of which is placed on record. Proceeding further, he relied on the Supreme Court judgment in the case of Jetmull Bhoj Raj v. State of Bihar (supra) for the proposition that under section 17 of LAA, the Collector cannot take possession of land until the expiration of 15 days from the date of publication of notice under section 9(1) of LAA. Similarly, reliance was placed on the judgment of Allahabad High Court in the case of State of UP v. Distt. Judge and the judgment of Delhi High Court in the case of Banwari Lal & Sons (P) Ltd. 1992 (1) Land Acquisition Laws 344.
10. On the other hand, the learned Departmental Representative has strongly relied on the order of CIT under & 263 and, therefore, his arguments need not be repeated. However, he pointed out that the award was given on 7-12-1990 as mentioned in the order, of assessment and, therefore, assessed could not argue that award was not given by the Collector. According to him, once the award is given, then any interest payment would be of revenue character. In reply, it was stated that entire proceedings of acquisition were jeopardised due to litigation before the High Court and, therefore, no income could be said to accrue to the assessed in view of the Supreme Court judgment in the case of Hindustan Housing Development Just (supra). However, he repeated his earlier arguments to the effect that interest payment was capital receipt.
11. Rival submissions of the parties have been considered carefully in the light of material placed before us and the case law referred to. It is now the settled legal position that order of the assessing officer cannot be considered as erroneous if the view taken by the assessing officer is a possible view. Reference can be made to the recent judgment of the Apex Court in the case of Malabar Industrial Co. (supra). So the issue to be considered is whether the view taken by assessing officer can be said to be a possible view. Before considering the same, it is pertinent to note that assessing officer had taken into consideration all the factual details and it is also not the case of the CIT that assessing officer failed to consider any relevant-facts. The assessing officer had also considered the relevant provisions of LAA, i.e., sections 16, 17, 31 and 32. He has also considered the judgment of Supreme Court in the case of Dr. Sham Lal Narula (supra) and the judgment of Kerala High Court in the case of Periyar & Pareekanni Rubbers Ltd. (supra). Hence, it cannot be said that assessing officer failed to apply his mind.
12. Let us now consider the views taken by the various courts and the Tribunal. The first decision is the judgment of Hon’ble Supreme Court in the case of Dr. Sham Lal Narula (supra) on which reliance has been placed by both the parties. At p. 156, the court made a distinction between interest paid for deprivation of the right to retain the possession of the land. The relevant portion of the judgment is quoted below :
“The scheme of the Act and the express provisions thereof establish that the statutory interest payable under section 34 is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but that is given to him for the deprivation of the use of the money representing the compensation for the land acquired.”
At the same page, their Lordships further observed as under :
“Therefore, the interest awarded under section 28 of the Act, just like under section 34 thereof, cannot be a compensation or damages for the loss of the right to retain possession but only compensation payable by the State for keeping back the amount payable to the owner.”
At p. 157, their Lordships, while distinguishing the judgment of Kerala High Court in the case of P.V. Kurien v. CIT , noted certain judgments of Judicial Committee and Madras High Court. With reference to Madras High Court judgment in the case of revenue Dision Officer v. Venkatarama Ayyer AIR 1936 Mad 199, their Lordships observed to the effect that where the possession of land was taken outside the scope of sections 16 and 17 of the LAA, title did not pass to the, State Government and, therefore, it could be said that the owner was given interest in place of his right to retain the possession of the property.
13. On a perusal of the entire judgment as a whole, it appears that where the interest is paid for deprivation for the use of money, it would be a revenue receipt but where the interest is paid in lieu of the right to retain possession, it can be said to be a capital receipt. In the case of former, the Hon’ble Supreme Court has laid down as a legal finding that interest is a revenue receipt but in the latter case, the court has used the expression “may be said”. So it has not laid down as a legal finding that in such cases the interest is capital receipt. However, it has been expressed that such receipt may be of capital nature, But, certainly, it can be inferred by an authority that interest paid in lieu of right to retain possession, where the, possession was taken outside the scope of sections 16 and 17 of LAA, is a capital receipt.
14. In fact such inference has been drawn by Kerala High Court in the case of Periyar & Pareekanni Ruhbers Ltd. (supra). In that case, the land of the assessed was acquired on 29-11-1961, on the basis of an agreement between the assessed and the Government, but the. award was. given on 31-8-1962. Hence, the interest was given for the period from 29-11-1961 to 31-8-1962. Such interest was held to be capital receipt by the High Court on the basis of the inference drawn from the proposition laid down by the Apex Court in the case of Dr. Sham Lal Narula (supra).
15. Similar view has been taken by the Tribunal in the case of J.D. Singhal (supra). In that case, possession under section 17 of LAA was taken on 7-7-1982 while the award was given on 9-1-1988. The question arose as to whether interest paid for the period from the date of possession till the date of award could be taxed as revenue receipt. The Tribunal after referring to the provisions of LAA and the decisions of various courts, held that such interest amounted to capital receipt. Similar view has also been taken by the Commissioner (Appeals) in the cases of co-owners.
16. In view of the above discussion, we are of the view that the view taken by the assessing officer was a possible view and, therefore, the same could not be considered as erroneous in the light of the Supreme Court judgment in the case of Malabar Industrial Co. (supra). Hence, the assumption of jurisdiction under section 263 by the CIT was without the authority of law.
17. Before parting with this order, we may clarify that we are not holding that the view taken by the assessing officer represents the correct legal position. What is held by us is that the view taken by assessing officer is a possible view. The correctness of such view is left open to be decided in some other appropriate case.
18. In view of the above decision, the order of CIT under section 263 is quashed. The appeal of the assessed is, therefore, allowed.