TMI Blog1999 (4) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid Acts, assessee was entitled to compensation of Rs. 93,28,500 and Rs. 5,17,000 respectively. As per section 9(2) of the Coal Mines Act, the Government has to pay simple interest @ 4% the compensation amount from the date on which the Coal Act received the assent of the President upto the date when the amount is paid by the Central Government to the Commissioner of Payments. Section 17 of the Act provides for appointment of Commissioner of Payments by the Central Government for the purpose of distributing the amount payable to the owner of each coal mine. Section 18 provides that the Central Government should pay, to the Commissioner for payments, compensation amount within 30 days from the specified date. Amended section 18(5) reads as under: "Interest accruing on the amounts standing to the credit of the deposit account referred to in sub-section (3) shall enure to the benefit of the owners of coal mines and shall also be payable to the Commissioner in addition to the sum referred to in sub-section (1)." In section 20, it was stated that the creditors of the coal mines owners should make a claim with the Commissioner of Payments for recovery of their debts. Sections 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n February, 1983 even though it was received subsequently. The case of the assessee that the amount has to be taxed in the respective years of accrual i.e., between assessment years 1972-73 to 1984-85, though found to have some basis, was rejected on the ground that until and unless the Government decided disbursement, it cannot be said that the interest has automatically accrued or was paid. Subsequently, the assessing officer ascertained the actual year wise accrual of interest by addressing a letter to the Commissioner of Payments and accordingly taxed the same in the assessment years 1976-77 to 1983-84 also. 6. In so far as assessment year 1984-85 is concerned it has seen many a round of litigation as could be seen from the order of the CIT(Appeals) dated 25-8-1987 (assessment order was set aside), dated 25-3-1991 (assessment made by the Assessing Officer under sections 143(3)/251 was confirmed) and 11-11-1994 [impugned order passed in pursuance of the direction of the Tribunal vide their order dated 19-3-1992 in ITA No. 1344 (Cal.) of 1991]. 7. We would briefly touch upon the facts which are necessary for disposal of the appeals. In the previous round of litigation, Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the Commissioner of Payments in the form of disbursement of surplus after meeting the debts and liabilities of the company, it was held that the creditors of the assessee-company have an overriding title to the interest of Rs. 67,49,553. He further observed that the Commissioner of Payments had disbursed the entire interest along with the principal to the claimants and not a penny had ever reached the hands of the assessee as its income would also support the case of the assessee. He, therefore observed that the interest of Rs. 67,49,553 is not taxable either on receipt basis or on accrual basis. For the reasons given by him in his detailed order for the assessment year 1984-85, the addition made in other assessment years was also deleted. 10. Aggrieved by the action of the CIT(A), revenue is in appeal before us, contending, inter alia, that the interest accrued to the assessee which was later on applied by the Commissioner of Payments to settle the dues of the claimants and, therefore, it is a case of application of income already accrued to the assessee. In other words, income cannot be said to have been diverted at source by an overriding title as the interest is payable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that the CIT(A) has jumped to the conclusion that the income did not accrue to the assessee whereas, Hon'ble Supreme Court never stated so and also highlighted that other particulars were not examined by the CIT(A) as per direction of the Appellate Tribunal. 11. As regards the question as to when the interest income accrues, ld. departmental representative relied upon the decision of the Hon'ble Orissa High Court in the case ofCIT v.Raja S.N.Bhanja Deo [1977] 106 ITR 748. 12. On the other hand, ld. counsel, appearing on behalf of the assessee, submitted that ld. departmental representative has travelled beyond the grounds urged before the Tribunal. Elaborating further he submitted that it is not the case of the appellant that the CIT(A) has not given him proper opportunity before passing an order nor was a ground taken regarding non-compliance of the terms of the Appellate Tribunal. Ld. counsel, therefore, submits that the issues which were not specifically raised before the Tribunal should not be entertained. Apart from the paper book which was already filed, ld. counsel also filed an additional paper book containing several judgments of the Apex Court, order of the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable with the Commissioner is more than the amount payable to the claimants, the difference is payable to the mine owner under section 26 of the Coal Act. Ld. counsel submits that no such amount was received from the Commissioner of Payments and, therefore, there is no accrual of income. He further submitted that the Statute specifically provided for payment by the Central Government to the Commissioner of Payments for disbursement to the claimants and, therefore, at no stage, the assessee-company was involved. In other words, the interest never reached the hands of the assessee-company. The only provision by which the assessee-company was entitled to receive was section 26 of the Coal Act. But in the instant case, there was no such receipt. Therefore, according to the ld. counsel, there was no real income. He also submitted that there was an over-riding title created under the Statute. Therefore, it was not the case of application of income but diversion of income under various provisions of the Coal Act and Coking Act. He relied upon the following decisions in support of his submission that there is no real income and, at any rate, there is diversion of income by overriding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority, etc. were not agitated by the revenue by raising specific ground and, therefore, do not call for consideration. 14. As regards the taxability of interest either on accrual basis or on receipt basis, it is necessary to bear in mind the settled principles on the question of real income as well as diversion of income by over-riding title. In the case of Raja Bejoy Singh Dudhuria the facts are that the assessee succeeded to the family estate on the death of his father. Subsequently, his step mother brought a suit for maintenance against him in which a consent decree was made directing the assessee to make a monthly payment of a fixed sum to his step-mother. It was declared that the maintenance was a charge on the ancestral estate in the hands of the assessee. The amounts paid by the assessee to his step-mother were not included in his income on the ground that there was diversion of income by overriding title. The Privy Council held that it was not a case of application by the assessee of part of his income in a particular way; it was rather the allocation of a sum out of his revenue before it became income in his hands. It was, therefore, directed that such payment shall st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the firm. 19. In the case of Shoorji Vallabhdas Co., the facts are that the assessee credited in its accounts the commission receivable under original agreement. Subsequently, assessee entered into a contract, after the end of the accounting year, to receive less commission. The question that arose for consideration was whether whole amount credited in the books was taxable as income. In this regard the Hon'ble Supreme Court observed, at page 148 of the report, as under: "Income-tax is a levy on income. No doubt, the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a 'hypothetical income', which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even ..... X X X X Extracts X X X X X X X X Extracts X X X X
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