09 October 2009
Hi there A person receives enhanced compensation after the order of high court,the govt after paying this enhanced compensation appeals to the supreme court for reducing the compensation. Now will the enhanced compensation received by the assessee be taxable? In Vinod K Singhania text book its given that this amount will be included in computing capital gain and after the apex court gives judgement AO can recompute the capital gain. But in another text book written by an renowned author there is supreme court case law stating that such an amount is not taxable when the matter is pending in the supreme court. The case law is " Commissioner of Income-tax VS. Hindustan Housing & Land Development Trust Ltd."
09 October 2009
If addittional compensation is received from government it will be considered for capital gains taxation in the year in which such compensation is RECEIVED, even in cases where pending appeal, the Court/Tribunal/Authority before which appeal is pending, permits the claimant to withdraw against security or otherwise the enhanced compensation, the same is liable to be taxed under section 45(5) of the 1961 Act.
Where such compensation is subsequently reduced by any court/tribunal/any authority the capital gain of that year in which the compensation received is taxed shall be recomputed accordingly.
The AO has a power to recompute capital gain within 4 years from the end of the previous year in which the order reducing the compensation was passed by court,Tribunal or other authority.
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