TMI Blog1984 (6) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... nging to the assessee was acquired by the State Government. On October 11, 1967, the preliminary notification was issued and on September 1, 1969, the final notification was issued. On February 11, 1971, the possession of the land was taken. On December 6, 1971, the assessee was paid advance compensation of Rs. 1,48,500. On July 10, 1974, the Land Acquisition Officer passed an award determining the compensation payable to the assessee at Rs. 2,65,650 with interest at 5 per cent. from February 11, 1971. The award was at the rate of Rs. 14,000 per acre as against Rs. 75,000 claimed by the assessee. The assessee being not satisfied with the award, got the matter referred to the civil court for enhanced compensation. On July 22, 1981, the civil court disposed of the matter awarding compensation at Rs. 23,000 per acre. On August 31, 1974, the Income-tax Officer completed the assessment for the assessment year 1972-73. He worked out the compensation receivable by the assessee at Rs. 12,56,250 at the rate of Rs. 75,000 per acre as per the claim. He deducted therefrom Rs. 1,48,500 received by the assessee and on the balance, he computed interest at 5 per cent. receivable by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s court in CIT v. V. Sampangiramaiah [1968] 69 ITR 159 (Mys) has been understood in that sense at least by three High Courts, namely, the Andhra Pradesh High Court in CIT v. Smt. Sankari Manickyamma [1976] 105 ITR 172 (AP), the Gujarat High Court in Topandas Kundanmal v. CIT [1978] 114 ITR 237 (Guj) and the Kerala High Court in M. Jairam v. CIT [1979] 117 ITR 638 (Ker). Before we examine these contentions, it is first convenient to set out the statutory provisions under the Land Acquisition Act, 1894, relevant to the case. Section 4 of the Land Acquisition Act provides for issuing a preliminary notification for acquiring land. Section 6 provides for declaration that the land is required for public purpose. Sections 11 and 12 provide for enquiry and for making of an award. The award must contain the determination of compensation payable in respect of the land as on the date of the preliminary notification. Section 18 provides for a reference to court for adjudication of the claim as to compensation if the claimant does not accept the award. Section 23 provides for determining the amount of compensation by the court. Section 31 provides for payment of compensation or deposit of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not two different rights. Both relate to the right to receive proper compensation in respect of the land acquired. The Land Acquisition Officer is required to make an award determining the compensation and if that is not accepted by the claimant on the ground that it is inadequate or insufficient, then the court upon reference has to determine the proper compensation for the land acquired by the State. This compensation is required to be determined by both the authorities on the basis of the market value of the land with reference to the date of publication of the preliminary notification under section 4 of the Act. The Supreme Court in Khorshed Shapoor Chenai v. Asst. CED [1980] 122 ITR 21 (SC), at p. 31, observed: " Upon acquisition of his lands under the Land Acquisition Act, the claimant has only one right which is to receive compensation for the lands at their market value on the date of the relevant notification and it is this right which is quantified by the Collector under section 11 and by the Civil Court under section 26 of the Land Acquisition Act. It is true that under section I 1, the Collector after holding the necessary inquiry determines the quantum of compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the annual net profits of the U Company, which was due to them on 31st March of every year. On December 1, 1943, the S Company assigned to A their office as managing agents and all their rights and benefits under the managing agency agreement and the consideration received by them was transferred by them to the capital reserve account. The accounts of the managing agency commission payable to the managing agents for the calendar year 1943 were made up in 1944 and paid to A in 1944. The question was whether in the assessment year 1944-45, A was liable to pay tax on accrual basis on the whole of the commission or whether the tax was payable by A and the S Company on proper apportionment being made between them of the amount received by A. The majority judgment held that A was liable to pay tax on the whole commission and that the commission was not liable to be apportioned between S and A in proportion to the service rendered by each of them as managing agents. In discussing the question, the Supreme Court examined as to when income can be said to have accrued as used in the Income-tax Act. The position was summarised thus (p. 51) : "It is clear, therefore, that income may accrue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s than that awarded. However, the alternate contention urged by Mr. Sarangan should not go unnoticed. The learned counsel submitted that the interest accrued on the compensation finally determined should at least be brought to tax in the relevant year in which it is awarded or received by the assessee and it should not be spread over the years from the date of taking possession up to the date of payment. If that is not permitted, the counsel argued that the Department would lose a substantial portion of the tax on interest on compensation by the bar of limitation as it has no means to keep track of the assessee's litigation in courts of law. We do not think that we could accept this submission since it stands concluded by the decision of this court in Sampangiramaiah's case [1968], 69 ITR 159. In that case, the Department insisted that the interest accrued should be brought to tax in the year in which it was received. But this court negatived that contention, firstly, on the ground that the accrual of interest was not arrested in each year by mere pendency of the proceedings in the various forms and, secondly, that the omission by the assessee to include the interest which had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x in the year in which it is received. The Kerala High Court, however, even relying upon the decision of this court in Sampangiramaiah's case [1968] 69 ITR 159 (Mys) has taken contrary view in Jairam v. CIT [1979] 117 ITR 638 (Ker). It was observed therein that the right to interest on the excess amount of compensation arises only on the date when the court awards the interest and it becomes due to the assessee only on that date and not on the prior date. Similar was the view taken by the Andhra Pradesh High Court in Khan Bahadur Ahmad Alladin Sons v. CIT [1969] 74 ITR 651 ; CIT v. Smt. Sankari Manickyamma [1976] 105 ITR 172; CIT v. Syed Khadruddin Ali Khan [1983] 144 ITR 266 and Sadasiva Krishna Rao v. CIT [1983] 144 ITR 270. But the same High Court in the recent decision in ClT v. Janardhan Reddy [1983] 145 ITR 303, without reference to the earlier three decisions of that court, has held to the contrary. It was observed that the interest that is awarded on the compensation will have to be assessed from year to year right from the date on which the assessee was dispossessed of the land. With respect, if we may say so, the Kerala and Andhra Pradesh High Courts have not proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be brought to tax in the assessments for the several years in question since the assessee cannot be said to be entitled to anything more than the amount as fixed by the Land Acquisition Officer in his award. In these references, at the instance of the Department, the question that arises for our consideration is, whether the assessment of the interest income as computed by the Income-tax Officer is valid in law ? Under the Land Acquisition Act, the claimant gets a right to recover the interest on the amount of compensation as per the award passed by the Land Acquisition Officer. The said interest becomes payable to the owner under section 34 of the Land Acquisition Act from the date of taking possession. Similar would be the consequence when the compensation gets enhanced by a decree of the civil court in further appeals. This court has laid down in Sampangiramaiah's case [1968] 69 ITR 159 (Mys), that the interest accrues on the award amount from the date of dispossession and the same would become recoverable when it is quantified by the Land Acquisition Officer and enhanced by the civil court in further appeal/appeals. On this premise, it was held by this court that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as and when it is enhanced or reduced. The question that arises then, in land acquisition cases, is, when does the interest on such compensation accrue to the assessee ? Under section 28 of the Land Acquisition Act, the court is empowered to award the interest on the excess amount of compensation at the rate of 5 per cent. or 6 per cent. per annum, as the case may be from the date of taking possession up to the date of payment of such excess amount into the court. Under section 34 of the Act, the claimant is entitled to interest on the amount of compensation fixed by the Land Acquisition Officer in the award, from the date of taking possession until it is so paid or deposited. This interest is deemed to have accrued to the assessee year after year as held by this court in Sampangiramaiah's case [1968] 69 ITR 159. This accrual of interest which dates back to the date of dispossession and any interest on further compensation also becomes payable to the assessee from the date of dispossession up to the date of payment or deposit. This concept is peculiar to land acquisition cases. The, right to the interest on the award amount/increased compensation under the Land Acquisition A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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