TMI Blog1972 (7) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the jenmikaram payable by the kanom tenant to the jenmi is income assessable to tax under the Income-tax Act or only a capital receipt ?" The assessee is a person governed by the Kanom Tenancy Act, 1955 (hereinafter referred to as "the Act"). The jenmi is defined in section 2(3) of the Act and the questions referred to this court relate to the assessment of income-tax of the jenmi for eight years 1957-58 to 1963-64, both years inclusive, and for the year 1965-66. For the relevant accounting periods relating to these assessment years the assessee had received amounts as jenmikaram payable under the provisions of the Act, the payments being received by the assessee from the Government as envisaged by the Act. The assessee contended before the Income-tax Officer that these payments of jenmikaram really represented payments of capital ; that such payments were as compensation for the deprivation of capital and, therefore, did not constitute income for the purpose of assessment under the Income-tax Act, 1961. This contention was negatived by the Income-tax Officer and the appeals by the assessee before the Appellate Assistant Commissioner failed. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject only to payment of jenmikaram. --(1) From and after the commencement of this Act, the jenmi shall not have any right, claim or interest in any land in a holding except the right to receive the jenmikaram thereon and the kanom-tenant shall be deemed to be the owner of the land subject only to the payment of the jenmi-karam ...... (2) The jenmi's right as well as the kanom-tenant's right is heritable as well as transferable by sale, gift or otherwise. (3) The jenmi's right to the jenmikaram shall be deemed to be immovable property..... 48. Apportionment of compensation money on land acquisition.--When the jenmi and the kanom-tenant cannot agree as to the apportionment as between them of the compensation money awarded or awardable on the acquisition of any land or portion of land comprised in any holding, under any law providing for the compulsory acquisition of land for public purpose, the portion due to each shall be determined in accordance with the following rules : (a) so much of the compensation money as is due to any buildings shall belong entirely to the kanom-tenant ; (b) the balance left after deducting the portion of compensation money referred to in rule (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and puravaka dues. This clearly shows that the jenmikaram payable under the Act has no relation to the capital value of the assets which the jenmi had in his property before the Act took away those capital assets from the jenmi and enforced it on the kudiyan. There is no provision in the Act for quantifying the capital value of the assets of the jenmi as they stood at the time the Act came into force and there is no provision for payment of either that capital or for compensation for the deprivation of that capital. The provision in section 48 of the Act clearly indicates that, in the event of the property being acquired by the State Government, the capital of the jenmi as represented by his interests in the land acquired are liable to be paid to the jenmi and his capital is, therefore, returned to the jenmi if and when land is acquired for public purposes. Till such an event occurs the jenmikaram has to be paid and it is difficult to conceive that this payment of jenmikaram was towards capital, because if it was towards capital it certainly must go in diminution of the compensation awardable on land acquisition and the entire amount of the value of the interest of the jenmi in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of the pension was agricultural income in its hands and whether the amount received by the respondent was revenue income taxable under the Income-tax Act, 1961. The Supreme Court held that the income received was not agricultural income as there has been no question of land revenue payable and was, therefore, not agricultural income. It also held that the payments towards what is called pension was revenue income and was taxable. We shall extract a passage from the judgment : " It seems to us that where all owner of all estate exchanges a capital asset for a perpetual annuity, it is ordinarily taxable income in his hands. The position will be different if he exchanges his estate for a capital sum payable in instalments. The instalments when received would not be taxable income." In the case before us, we are not considering the rights and obligations of the jenmi and kudiyan arising out of any contract between them. In most of the cases decided, the question arose on the basis of all agreement where there have been either a purchase of what is called an annuity by the sale of a capital asset or an agreement by which there has been provision made for payment in insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference has been made more than once by counsel : " While it is true that the terminology used by the legislature in respect of a payment is not conclusive of the true character of that payment, it would be proper to proceed on the basis that the legislature knew what it was saying. The word 'compensation' is a well-known expression in law When the legislature says that all payments made under the Act are in respect of the compensation payable to the former holders unless there are clear and convincing circumstances to show that one or more items of payment do not form part of the compensation payable, we must hold that those payments are what they are said to be by the statute. We must give the word 'compensation' its normal and natural meaning. As seen earlier, in clause (e) of section 3 of the Act, the legislature definitely says that the holder or holders of the estate falling within clauses (b) and (c) of section 3 'shall be entitled only to compensation from the Government as provided in this Act'. From this, it follows that all payments made to them under the Act are compensation payable to them for taking over their estates. Statutes which take away others' property, by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were to be made in lieu of the payment of interest on the compensation payable, nothing would have been easier than to say so in the Act. The term 'interest' is a familiar term in law. In this very Act, the legislature had prescribed payment of interest under certain circumstances. As observed by this court in Dr. Shamlal Narula v. Commissioner of Income-tax the interest is a payment to be made by the debtor to the creditor when money was due to the creditor but was not paid or in other words was withheld from the creditor by the debtor after the time when the payment should have been made. Proceeding further, this court observed in that case that interest, whether it was statutory or contractual, represented the profit the creditor would have made if he had the use of the money which he was entitled to. In the cases before us, the assessees were not entitled to any compensation till the same was determined under section 39. Therefore, no amount, to which they were entitled, was withheld from them. Hence, on that account, they were not entitled to any compensation, in lieu of interest." It appears to us that the situation arising out of the promulgation of the Kanom Tenancy Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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