TMI Blog1962 (10) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 5 notification, and that the debt not having been discharged by payment on that particular date, the assessee was entitled, in law or in equity, to have interest at 6 per cent. till payment. This in substance appears to be the proper way of justifying the payment of interest and determining its true character. We, therefore, answer the first question against the assessee and in favour of the department. The amount of ₹ 1,28,716 is assessable to tax as income in the hands of the assessee. The Tribunal has not dealt with the question of apportionment of the tax amount between the two assessment years 1955-56 and 1956-57 as in its view the amount was not taxable at all. Question No. 2, therefore, does not arise out of the order of the Tribunal. It will be open to the Tribunal to go into this question afresh and pass suitable orders after hearing the assessee and the department. - TAX CASE NO. 195 OF 1960 - - - Dated:- 29-10-1962 - MR JAGADISAN AND MR SRINIVASAN, JJ. Jagadisan, J. The two questions that stand referred are : (1)Whether the sum of ₹ 1,28,716 is assessable as income under any of the provisions of the Act ? (2)If the answer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he accounting year 1954-55, the previous year for the assessment year 1955-56 and a sum of ₹ 3,78,831 during the accounting year 1955-56, the previous year for the relevant assessment year 1956-57. Of this total amount received, ₹ 1,28,716 represented the interest awarded to the assessee by virtue of the order of this court dated 16th December, 1954. In the assessment proceedings for the years 1955-56 and 1956-57, the assessee contended that the receipt of interest payment of ₹ 1,28,716 was not income chargeable to tax but was only a capital receipt of the same nature as the sum of ₹ 5 lakhs admittedly received as compensation for the compulsory acquisition of the property. The Income-tax Officer, however, included the amount as part of the assessable income taking the view that it was chargeable to tax as miscellaneous income under section 12 of the Act. He apportioned the amount of ₹ 1,28,716 between the two years and included ₹ 50,595 as part of the income of the assessment year 1955-56 and ₹ 78,121 as includible in the income of the assessment year 1956-57. This apportionment was made by the officer by working out the proportion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appropriate Government may at any time when any requisitioned land continues subject to requisition acquire such land by publishing in the Official Gazette a notice to the effect that the Government have decided to acquire such land. When such notice is published in the Official Gazette the requisitioned land shall vest absolutely in the appropriate Government on and from the commencement of the day on which notice is published. On such vesting all encumbrances upon the property cease to exist, and the period of requisition is automatically terminated. In effect the title to the requisitioned land is statutorily transferred from the owner to the appropriate Government. The owner of the acquired land is however entitled to compensation. The provision in regard to fixation of compensation is contained in section 6(2). It reads : In respect of any acquisition of requisitioned land under this Act... the amount of compensation payable shall be such sum as would be sufficient to purchase at the market rate prevailing on the date of the notice under section 5 a piece of land equal in area to, and situated within a distance of three miles from, the acquired land, and suitable for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or who made the offer of ₹ 2,40,000 as and for compensation on 21st December, 1949, offered to pay interest at 6% from 24th May, 1949, which was the date of publication of the notice under section 5 of the Act. Both the Chief Judge of the Court of Small Causes and this court have granted interest at 6% on and from 24th May, 1949, on the amount of compensation fixed as payable. The statute fixes the limit of compensation as the market value of the land on the date of the notification under section 5 or twice the market value on the date of the requisition whichever is less. There is no power on the part of the Government to pay anything more than the ceiling fixed under the Act and it follows that the subject whose property is acquired has no right or claim to demand anything in excess thereof. The amount of ₹ 5 lakhs which has now been determined as the proper compensation payable to the assessee falls within the statutory limits, and it is conceded that any payment over and above the said sum of ₹ 5 lakhs would not represent the statutory compensation payable under the Act. It is, therefore, clear that the interest of 6% awarded as and from the date of section 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .......... At page 611, Lord President (Clyde) observes thus : But an interest calculation is a natural and legitimate guide to be used by an arbiter in arriving at what he thinks would be a fair amount. In most cases in which such an allowance is a constituent of an award it does not separately appear, but is slumped along with other elements in the gross sum decerned for; but there is nothing to prevent an arbiter, if he thinks it just and reasonable in a particular case, to make the allowance in the form of an actual interest calculation from a past date until the sum fixed as at that date is paid. In all such cases, however-whether the allowance is wrapped up in a slump award or is separately stated in the decree-the interest calculation is used in modum aestimationis only. The interest is such merely in name, for it truly constitutes that part of the compensation decerned for which is attributable to the fact that the claimant has been kept out of his due for a long period of time. It is not therefore 'interest of money' chargeable under Case III of Schedule D. The decision in this case rested on the view that the arbiter directed payment of interest onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iabilities of the authority were also transferred under section 113, sub-section 2(a) and (b) and were divided between the councils. By the agreement between the two councils under section 113 a certain sum of balance became due under the adjustment from the defendant to the plaintiff council, and that sum included a sum which under the agreement was called interest. The defendant council accordingly paid over the amount which was the aggregate of the two sums deducting therefrom income-tax on that part of it which represented the interest. It was held that the latter part was not interest within the meaning of the Income-tax Act but that was an element in the calculation of the capital sum, that is, the total sum paid over which had to be made for the purpose of the said adjustment and that accordingly the defendant had no right to deduct income-tax therefrom. This case is on a line with the cases already referred to. The question for decision depended upon the constructions of the terms of the agreement between the two councils. At page 598, Lawrence J. observes thus Southport Corporation's case (Supra) : ...........................I am of opinion that the terms of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Cas. 427, where compensation on an interest basis had been given in respect of the sterilisation of a capital asset, and said : The distinction through these cases is whether the payments were payments of profits, that is, were income, or were payments on capital account estimated in terms of interest. Riches' case (Supra ) had been consistently followed by several High Courts in India, and we have recently adopted the rule laid down therein in T.C. No. 144 of 1960 Since reported as Ramanathan Chettiar v. Commissioner of Income-tax [1963] 50 ITR 43 . We do not feel called upon to add to the discussion in that case. Mr. Swaminathan, learned counsel for the assessee, submits that the rule in Riches' case (Supra ) is unexceptionable but contends that where award of interest is not founded on law or contract but is only an ex gratia grant it can have no separate existence but must be treated as a blend of the primary award. We do not agree with this contention. The question is not under what authority the payment of interest was directed to be made. The real question is what is the character of the amount received. On ultimate analysis the answer to this question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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