Decided on October 22,1972



Lakshmaiah, J. - (1.) AT the instance of the Commissioner of Income-tax, the Income-tax Appellate Tribunal referred under Section 256(1) of the Income-tax Act, 1961 (referred to hereinafter merely as "the Act"), the following question for our decision : "Whether, on the facts and circumstances of the case, the entire interest amounting to Rs. 31,659 received on the 1st of March, 1964, or only a sum of Rs. 1,260, the interest attributable to the year ending 31st of March, 1964, was assessable as income for the assessment year 1964-65 ?"
(2.) THE assessment year, in the instant case, is 1964-65 for which the department adopted the relevant accounting year as the year ending with March 31, 1964. The assessee is an individual and she has had her agricultural land situated at Rayaghada, acquired by the State Government of Orissa under the Land Acquisition Act some time in the year 1933, and as the amount awarded towards the compensation was found to be inadequate, the matter was taken before a court of law and the matter ultimately culminated in a compromise decree being passed by the Orissa High Court on May 9, 1963. As per the terms of that compromise the assessee was entitled to receive an extra compensation of Rs. 22,904 towards the value of the land and a further sum of Rs. 31,659 as interest at the rate of 6% per annum for the period during which the said extra compensation amount remained duo to the assessee. The assessee received the extra compensation amount as well as the said sum of Rs. 31,659 on March 1, 1964. Both the date on which the compromise decree was passed as well as the date on which the assessee received the said amounts fell during the relevant previous year. The assessee disclosed an income of Rs. 1,260 being the interest accrued for the relevant assessment year. She, however, declared as the total amount of interest received, namely, the sum of Rs. 31,659, claiming that the entire amount of interest received during the relevant year was not chargeable to tax for that year. The Income-tax Officer held that the entire amount of interest, namely, Rs. 31,659, is liable to be taxed for the assessment year in question.
(3.) ON appeal, the Appellate Assistant Commissioner confirmed the decision of the Income-tax Officer, observing that the award of interest, under Section 28 of the Land Acquisition Act, 1894, is discretionary and that the interest has to be calculated on the extra amount of compensation awarded by the court, and that the said amount of compensation was not determined till the court delivered the judgment, and the interest received by the appellant accrued to him only on the date of the judgment. According to the Appellate Assistant Commissioner, even if this interest is to he calculated with reference to the period of 26 years, that cannot be said to have accrued to the assessee before the date of the judgment of the court. In further appeal before the Tribunal, the Tribunal upheld the claim of the assessee and allowed the appeal holding that since the land was acquired in the year 1933, and the assessee's right to receive the correct value of her land accrued to her immediately when the land was acquired, the amount which was legally taxable as income from interest for the relevant year was Rs. 31,659 divided by 26, i.e., Rs. 1,260. It is under these circumstances the question was referred for our decision. The point that arises then for determination is whether the interest for 26 years amounting to Rs. 31,659 or only a proportionate interest amounting to Rs. 1,260 and attributable to the relevant accounting year that was assessable for income-tax for the assessment year 1964-65.;

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