1983 (1) TMI 56
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....e of the family of Muthukaruppan Chettiar observing that he had already held that there was no division between Karuppan Chettiar and Muthukaruppan Chettiar, and, therefore, the file had to be clubbed only with the file of the father, Karuppan Chettiar. He further stated that if for any reason it was ultimately held that the claim for partition has to be accepted, it would be possible to take action under s. 34 of the Indian I.T. Act, 1922. On appeal against the assessments made by the ITO on the family of Karuppan Chettiar, the AAC by his order dated December 18, 1954, held that there was complete partition, and, therefore, the order of the ITO on the basis of the continued existence of the HUF had to be cancelled. The ITO, for the purpose of giving effect to the order of the AAC, issued notices under s. 34 of the Indian I.T. Act on March 2, 1957, to the family of Muthukaruppan Chettiar for the three assessment years 1950-51 to 1952-53, after obtaining the previous approval of the Commissioner. In response to the said notices, Muthukaruppan Chettiar submitted returns on April 9, 1957, for the three assessment years under protest. On the basis of the returns filed, the ITO made as....
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....sp; 13-4-67 to 30-9-67-5 months and 7 days at 6% and 1-10-67 to 12-4-68-6 months and 15 days at 9% 12,506 1969-70 13-4-68 to 12-4-69-One year at 9% 14,809 1970-71 13-4-69 to 12-4-70-One year at 9% 14,809 1971-72 13-4-70 to 12-4-71-One year at 9% 14,809 1972-73 12-4-71 to 16-6-71-2 months and 4 days 2,632 ------ &....
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.... the entitlement for interest has accrued even as early as June 5, 1965, when the refund became due as per s. 244, and, therefore, the AAC was right in holding that only a sum of Rs. 2,632 had accrued as interest during the accounting year relevant to the assessment year in question, and that the Revenue was not justified in proceeding to assess the entire sum of Rs. 77,844 as an amount accrued during the assessment year in question. Aggrieved by the decision of the Tribunal, the Revenue has sought and obtained a reference to this court on the following question under s. 256(1) of the I.T. Act, 1961 : " Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that though the sum of Rs. 77,844 was received by the assessee in a lump sum during the previous year relevant to the assessment year 1972-73, only a sum of Rs. 2,632 accrued to the assessee as interest for the said assessment year under sec. 243 of the Income-tax Act, 1961 ? " In this case, there is no dispute regarding the factual position. If the accrual basis is adopted, the entire sum of Rs. 77,844 received during the previous year relevant to the assessment year 1972-73, cannot be ....
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....that if refund is not made within a period of six months from the date of such order, interest at a specified rate is payable. In this case, it is not disputed that the liability to pay interest under s. 244 of the Act arose on June 5, 1965, and that the actual payment was made only in the year 1971. Both the AAC and the Tribunal have held that the statutory liability to pay interest having arisen on June 5, 1965, entitlement to interest should be taken to have accrued statutorily since June 5, 1965. Since the sum of Rs. 77,844 is the amount of interest accrued for the period from June 5, 1965, to June 16, 1971, 'the amount of interest has to be treated as the income accrued during that period, and, therefore, the said interest income has to be spread over for the various assessment years commencing from 1966-67 to 1972-73. The sum of Rs. 77,844 received on June 16, 1971, as the interest due to the assessee for the period from June 5, 1965, to June 16, 1971, cannot in any sense be treated as the income of the year 1972-73. On the facts of this case, the question for consideration is whether the accrual or the actual receipt should be taken as the basis. Both the AAC and the Tribun....
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....in a position to accept the said contention for the reason that merely because the amount was paid during the previous year relevant to the assessment year 1972-73, the interest payments cannot be taken to be the income of the assessee for the said assessment year, for the interest income has accrued from June 5, 1965, till June 16, 1971, when the refund was given. This view of ours finds support from the decision of this court in T.N.K. Govindarajulu Chetty v. CIT [1973] 87 ITR 22 (Mad), to which one of us was a party. That case also related to interest payment on the compensation amount which was payable by the Government for a property acquired under the provisions of the Land Acquisition Act. Though the property was acquired in the year 1949, the compensation payable to the assessee by the Government was ultimately fixed at Rs. 5,00,000, and the Government paid the same in two instalments, one in the assessment year 1955-56 and the other in the assessment year 1956-57. The ITO took the view that the amount paid included a sum of Rs. 1,28,716 representing the interest and apportioned the same in the two years, rejecting the claim of the assessee that it was capital in nature. T....
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....4 of the Act deals with the receipt of income while the accrual of income is dealt with in clause (b) of that sub-section. " The above passage from the decision of the Supreme Court throws considerable light on the question before us as to whether the accrual or the actual receipt should be taken as the basis. The principle laid down by this court, in the decision cited supra, applies on all fours to the facts of this case. Here also, there is a statutory liability to refund and to pay interest on the amount to be refunded if there is a delay in making refund. The conduct of the assessee in showing in his accounts the interest as having accrued in the respective years from 1966-67 to 1972-73 clearly indicates that the assessee had adopted the accrual basis. It is also not in dispute that the sum of Rs. 77,844, which is the interest actually received during the year 1972-73, represents the interest accrued for the years 1966-67 to 1972-73. On these facts, as pointed out by the Supreme Court in CIT v. Chunilal V. Mehta & Sons P. Ltd. [1971] 82 ITR 54, what was relevant to find out is as to when the amount accrued, and not when the amount was actually received. In CIT v. Hira Lal Mi....