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2011 (3) TMI 1671 - HC - Income TaxInterest component in MACT Award to be treated as Taxable income or as part of compensation which being in the nature of capital receipt is not Taxable - Assessee failed to deduct tax at source out of interest income received by the claimants as per awards by MACT, the assessee was held to be assessee in default HELD THAT:- In our view, interest component is a part of compensation which being in the nature of capital receipt is not taxable. Admittedly, compensation under the award of MACT is not income. The expression ‘income’ used in Entry 82 of List I of Seventh Schedule to the Constitution can be given widest meaning. Under Section 2(24), inclusive and not exhaustive definition has been given. In absence of an express provision to the contrary, income can be held to refer to something earned. What is received as compensation for loss in one or the other form may not be income. In SENAIRAM DOONGARMALL VERSUS COMMISSIONER OF INCOME-TAX, ASSAM [1961 (3) TMI 7 - SUPREME COURT], the question was whether compensation received from military authority on account of loss of earning of tea estate was income or capital receipt. It was observed that quality of payment was decisive of the character of income and compensation received was not income. In the context of compensation received under the Motor Vehicle Act, the compensation is either on account of loss of earning capacity on account of death or injury or on account of pain and suffering. Such receipt is not by way of earning or profit. Award of compensation is on the principle of restitution to place the claimant in the same position in which he would have been had the loss of life or injury not been suffered. In GOBALD MOTOR SERVICE LTD. & ANOTHER VERSUS R.M.K. VELUSWAMI & OTHERS. [1961 (4) TMI 100 - SUPREME COURT] "The claim for damages falls under two separate heads. First, if the deceased had not been killed, but had eked out the full span of life to which in the absence of the accident he could reasonably have looked forward, what sums during that period would he probably have applied out of his income to the maintenance of his wife and family" Having regard to nature of receipt of compensation as per award under the M.V.Act, compensation is in the nature of capital receipt for death or injury and cannot be held to be in the nature of income. It appears to be for this reason that the said receipt is not sought to be treated as income. Interest on account of delay in adjudication - Part of compensation or a separate component of income?- Receipt of interest after amount has been received by the claimant u/s 194A(3)(ix) - HELD THAT:- In context of compensation under the provisions of Land Acquisition Act, 1894, the Hon'ble Supreme Court in COMMISSIONER OF INCOME-TAX, FARIDABAD VERSUS GHANSHYAM (HUF) [2009 (7) TMI 12 - SUPREME COURT], held that interest paid by the Collector was part of compensation and was treated to be at par with the compensation for purposes of taxability. The principle in Ghanshyam applies to award of interest from the date of claim to the date of receipt of the awarded amount under the Land Acquisition Act. The apex Court in TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD VERSUS COMMISSIONER OF INCOME-TAX [1997 (7) TMI 4 - SUPREME COURT] had noted that ordinarily, the interest received is income but it would not be of revenue nature where it is received by way of damages or compensation. In view of the above, the interest component in compensation awarded by MACT is part of compensation and has to be treated as capital receipt and not income till the claimant received the amount in pursuance of award. However, different consideration will prevail for interest earned by the claimant on the amount so received, after the receipt thereof. Section 194A(3)(ix) refers to the provision of receipt of interest after amount has been received by the claimant in pursuance of the award. We are, thus, of the opinion that question of law raised on behalf of the assessee has to be answered in its favour. The view of the Tribunal that interest allowed by the MACT in an accident case was income from interest and, thus, revenue in nature, is not sustainable - Decision in favour of Assesee
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