TMI Blog1996 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... f income-tax on the delayed interest amount recovered under the Land Acquisition Act, 1894 (for short the "LA Act"). Calling that notice in question, they filed writ petitions. The High Court relying upon the decisions of this court dismissed the petitions with a finding as under : " This now leads us to the consideration of the question whether interest paid on the amount of compensation for compulsory acquisition of land is 'income' and, therefore, taxable under the Act. Matters which have to be considered for awarding compensation for compulsory acquisition of land are enumerated in section 23 of the Land Acquisition Act. While sub-section (2) of that section provides for payment of certain solatium for acquisition of compulsory nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat interest 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 is given to him for the deprivation of the use of the money representing the compensation for the land acquired. This interest under section 34 of the Land Acquisition Act is thus paid for the delayed payment of the compensation amount and, therefore, a revenue receipt liable to tax under the Income-tax Act. The Supreme Court expressly distinguished the decision of the Privy Council in Inglewood Pulp and Paper Co. Ltd. v. New Brunswick Electric Power Commission, AIR 1928 PC 287. This decision of the Privy Council as also the decision in Abhay Singh Surana v. Secretary, Ministr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, to be held that the amount received as interest on the amount of compensation assessed under the Land Acquisition Act or under the Requisition and Acquisition of Immovable Property Act is income taxable under the Income-tax Act. Certainly, it is not agricultural income since it is neither rent nor revenue derived from the land used for agricultural purposes. It is, therefore, not exempt from income-tax under section 10(1) of the Income-tax Act as agricultural income. The Land Acquisition Collector is, therefore, perfectly justified in retaining the amount of interest payable to the holders of agricultural lands compulsorily acquired in terms of section 194A of the Act. The Land Acquisition Collector is also justified in demanding the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount' or 'suspense account' or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. " In the circular issued by the Central Board of Direct Taxes, the concept of "interest" defined under section 2(28A) has been explained with the added Explanation as under : " The term 'interest' has been defined in new clause (28A) inserted in section 2 of the Income-tax Act with a view to removing doubts about the true character of fees or other charges paid in respect of moneys borrowed or in respect of the credit facilities which have not been utilised. The definition is ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the earlier case law on the concept of "interest" laid down by the Privy Council and all other cases and had held at page 158 as under : " 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 term 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 section 16 or section 17 of the Act. We, therefore, hold that the statutory interest paid under section 34 of the Act is interest paid for the delay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? It is seen that this court has consistently taken the view that it is a revenue receipt. The amended definition of "interest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under section 28 or 31 of the Acquisition Act is a taxable event. Therefore, we hold that it is a rev ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
