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TMI Blog1982 (6) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... Additional District Judge,Delhi, by his judgment dated14-4-1976in LAC No. 744/65, and 209/68 enhanced the compensation by a sum of Rs. 23,01,119.47. 3. TheUnionofIndiafiled an appeal in the Delhi High Court which bears No. 244 of 1976. An application for stay was also made. The Delhi High Court by its judgment dated 3-8-1976 in Appeal No. 244 of 1976 directed that 'The amount in dispute in the appeal must be deposited in the Court below within two months and the same will be payable to the respondents on furnishing security for restitution to the satisfaction of the Additional District Judge.' 4. An application dated24-8-1976, was made on behalf of the recipients of the enhanced compensation and it was pleaded that the enhanced compensation may be distributed to the various applicants as per Schedule 'A' on their furnishing security of the whole amount. A security bond was executed on16-9-1976and submitted in the Court of the learned Additional District Judge,Delhi. The details of the break-up of the sum of Rs. 23,01,119.47 are as under: --------------------------------------------------------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the High Court directed that the amount payable under the said judgment be payable only upon furnishing security to the satisfaction of the Addl. District Judge, for restitution of the entire amount of compensation and interest. Accordingly, security for restitution was furnished by way of Bank Guarantee for the entire amount of compensation and interest thereon. Upon accepting the said Bank Guarantee for restitution of the entire amount, the payment was made to the assessee by about the end of September, 1976. The assessee received a sum of Rs. 65,509.89 by way of enhanced compensation and Rs. 52,496.24 by way of interest thereon since the date of possession. As the said amounts are received subject to restitution and final decision in the aforesaid appeal, the aforesaid amount received by way of interest is not included in the return of income for the assessment year 1977-78 and will be included in the year in which the compensation is finally determined in appeal. This is as per the decisions of the High Courts that the amount of interest on enhanced compensation would be treated as income only in the year in which the decision on compensation becomes final in appeal. This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andas Kundanmal, a Special Leave Petition had been filed before the Supreme Court, but this petition was dismissed on9-3-1977. In the light of the aforesaid judgment of the Gujarat High Court against which the Special Leave Petition filed by the revenue had been dismissed, it was pleaded that the amount of interest, if any, could be taxed not in this year but only when the position regarding the enhanced compensation became final. The Commissioner (Appeals) accepted the assessee's submission and deleted the sum of Rs. 52,496 from the present assessment. He observed that the enhanced compensation could get determined after the decision of the appeals and the interest could be calculated only on the final determination of the enhanced compensation and until then, it could not be said that interest had accrued to, or had been received by, the assessee. According to the Commissioner (Appeals), the judgments relied on by the ITO did not lay down that when the enhanced compensation was contested in appeal the interest on such enhanced compensation could be treated as having accrued before such final determination. The revenue is in appeal against this order of the Commissioner (Appeals). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The distinction between right to claim and right to receive compensation is too vital to be ignored of. Under section 4 of the Income-tax Act, what is liable to tax is income received or accrued during the relevant previous year, and not mere claim to receive. In this judgment, the earlier judgment of the Andhra Pradesh High Court in Khan Bahadur Ahmed Alladin & Sons was applied. He submitted that the interest on enhanced compensation accrued on the date of the award, viz.,14-5-1976. He pointed out that the date of receipt of interest was some time in September 1976, which date fell during the year of account. In support of his submission that the interest on the enhanced compensation accrued on the date of the judgment of the Additional District Judge (viz.14-4-1976), he referred to the judgments in CIT v. His Highness Maharaja Yashwant Rao Pawar [1981] 127 ITR 650 (MP), CIT v. Hindustan Housing & Land Development Trust Ltd. [1977] 108 ITR 380 (Cal.), M. Jairam, E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27 (SC), and strongly relied on the judgment in George Paul Puthuran v. CIT [1980] 126 ITR 168 (Ker.). He thus submitted that the order of the Commissioner (Appeals), should b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment of the Subordinate Judge who had allowed enhanced compensation and there was no bank guarantee given for the purpose of obtaining the amount of enhanced compensation. That judgment was also distinguishable. Similarly, the judgment in M. Jairam, which was followed in George Paul Puthuran, was also distinguishable on facts. According to him, the other judgments relied on by the learned departmental representative were also distinguishable. He referred to the judgment in Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC), wherein it has been held that the receipt spoken of in section 4(1) of the Indian Income-tax Act, 1922 is the first receipt after the accrual of the income [see the decision of the Supreme Court in Keshav Mills Ltd. v. CIT [1953] 23 ITR 230]. He supported the order of the Commissioner (Appeals) and pointed out that as there was no accrual of income because the judgment of the Additional District Judge, Delhi, was in appeal, no debt could be said to have accrued in favour of the assessee and, hence, no income from interest was liable to be taxed either on accrual basis or on receipt basis. 9. We have carefully considered the rival submissions. In Mrs. Khorsh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence nor equal to the claim actually awarded by the Civil Court inasmuch as the risk or hazard of litigation would be a detracting factor while arriving at a reasonable and proper value of this property as on the date of the deceased's death. The assessing authority will have to estimate the value having regard to the peculiar nature of the property,..." We may also refer to the provisions of section 155(7A) inserted by the Finance Act, 1978, with retrospective effect from1-4-1974. On a reading of the aforesaid judgment of the Supreme Court and the provisions contained in section 155(7A) with retrospective effect from 1-4-1974, the position appears to be that on transfer of a capital asset the enhanced compensation even if awarded later would relate back to the date of the transfer. This would appear to be the position so far as the taxability of capital gains under section 45 is concerned. In the aforesaid judgment, the Supreme Court has also held that it would be the duty of the assessing authority under either of the enactments (Estate Duty Act or Wealth-tax Act) to evaluate this property (right to receive compensation at market value on the date of relevant notification), as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then that part of interest certainly has to be taxed in respect of the year to which such interest relates. 11. The further question that requires to be determined is regarding the interest allowed under section 28 of the Land Acquisition Act. The question for consideration is whether such interest is to be taxed as and when the interest is finally determined or it is to be taxed in different years to which the interest may relate even after it is finally determined. The revenue's contention is that interest on enhanced compensation should be taxed on the date of accrual, viz.,14-4-1976, which is the date of the judgment of the Additional District Judge,Delhi. The revenue, of course, has no objection if, against the figure of interest allowed by the Additional District Judge,Delhi, the figure finally determined is adopted as and when available. The assessee's contention, on the other hand is that the right to receive interest would arise only when the interest is finally determined either in the appeal before the High Court or before the Supreme Court. 12. There is a divergence of judicial, opinion, on the question regarding the taxability of the interest allowed on enhanced co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be said to be determinate as the said amount was pending appeal in the High Court (sic). The Madhya Pradesh High Court in His Highness Maharaja Yashwant Rao Pawar has held that the entire income from interest on the enhanced compensation was assessable in the assessment year 1970-71, and the Tribunal was not justified in holding that the amount had to be spread over the previous years. The Madhya Pradesh High Court has followed the judgments in Hindusthan Housing & Land Development Trust Ltd. and E.D. Sassoon & Co. Ltd. There are certain other judgments in which a different view has been taken. In CIT v. V. Sampangiramaiah [1968] 69 ITR 159 (Mys.), it has been held that there was a complete acquisition of the right to recover the accumulated interest on the amount awarded by the Land Acquisition Officer when possession was taken, and, on the enhancement, when the appropriate decree made such enhancement, and to subsequent interest so long as it ran but was not paid. Such interest was income which accrued in the year in which it became so recoverable, within the meaning of section 4(1)(b)(i) of the Indian Income-tax Act, 1922. The attribution of the whole of that interest to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der as to which line of judgment should be followed in the case of the present assessee and the other co-owners, in respect of whom also the revenue is in appeal before us. We have already pointed out that after the judgment of the Supreme Court in Mrs. Khorshed Shapoor Chenai, wherein it has been held that where lands are compulsorily acquired under the Land Acquisition Act, there are no two rights, one a right to receive compensation and the other a right to receive extra or further compensation, the claimant has only one right which is to receive compensation for the lands at their market value on the date of the relevant notification and it is this right which is quantified by the Collector under section 11 and by the Civil Court under section 26 of that Act. We have also pointed out that for the purpose of capital gains the date of dispossession will be the material date and the total amount of compensation whether awarded by the Collector or enhanced by the Courts later on, will have to be taken into consideration on the date of dispossession. This is now implicit in the provisions of section 155(7A), inserted by the Finance Act, 1978, with retrospective effect from1-4-1974. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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