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2014 (6) TMI 1000 - HC - Income TaxTax on the interest received by the assessee on account of refund - Held that:- Section 244A provides, where refund of amount becomes due to the assessee under the Act, he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the manner stipulated in the said Act. The said interest received by the assessee could be income in the hands of the assessee. Section 4 of the Act which is the charging section levies tax under the Act on such interest. The income received on 9.3.2004 is to be assessed for the years 1.4.2003 to 31.3.2004 which is previous year as the assessment year being 1.4.2004 to 31.3.2005. When once the assessee receives the income by way of interest, the liability to pay tax under the Act arises. As that income is received prior to 31.3.2004, it has to be declared for the year commencing from 1.4.2003 to 31.3.2004 and it has to be assessed during the period from 1 4.2004 to 31.3.2005. The date on which the order of the Tribunal is passed, though determined the rights of the parties, on that day, no income is received by the assessee. It is on receipt of the income, the liability to file return under the Act would arise. The law provides for a reference to the civil court if the compensation awarded by the land acquisition officer, in the opinion of the land owner, is not sufficient and the reference court has jurisdiction to enhance the compensation and also to award interest on the said compensation. The said order is also subject to appeal and second appeal. In that context, it has been held that unless a competent court determines the liability to pay enhanced compensation and the compensation is paid in pursuance of such determination, the liability to pay tax on such compensation or the interest which is a component of interest would not arise. In the instant case, we are not dealing with any compensation. It is a simple case of payment of interest on the amount of refund which department found due to the assessee subject to the determination by the Appellate Authority. Therefore, no fault can be found in the order passed by the authorities. Decoded in favour of the revenue and against the assessee.
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