TMI Blog1986 (7) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... granted by the High Court is directed against the judgment of the Calcutta High Court answering the following question in the negative : " Whether, on the facts and in the circumstances of the case, the extra amount of compensation amounting to Rs. 7,24,914 was income arising or accruing to the assessee during the previous year relevant to the assessment year 1956-57 ? " The assessee, who is the respondent before us, is a limited company dealing in land. It maintains its accounts on the mercantile system. By an order dated June 21, 1946, under rule 75A(1) of the Defence of India Rules read with section 19 of the Defence of India Act, 1939, certain plots of land measuring about 19.17 acres in village Kankulia in the District of 24 Parga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant accounting period being the year ended March 31, 1956, the Income-tax Officer brought to tax a sum of Rs. 7,24,914 as the assessee's business income. This represented the difference between the sum of Rs. 7,37,190 payable to the assessee in terms of the award dated July 29, 1955, of the arbitrator and a sum of Rs. 12,276 out of that amount which had already been assessed to tax. The Income-tax Officer treated the sum as liable to income-tax during that year on the basis that the income accrued to the assessee on the date of the award. The assessment was confirmed by the Appellate Assistant Commissioner of Income-tax on first appeal. In second appeal by the assessee before the Income-tax Appellate Tribunal, two contentions were raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered the question as to the point at which income could be said to accrue or arise to an assessee for the purpose of the Indian Income-tax Act. In the majority judgment delivered by N. H. Bhagwati J., it was explained that the words " arising or accruing " describe a right to receive profits, and that there must be debt owed by somebody. " Unless and until there is created in favour of the assessee a debt due by somebody ", it was observed, "it cannot be said that he has acquired a right to receive the income or the income has accrued to him ". In the present case, although the award was made by the arbitrator on July 29, 1955, enhancing the amount of compensation payable to the assessee, the entire amount was in dispute in the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... din Sons v. CIT [1969] 74 ITR 651 (AP), held that when land was taken over by the Government, the right of the owner to compensation was an inchoate right until the compensation had been actually determined and had become payable. It was observed that the enhanced compensation accrued to an assessee only when the court accepted the claim and not when the land was taken over by the Government. Examining the question whether income could be said to have accrued to the assessee on the date when possession of the land was taken by the Government for the purpose of assessment to tax in the year of assessment, P. Jaganmohan Reddy C.J., speaking for the court, said (pp. 657, 658); " If the actual amount of compensation has not been fixed, no i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed compensation, there is a right of appeal by the Government to the High Court, and the High Court may either disallow that claim or reduce the compensation. As against that judgment, there is a further right of appeal to the Supreme Court. The assessee also can appeal against the insufficiency of the enhanced compensation. Can it be said that the final determination by the highest court of the compensation would entitle the Income-tax Officer, notwithstanding the period of limitation fixed under the Income-tax Act, to reopen the assessment in which he had included the initial compensation awarded by the Collector and recompute the entire income on the basis of the final compensation? We do not think there can be any justification for such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate and the claimant is entitled to an additional compensation and if yes, at what rate is in flux till the question is set at rest finally, we do not think that any enforceable right to a particular amount of compensation arises. The offer made by the Land Acquisition Officer, by his award, if not accepted by a claimant would not result automatically in a liability to pay additional compensation as claimed by a party aggrieved. There is no doubt a liability to pay compensation as offered by the Land Acquisition Officer. Bat that is far from saying that that liability is a liability to pay additional compensation or enhanced compensation as claimed by a party aggrieved. If there is an existing liability, the mere fact that the payment is po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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