TMI Blog1982 (5) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... onal District judge, Delhi, the compensation was enhanced from Rs. 3.50 per square yard to Rs. 8.50 per square yard, vide order dated 27th January, 1961. At that rate, the compensation payable to the assessee came to Rs. 8,24,551. The Additional District judge also directed payment of interest on the enhanced compensation under s. 28 of the Act to the assessee from the date of taking over of the possession of the land till the date of payment. This order was upheld in appeal by the Punjab High Court. The compensation amount awarded by the Collector was paid to the assessee on 13th May, 1958. The enhanced amount of compensation together with interest awarded by the Additional District judge was paid to the assessee on 6th June, 1962, 13th December, 1962, and 6th May, 1963, in three instalments. A sum of Rs. 1, 10,376 represented payment of interest awarded under s. 28 of the Act by the Additional District judge. It is the common case of the parties that if the interest payable to the assessee is taken to have accrued from day to day, from the date of the taking over of the possession of the land, i.e., 5th May, 1958, the interest amount would have accrued during the period relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h [1968] 69 ITR 159, and held that the addition under the head " Interest " in the assessment for the assessment year 1961-62 should be restricted to Rs. 28,930 only. The learned Accountant Member differed with that finding. He was of the opinion that irrespective of the fact that the assessee was following the mercantile system of accounting it had at no time in the past given any indication about this interest in the account books or for that matter in the return of income-tax. He found that because interest income was a source different from the business which had been accounted for in the account books of the business it did not follow that the assessee had also opted to account for the interest amount also on the mercantile basis. He was, therefore, of the view that such interest amount had to be taxed on receipt basis. However, there being no receipt in the year under consideration, i. e., 1961-62, it was held by him that no part of the interest amount was assessable in that year. He left it open to the department to assess the assessee on receipt basis as and when the interest was received. The appeal was thus referred to a third Member of the Tribunal. The question formul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d " to have accrued from the date of dispossession of the land. According to this view, the interest income becomes due only on the date when the enhanced compensation was granted by the court and not prior to it. Therefore, this interest income cannot be spread over the period prior to the date of the court's order. The other view is that the award of interest under s. 28 of the Act is obligatory; it becomes due from the date of possession by the Government of the land in question; as such, the income accrues each year and not on quantification of the amount. Income accrues or arises when the right to receive the income becomes vested in the assessee. It, therefore, should be spread over the years in which it accrued. While coming to their respective views on this question, the various High Courts have relied upon the decision of their Lordships of the Supreme Court in Dr. Shamlal Narula's-case [1964] 53 ITR 151, wherein the question as to the nature of interest paid under the Act and the question of its taxability was considered. It was held that the scheme of the Act and the express provisions thereof establish that the statutory interest payable under s. 34 is not compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Habib-Ullah-Din, AIR 1967 J K 44, has held that (the order for) payment of interest is mandatory by the courts if the compensation is enhanced. After reviewing the case law on the point, S. Murtaza Fazl Ali J. (as he then was), speaking for the Bench, held (p. 49): "Furthermore, the right to interest on the amount of, compensation which is kept back by the Collector is an inherent, common law right of an owner and has been clearly recognised by section 35 of the Act (J K It Land Acquisition Act) itself and, therefore, the Legislature could not have intended that this right should be curtailed by the court by conferring on him only a discretion to grant interest. In these circumstances, therefore, we are clearly of the opinion that the word may used in section 28 does not invest a mere discretion in the court but imposes a duty on it to pay interest at the rate mentioned in the section and must, therefore, be held to have a mandatory force. We may mention here that s. 28 of the J K Act, which was under consideration in the above-cited decision, is in pari materia with s. 28 of the Act, We are, therefore, of the opinion that where the court enhances the amount of compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited decision agreed with the decision of the Mysore High Court in CIT v. Sampangiramaiah [1968] 69 ITR 159, the Punjab High Court in CIT v. Dr. Sham Lal Narula [1972] 84 ITR 625, the Madras High Court in T. N. K. Govindarajulu Chetty v. CIT [1973] 87 ITR 22 and of the Orissa High Court in Joyanarayan Panigrahi v. CIT [1974] 93 ITR 102, and disagreed with the decision of the Andhra Pradesh High Court in Khan Bahadur Ahmad Alladin Sons v. CIT [1969] 74 ITR 651. The interest income, therefore, has to be spread over all the years when it accrued in the present case. For the assessment year 1961-62 only a sum of Rs. 28,920 was assessable. In the result the question of law referred to us is answered in the affirmative. However, no order as to costs. Before parting with this judgment it may be observed that the question whether the accounts are mentioned on mercantile or cash basis has no bearing on the question of assessability of the interest income under s. 28 of the Act. We agree with a similar view expressed by the Allahabad High Court and the Mysore High Court in Virendra Singh's case [1979] 118 ITR 923 and Sampangiramaiah's case [1968] 69 ITR 159, respectively. - - TaxT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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