Section 155(16)

Section 155(16) — the law in short

What the courts have decided on section 155(16), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Chet Ram (HUF) Supreme CourtHelps department
  I withdrew enhanced land acquisition compensation under an interim High Court order while the appeal is still pending. Is it taxable now?
  Yes. The Supreme Court held that assessees who received enhanced compensation and interest on it under an interim order of the High Court in pending land acquisition appeals are liable to tax on those amounts in the year of receipt. It followed its earlier decision in CIT, Faridabad v Ghanshyam (HUF), where it had held that section 45(5) treats enhanced compensation as deemed income taxed on receipt, so that even where the court permits withdrawal against security pending appeal the amount is taxable. The orders of the High Court and the Tribunal were set aside and the Revenue's appeals allowed, parties bearing their own costs.
• CIT v Govindbhai Mamaiya Supreme CourtCuts both ways
  The court enhanced the compensation for my acquired land and awarded interest running back many years — can I spread that interest over those years, and are my brothers and I an AoP because we inherited the land together?
  No to the spreading, yes to being taxed as individuals. The Supreme Court held on 4 September 2014 that interest awarded under section 28 of the Land Acquisition Act 1894 is an accretion to the value of the land, so it forms part of the enhanced compensation under section 45(5)(b) and is taxable in the year it is received, not spread over the years from dispossession. Interest under section 34, which compensates undue delay in making the award, stands differently. On status, three brothers who inherit land by operation of law and receive compensation on compulsory acquisition form no association of persons, because volition to produce income is absent.
• CIT v Ghanshyam (HUF) Supreme CourtHelps department
  The court enhanced my acquisition compensation with interest. Which year is it taxed, and is the interest capital?
  Interest awarded under s.28 of the Land Acquisition Act, 1894 is part of the amount of compensation; interest under s.34 is not, because it is only compensation for delay in paying a sum already determined. The additional amount under s.23(1A) and the solatium under s.23(2) are likewise part of enhanced compensation, and the whole of it — including s.28 interest — is taxed under s.45(5) in the year of receipt, even where the claimant has withdrawn it against security while the Revenue's or the State's appeal is pending.
• CIT v Hindustan Housing and Land Development Trust Ltd Supreme CourtHelps taxpayer
  An arbitrator enhanced the compensation for my land, the State has appealed against the whole of it, and I have taken the money out of court against a security bond. Has that enhanced amount accrued to me?
  Not while the whole of it is in dispute. The Supreme Court held that the extra compensation awarded by the arbitrator had not accrued in the year of the award, because the State Government's appeal put the entire amount in issue and the dispute was real and substantial - a point the Court underlined by the fact that the assessee could only withdraw the deposit on a security bond to refund it if the appeal succeeded. The right to compensation of that kind is inchoate until the amount is finally determined; there is no liability in praesenti, and so no enforceable right to any particular amount, and nothing accrues. The line the Court drew is between a case where the right to receive payment is itself in dispute and a case where the right is admitted and only quantification is left.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.