TMI Blog1967 (8) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Act, 1961, by the Income-tax Appellate Tribunal, at the instance of the Commissioner of Income-tax, is : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the entire interest amount of Rs. 87,265 was not assessable in the assessment year 1962-63 and that only the proportionate interest referable to the assessment year 1962-63 was assessable in that year ? This is how the question arises: By a notification made on January 13, 1948, under section 4 of the Land Acquisition Act, a land owned by the assessee measuring 20,000 square yards was proposed to be acquired, and on February 19, 1949, possession was taken. The Land Acquisition Officer of the Corporation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt of this sum of Rs. 2,02,265, but claimed that the whole of that amount was exempt from tax on the ground that it was a capital accretion. The Income-tax Officer upheld the contention that no tax was payable in respect of the compensation amounting to Rs. 1,15,000 but negatived the plea that the interest which was received by the assessee was a capital receipt. So, the sum of Rs. 87,265, which represented the interest paid to the assessee by the Land Acquisition Officer, was taxed as a revenue receipt. The appeal preferred by the assessee to the Appellate Assistant Commissioner was dismissed, but, in the further appeal, the Income-tax Appellate Tribunal took the view that the interest paid to the assessee was taxable income, but that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Keshav Mills Ltd. v. Commissioner of Income-tax, and E. D. Sassoon Company Ltd. v. Commissioner of Income-tax, on which it depended as could be seen from the more recent enunciation in Commmssioner of Income-tax v. A. Gajapathy Naidu. The pendency of the appeals before the Supreme Court, it was said, introduced an element of uncertainty as to the compensation really claimable which denuded the High Court decrees of the attribute of finality, and the argument was constructed that the right to compensation and the interest thereon did not accrue until there was their quantification by the Land Acquisition Officer on the basis of the decisions in those appeals. The proposition that the accrual of that right stood so postponed cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Now, when possession was taken by the Land Acquisition Officer, he became liable to pay interest until the amount awarded by him was paid, and the assessee acquired the right to recover it from him. The direction of the District Judge for the payment of interest on the enhanced compensation, which, his decree made on February 28, 1951, incorporated, produced the right to recover such interest at least on the date of that decree. Then again, when compensation was further enhanced by the former High Court of Mysore which made a similar direction for the payment of interest on such enhanced compensation, all that interest which that amount so earned from February 19, 1949, became immediately due and payable under an executable decree. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be remembered that the contention of the assessee has all along been that no part of the interest was a revenue receipt and it is not unintelligible that it is due to that reason that there was an omission to disclose the interest which had accrued due when he produced the returns for the earlier years. The principle on which the finding of the Tribunal rested, was thatwhich emerges from the decision of the Supreme Court in E. D. Sassoon Company Ltd. v. Commissioner of Income-tax, in which it was observed : " ' The computation of the profits whenever it may take place cannot possibly be allowed to suspend their accrual. . . .' What has however got to be determined is whether the income, profits or gains accrued to the assessee an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment far enough. The mercantile system which, when regularly employed, credits income immediately after it becomes due and recoverable, dispenses, in a proper case, with further proof, that it then accrued, while the cash system which displays the choice of the assessee to treat the income as having arisen when it was received, regulates computation accordingly. And, in the case before us, in which the Appellate Tribunal did not find that the method of accounting employed was the one or the other, the income became taxable when it became legally due and recoverable, for, it is then that it accrued. That being so, we must answer the question referred to us in favour of the assessee, and our answer is that the Appellate Tribunal was right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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