TMI Blog2007 (8) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... ,524/- for the period from 31 st July, 1989 to 25 th July, 1995, was only a measure and method of payment of compensation and was not decisive of the character of compensation inasmuch as the award was made only on 28 th February, 1995 and the question of payment of interest can arise only after the same is made ? 2. Whether on the facts and in the circumstances of the case the Tribunal in law ought to have held the Appellant having received interest of Rs.43,99,404/- under the Arbitration Award dated 28 th February, 1995 at the rate of 12% on the amount of Rs.67,92,524/- for the period from 31 st July, 1989 to 25 th July, 1995, only the interest pertaining to the period 1 st April, 1995 to 25 th July, 1995 could be taxed in the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable income of the appellant. 4. We may now first deal with the first question namely, whether interest received under Arbitration Award was only a measure and method of payment of compensation and was not decisive character of compensation as the Award was made only on 28/2/1995 and the payment of interest can only arise after the same is made. On facts it may be pointed out that the learned Arbitrator was considering the claims arising out of construction contract. The learned Arbitrator allowed the claim of Rs.67,92,524/-. Apart from that, the MDL was directed to pay to the appellants interest on that amount at the rate of 12% p.a. from 31 st July, 1989 till payment or the date of decree on this Award, whichever is earlier. 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court has held that, if the source of the obligation imposed by the statute to pay interest arises because the claimant is kept out of his money, the interest received is chargeable to tax as income. The Court held that statutory interest payable under Section 34 of the Land Acquisition Act, is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but that given to him for the deprivation of the use of the money representing the compensation for the land acquired. In deciding the issue, the Supreme Court apart from its earlier judgment in Dr. Shamlal Narula, [1964] 53 ITR 151, also referred to some English judgments which it distinguished. The ratio of the judgment would be that, if the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had his money at the due date, it would be income in his hands. It may be regarded either as representing the profit he might have made if he had the use of the money in time, or, conversely, the loss he had suffered, because he had not had that use. If, on the other hand, the claim is for loss of property or loss of goods, or some other injury to capital and the element of interest comes in by way of estimating the compensation to be granted for such capital loss or capital injury, then, the receipt would be capital." 8. Considering the various tests, the Court held that mesne profits being an Award of compensation in the nature of damages are not taxable, interest thereon which is an integral part of the mesne profits is also not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cession, but we are of the opinion that it was a concession rightly made and is correct in law". In our opinion, therefore, the first question as raised is to be answered against the assessee. 11. That brings us to the next question of law as framed. In our opinion, the issue can be answered by applying the ratio of the judgment of the Supreme Court in Rama Bai v. Commissioner of Income-tax, Andhra Pradesh [181 ITR 400]. In proceedings under Land Acquisition Act on enhanced compensation interest of Rs.37,529/- was awarded. The ITO held while making assessment for assessment year 1967-68 and 1968-69 that the right to receive interest on enhanced compensation arose on the date when the City Civil Court passed the order. The assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year after year from the date of delivery of possession of the lands till the date of such order". 12. In the instant case interest has been awarded at 12% from 31 st July, 1989 till payment or the date of the decree on the award. Considering the law as declared by the Supreme Court, in our opinion the second question of law as framed will have to be held in favour of the assessee and against the revenue. 13. In the light of above, in so far as first question is concerned, we hold in favour of the Revenue and against the assessee and insofar as the second question is concerned, we hold in favour of the assessee and against the revenue. To that extent the appeal is allowed. 14. The appeal stands disposed of accordingly. There s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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