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TMI Blog1985 (9) TMI 101X X X X Extracts X X X X X X X X Extracts X X X X ..... vi) of the Income-tax Act, 1961 ('the Act') and it is irrelevant that the deposits had been made voluntarily or under statutory compulsion. 3. The Commissioner (Appeals) has confirmed those orders on the ground that section 7(3) of the 1974 Act would be redundant if the said interest was not to be considered as income of the assessees as argued by their advocate. 4. This matter has been argued at length before the Pune Bench of this Tribunal and at the time of hearing we have had the benefit of the decision of that Bench. However, the assessees' advocate tried to point out the errors in that decision and also re-emphasized the points argued before that Bench. 5. The argument on behalf of the assessees in a nutshell is : (i) that the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (ii) that the compensation is a capital receipt, the following authorities were relied upon---Senairam Doongarmall v. CIT [1961] 42 ITR 392 (SC), Bombay Burmah Trading Corpn. Ltd. V. CIT [1971] 81 ITR 777 (Bom.) and CIT v. New India Assurance Co. Ltd. [1980] 122 ITR 633 (Bom.). 8. In support of the proposition (iii) that reliance was placed on the decision in the case of CIT v. Madho Pd. Jatia [1976] 105 ITR 179 (SC). 9. The learned departmental representative on the other hand, argued that we should take the same decision as the decision of the Pune Bench for judicial discipline. He pointed out that there has been no High Court decision subsequent to that decision which is reasonable decision based on cogent reasoning. He also empha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that section 6 of the 1974 Act had not been considered therein. He also said that the said Bench had relied upon the decision in the case of Dr. Shamlal Narula v. CIT [1964] 53 ITR 151 (SC) but that case was concerned with the interest on compensation, not with compensation and so was not applicable here. Regarding the argument based on section 7(3) he relied on the decisions in the cases of [1960] 40 ITR 42 (sic) and CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC) that the fiction cannot be used to bring within the scope of taxability what is not taxable otherwise, by charging section. 11. We shall deal with all the arguments for and against, in the above order. Now, there is no doubt that making of deposit is compulsory under the 1974 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation." This is a reference to the Peace Treaty which compelled the payment of compensation. This cannot be interpreted to mean that when a person is prevented from exercising his power of disposition over his property, what is paid is compensation. 12. It is true that under the Constitution of India no property could be compulsorily acquired or requisitioned without payment of compensation and a law which violated that provision would be ultra vires. However, from this it does not necessarily follow that the intention of the Legislature was payment of compensation. The 1974 Act is not a part of the Constitution nor does the Constitution direct the enactment of this Act. It is not in exercise of the constitutional provision with rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been possible to say that since business was done, though compulsorily, profits had resulted...." This shows that the receipt would have been regarded as a revenue receipt if the assessee's business would have been continued. 14. In the case of Bombay Burmah Trading Corpn. Ltd. the Court's decision is based on the fact that the rights under the forest leases were acquired and that they were capital assets. That is why the compensation paid in respect thereof could not be held to be revenue receipt. 15. In the case of New India Assurance Co. Ltd. the assessee had been deprived of the right of management of the company and that right was held to be a capital asset and so the compensation paid in respect thereof was held as not liable to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng sentence in the case of Bombay Burmah Trading Corpn. Ltd. "Compensation received for immobilisation, sterilisation, destruction or loss, total or partial, of a capital asset would be capital receipt..." He argued that since the money has been immobilised in this case, the compensation must be considered to be a capital receipt. We do not agree. In that case, immobilisation was part of the entire act of acquisition and it was acquisition with which the Court was concerned. Therefore, immobilisation cannot be separated out and this word cannot be considered in isolation. The main conclusion or the test derived from the above cases remains unaffected. 17. Therefore, applying these tests to the case before us, we have to find out the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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