TMI Blog1978 (8) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... Law in not treating the interest amount as capital receipt." 3. The controversy is whether the interest of Rs. 9,927 is a capital receipt or a revenue receipt. The fact bearing on this controversy are as follows. In 1960 the assessee and his brother, Shri I.K. Puri purchased from the Ministry of Rehabilitation in an open auction 78 bighas and 13 biswas of land in Village Tigri Delhi for Rs. 19,504.50. The Delhi Administration became interested in this land for the public purpose of planned development of Delhi. A notification under s. 4 of the Land Acquisition Act. 1894 (hereinafter referred to as "the Act") was accordingly issued on 8th Nov., 68 declaring that the land in the area specified therein was likely to be needed for a public purpose. On 29th May, 1969 the Delhi Administration issued the declaration under s. 6 of the Act in respect of the area of 88 bighas and 13 biswas of Village Tigri (including the aforesaid 78 bighas and 13 biswas land of the assessee and his brother) expressing its intention to acquire the said land for the public purpose of planned development of Delhi and the acquisition proceedings culminated in the Land Acquisition Collector s order dated 19th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest payable in the amount so awarded. If interest on the amount of compensation determined under s. 23 is considered to be a part of the compensation or given in consideration of the compulsory nature of the acquisition, the legislature would have provided for it in s. 23 itself. But instead payment of interest is provided for under s. 34 in part V of the Act under the head "payment". It is so done because interest pertains to the domain of payment after compensation has been ascertained. It is a consideration paid either for the use of the money or for the forbearance from demanding it after it has fallen due. Therefore the Act itself makes a clear distinction between the compensation payable for the land acquired and the interest payable on the compensation awarded. The decision of the Supreme Court in Dr. Shyamlal Narula s (2) case fully supports the case of the Department. It has been held by their Lordships that the statutory interest provided under s. 34 of the Land Acquisition Act cannot be described as damages or compensation for the owner s right to retain possession. The statutory interest is interest paid for the delayed payment of the compensation amount and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision in 87 ITR 666 that in such circumstances the interest paid represented damages for the deprivation of the property of the assessee by the Delhi Administration. The source of interest, he said, was the deprivation of the property and not the compensation money because the compensation money became payable only on 19th July, 72 when the Collector s award was made. Referring to Shyamlal Narula s (2) case, he said that the same had been misconstrued and mis-applied. In that case, Shri Kali stressed, the possession of the land was taken under s. 16 of the Act after the Collector s award was made and, therefore, the compensation money became the source of the Government s obligation to pay interest while in the present case the position is different inasmuch as the possession was taken otherwise then under s. 16 of the Act and the source of the obligation to pay interest was the deprivation of the property. He also referred to several cases, such as, Satender Singh vs. Umrao Singh(3) Revenue Divisional Officer vs. VenKartarama (4), Ingie Wood pulp and Paper Co. Ltd. vs. New Beudswick Elect. Power Commission (5) in which it was held that the right to receive interest took place of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion). 7. We have carefully considered the rival submissions. We have also gone through the relevant provisions of the Act and the various judicial pronouncements referred to on both the sides. We have also seen the observations of Kanga Palkhiwala and Pithisaria and Chaturvedi relied upon by the counsel. It appears from the facts stated above than in the present case the land was taken possession of by the Delhi Administration in three lots in March, 1966, Jan., 1968 and Nov., 1970. According to the assessee, the possession was unlawful and the authorities had, in fact, tresspassed. In law the ownership was still with the assessee as the title to the land did not pass to the authorities although the right of possession had been taken away without applying the due process of law. The process of the law contemplated in the Act commenced on 8th Nov., 68 when the notification under s. 4 was issued by the concerned authorities. There after the authorities issued the declaration under s. 6 of the Act on 28th May, 69 expressing their intention to acquire the specific price of land for the public purpose of planned development of Delhi. In pursuance of the said declaration under s. 6, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensation : the award quantifies the offer of the appropriate Government has taken over, or intends to take the land of the owner under the authority conferred by the Land Acquisition Act". In Sajju Prasad Shah vs. State of U.P.(8) the Supreme Court again observed as follows: "The scheme of the Act is that after notifying that land is needed or likely to be needed for a public purpose, the Government directs the Collector to hold an enquiry into the objections which may be raised by person interested in the land notified, and it is after the enquiry is made and the objection of person interested in the land are considered, that the notification that the land is needed for a public purpose may issue. The right of the owner of the land is extinguished when Government takes possession of the land after an award of compensation is made. This Court in State of Madras vs. Vasudevan Potti ILR (1970) 2 Mad. 546 has pointed out that there was passing of title to the property only when possession thereof was taken from the owner by the Government under s. 16 of the Land Acquisition Act. The provisions of the Land Acquisition Act themselves are clear to show that till possession was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceding the date of the award. 10. The question is whether the interest so allowed by the Collector is capital receipt or revenue receipt. The assessee s case is that the source of the interest for the period upto 18th Sept., 1972 is the deprivation of the land because it was only on 19th July, 72 when the collector issued the award that the assessee became entitled to receive the compensation together with the interest awarded by the Collector. In support of this view reference has been made to several cases, such as Satendra Singh vs. Umraosing(3) in which their Lordships observed: "It would thus be noticed that the claim for interest proceeds on the assumption that when the owner of immovable property loses possession of it he is entitled to claim interest in place of right to retain possession." In Revenue Divisional Officer vs. Venkata Rama(4) possession was taken as in this case, before the Acquisition Award was made and their Lordships held that the right to receive interest takes the place of the right to retain possession. In Ingle Wood Pulp and Paper Co Ltd. vs. New Brunswick Electric Power Commissioner (5) the Privy Council had also held that right to receive intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been made, may on the expiration of fifteen days from the publication of the notice mentioned in s. 9. Sub-s. (1) take possession of any waste or arable land needed for public purposes or for a company. Such land shall thereupon vest absolutely in the Government, free from all encumbrances." Under both the sections the land acquired vests absolutely in the Government after the Collector has taken possession in one case after the making of the award in the other, even before the making of the award. In either case, some time may lapse between the taking of possession of the acquired land by the Collector and the payment of deposit of the compensation to the person interested in the land acquired. As the land acquired vests absolutely in the Government only after the Collector has taken possession of it, no interest therein will be outstanding in the claimant after the taking of such possession : he is divested of his title to the land and his right to possession thereof, and both of them vest thereafter in the Government. Thereafter he will be entitled to be paid compensation that has been or will be awarded to him. He will be entitled to compensation, though the ascertainment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid for the deprivation of the property as held in the various cases referred to in part 10 ante. The direct authority on this issue is the Kerala High Court decision in 87 ITR 666. In that case in possession of the land was taken on 29th Nov., 61 and the award was made on 31st Aug., 62. Their Lordships observed as under at page 668: "A distinction has been drawn in relation to possession assumed under the provisions of the Act and possession otherwise taken. In the former case, ss. 16 and 17 of the Land Acquisition Act stipulate that on possession being taken, the property will vest in the Government. In the absence of any such statutory provision, even when possession is assumed by the government, whether under some provision of law or by agreement or even sometime unauthorisedly, the view is that there has been deprivation of property and the interest paid by the Government is merely compensation for deprivation of such property. The fact that compensation that is payable for such deprivation is calculated on a percentage of interest on that amount does not affect the question. It is still compensation for deprivation of property. This is the distinction that has been drawn by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 and 17 of the said Act. In both the cases the title did not pass to the vendee in one case and to the State in the other when possession was taken by them and, therefore, it may the said that the owner was given interest in place of his right to retain possession of the property. But in a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because he had not that use. In no sense of the terms can it be described as damages or compensation for the owner s right to retain possession, for he has no right to retain possession, after possession was taken under s. 16 or s. 17 of the Act." Their Lordships thus did have in mind the distinction in relation to the possession assumed under the provision of the Act and the possession taken otherwise. In fact, in respect of latter type of cases i.e. cases where possession is assumed otherwise than under the Act, it was considered that it may be said that the owner was given interest in place of right to retain possession of the property. The decision in Shyaml ..... X X X X Extracts X X X X X X X X Extracts X X X X
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