TMI Blog2004 (5) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for asst. yrs. 1987-88 to 1994-95 in regular course. Subsequently, according to the learned AO, during the course of assessment proceedings for asst. yr. 1995-96 it was noticed that the assessee had received enhanced compensation amounting to Rs. 35,29,710 in respect of assessee's lands situated at Nangla Battu, Meerut. Besides, the assessee had also received interest amounting to Rs. 37,72,921 for the period 21st Aug., 1986 to 28th Feb., 1994. The AO thereafter issued notices under s. 148 to bring to tax the interest received by the assessee on accrual basis. The assessee replied by his letter dt. 27th Sept., 1999, that he had included the entire amount of interest and compensation in the return of income for asst. yr. 1995 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. He further held that merely because the entire income had been assessed in asst. yr. 1995-96 on actual receipt basis, the assessments in various years on accrual basis could not be prevented. The assessment for asst. yr. 1995-96 was on protective basis only. There was no dispute that the interest pertained to different assessment years from 1987-88 to 1995-96 if charged on accrual basis. He, therefore, dismissed the assessee's appeals for all the years. Still aggrieved, the assessee is in appeal before us. 3. In the appeals before us, the assessee has disputed reopening of assessment under s. 147 on the ground that the entire amount of interest on enhanced compensation was shown in the return of income for asst. yr. 1995-96 on receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as now well- settled that interest on compensation for delayed payments has to be assessed in all the assessment years on accrual basis. The same cannot be assessed in a single year of receipt. In support of these contentions, the learned Departmental Representative placed reliance on the judgments reported in (1990) 84 CTR (SC) 164 : (1990) 181 ITR 400 (SC) and Bikram Singh Ors. vs. Land Acquisition Collector Ors. (1997) 139 CTR (SC) 475 : (1997) 224 ITR 551 (SC). As to the additional ground taken by the assessee, learned Departmental Representative argued that only a part of enhanced compensation had been disputed in the Government's appeal and, therefore, the entire amount of interest was not in dispute. 7. We have carefully consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not as to when the interest accrues. There was a raising controversy in this respect and diversity of opinion amongst various High Courts, which has been resolved by the judgment of Hon'ble Supreme Court in the case of Smt. Rama Bai Ors. The question before us in these appeals is whether in a case where an assessee who opts for assessment on receipt basis of interest awarded on enhanced compensation can be forced to be assessed on accrual basis year after year. We do not find that the judgments of Hon'ble Supreme Court relied upon by the learned Departmental Representative are to such effect. In the case of Smt. Rama Bai, the Hon'ble Supreme Court has followed the earlier judgment of the apex Court in the case of Govindarajulu Chetty vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has ruled that interest payable under s. 28 cannot, in the case of an assessee following mercantile system of accounting, be taken to have accrued on the date of the order of the Court granting enhanced compensation, but has to be taken as having accrued year after year from the date of delivery of possession till the date of such order". 10. It is seen that in this case the interest income has to be assessed as business income by virtue of the provisions of s. 28(ii). Even otherwise, the interest income not being assessable under the head 'capital gains' would fall to be assessed under the head 'income from other sources'. Provisions of s. 145 confer on the assessee an option either to be assessed on accrual basis or receipt basis in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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