TMI Blog1968 (11) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... arose. It appears that the assessee-firm bought from the Government of India a property known as "Brengun Estate" consisting of factory and other buildings along with 403 acres of open land, some of which were, sold in the previous years and the profits arising from such sale-, were held to be liable to income-tax as arising from business. In respect of a further portion of this land, viz., 36 acres and 6 guntas, the Government of Hyderabad, after duly notifying the same, acquired it under section 3(1) of the Hyderabad Land Acquisition Act, and subsequently took over possession of the same on 23rd June, 1954, after making the necessary declaration under section 6. The Collector by his award under section 10 of the Act dated 10th December, 1954, fixed the compensation payable to the- assessee at O.S., Rs. 1,25,131 at the rate of Rs. 3,000 per acre. This amount was paid to the assessee on 22nd March, 1956. Aggrieved by the award, the assessee requested the Collector to make a reference to the District Judge, and on the same being made, the District, judge enhanced the value from Rs. 3,000 to Rs. 5,000 per acre, which enhanced the compensation payable to the assessee by Rs. 99,245. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding on the second question-held that the surplus realised by the assessee was a business profit, following its earlier order, which was the subject-matter of a reference in this court in R. C. No. 42 of 1962. On the second question, the Tribunal held that the lands formed the stock-in-trade of the assessee's business and, as such the realisation either from sale or acquisition by the Government would represent only a business receipt. It further held that the enhanced compensation accrued to the assessee on 23rd June, 1954, when the land was taken possession of by the Collector. Consequently, it allowed the appeal of the department. On the first question referred, we may observe that this court had already in R.C. No. 42/62 decided on 23rd July, 1964 (to which one of us, the Chief justice, was a party), answered the question against the assessee holding that the purchase of the site was an adventure in the nature of trade and was in the course of a profit-making scheme. Against this decision, the assessee went up in appeal to the Supreme Court which in Khan Bahadur Ahmed Alladin and Sons v. Commissioner of Income-tax affirmed the decision of this court. Accordingly, the first qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the table territories during such year,- (i) accrued or arise or are deemed to accrue or arise to him in the taxable territories during such year ......" We may, even at the risk of repetition, state that the compensation, which has been treated in this case as profits from an adventure in the nature of trade, is payable to the assessee. But the question is : Has it accrued or is deemed to accrue to him ? It may, in some, circumstances, where in amount becomes payable, be deemed to have accrued to him even though in fact it is not paid but paid subsequently. But unless the income is determined and become, payable, merely to have a right to receive compensation or payment of an unspecified amount does not attract tax liability in in the year in which the assessee gets such right. Bhagawati J., delivering the judgment of their Lordships of the Supreme Court in E.D. Sassoon Co. Ltd. v. Commissioner Income-tax at page 50, accepted the definition given to the words "accrue" or "arise" by Mukerji J. in Rogers Pyatt Shellac Co. v. Secretary of State for India which definition has again been referred to and approved of by Subba Rao J. (as he then was) in Commssioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he right to receive a particular amount as e accrues, no charge can be levied on that amount in any year anterior to the one in which it is receivable A decision of this court in Mahalakshmi Rice Oil Mill v. Commissioner of Income-tax was cited by the learned advocate for the assessee as supporting his contention. There the assessee-firm carried on the business of milling paddy into rice and selling it. On the 9th May, 1954, the assessee was appointed as the procuring agent by the Government for procuring paddy under the voluntary procurement of paddy the, compulsory procurement of paddy schemes. After procuring the paddy, the assessee had to mill it into rice and hold the stocks on behalf of the Government. One of the conditions of the agreement was that the assessee shall not dispose of the stocks of paddy and/or rice held by the assessee on behalf of the Government, except under and in accordance with the directions of the District Collector or any officer authorised by him. The assessee was to be paid for the rice so exported at certain rates appended to the agreement. Later, however, the Government felt that they were not in need of further stocks of rice and an agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n; there must be something tangible, something in the nature of debt, something in the nature of an obligation to pay an ascertained amount. Till such time, no income can be said to have accrued. If we may say so with respect, the learned judges in Mahalashmi Rice Oil Mill case appear to have relied to a large extent on certain English cases, namely, Commissioners of Inland Revenue v. Newcastle Breweries Ltd. , Commissioners of Inland Revenue v. Gardner, Mountain and D Ambrumenil Ltd. etc., with respect to which this court has, on several occasions, observed--which observations are reinforced by their Lordships of the Supreme Cour-t-that it is not advisable to rely upon English decisions in interpreting the Indian Income-tax Act. We have already noticed the observations of Subba Rao J. (as he then was) in Gajapathy Naidu's case. In the same judgment, after referring to J.P. Hall and Co. v. Commissioners of lnland Revenue and Severne v. Dadswell and stating that they would prefer to base their conclusions on the meaning of the words "accrue" and "arise" in section 4(1)(b)(i) of the Income-tax Act, observed at page 121 : " We cannot apply the English decisions in the matter of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "arise", we are of the view that such an interpretation cannot be placed. The interpretation given by us does not affect the interests of the revenue. At the same time, it safeguards the assessee and prevents harassment. To hold otherwise would be contrary to the provisions of law. In Commissioner of Income-tax v. Jai Prasad Om Prakash Co. Ltd. a Bench of the Punjab High Court was considering the point of time at which the amount claimed in a suit filed in the District Court, which was decreed, accrued or arose. There the assessee-company entered into a contract with Bharat Company for sale of mustard teeps but the Bharat Company cancelled the transaction before the due date. The assessee sent a telegram to the Bharat Company to the effect that if the latter did not within 4 hours accept the settlement of the bargain at Rs. 16-14-6 a maund, it wonld presume that the latter had accepted the settlement, but there was no response to the telegram. This led to a suit by the assessee in the District Court against the Bharat Company for recovery of a sum of Rs. 73,820-12-0 (after adjusting a sum of Rs. 20,000 odd due from the assessee to the Bharat Company on account of some earlier tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruary, 1951, and was further enhanced by the High Court, and a sum of Rs. 1,15,000 representing the value of the land and Rs. 87,265 representing interest on that sum from the date on which delivery of possession was taken up to the date of payment, was paid to the assessee on October 21,1961. The department assessed income-tax on the entire sum of Rs. 87,265 in the assessment year 1962-63. The Tribunal held that the interest that was payable to the assessee in each successive year accrued in that year and was liable to be assessed in that year itself and assessment of that interest cannot be postponed till the date on which the interest became ascertained or when the interest was actually paid to the assessee. The High Court, on a reference, agreed with the view of the Tribunal. Somnath lyer J., after stating that the right to no part of the interest was born until the Land Acquisition Officer made his arithmetic after the Supreme Court disposed of the appeals, cannot have the support of reason, observed at page 163 : " There was thus a complete acquisition of the right to recover the accumulated interest on the amount awarded by the Land Acquisition Officer when possession was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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