Section 45(5)(c) — the law in short
What the courts have decided on section 45(5)(c), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.
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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.
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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the whole of it — including s.28 interest — is taxed under s.45(5) in the year of receipt, even where the claimant has withdrawn it against security while the Revenue's or the State's appeal is pending.
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.
