R.N.MISRA, J. - (1.)ON an application of the Revenue made under S. 256(2) of the IT Act of 1961 (hereafter referred to as "the Act) this Court directed the Tribunal, Cuttack Bench, to state a case and refer the following two questions for opinion of the Court :
"(1) Whether, on the facts and in the circumstances of the case, the assessee's building at Cuttack Town is an agricultural house property and the income therefrom is not assessable income as defined in the Act ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that only the instalment due referable to the year under consideration, namely Rs. 1,245, as disclosed by the assessee is assessable and not the entire amount ?"

(2.)WE are concerned with asst. year 1965 66. The assessee had not taken into account the income attributable to a house called the Kanika House situated in the immediate vicinity of agricultural lands measuring about 35 acres all located within the municipal area of Cuttack which was also used as the residence of the assessee and claimed that the income attributable to the dwelling house was exempt as coming within the definition of agricultural income under S. 2(1) of the Act. Assessee was the ex proprietor of the Kanika Estate and became entitled to compensation under the Orissa Estates Abolition Act of 1951. Assessee claimed that a sum of Rs. 14,947 received by way of interest on the compensation should be spread over twelve years on equal proportion covering the asst. yrs. 1953 54 to 1964 65 on the ground that the income had accrued equally in each of these years. This contention was not accepted by the ITO as also the AAC. But the Tribunal came to hold that a sum of Rs. 1,245 out of the interest referred to above was to be taken as income of this year.
So far as the second question is concerned, it is conceded by both sides that the decision of this Court in CIT vs. Raja S.N. Bhanja Deo (1977) 106 ITR 748 (Ori) : TC31R.592 disposed of on 1st Dec., 1975, between the parties answers the point. In that case a Bench of this Court held :

"There is no material here at all to hold that before compensation was finalised, the quantum of the interest could at all be worked out because under the statutory provision interest is a percentage of the compensation that becomes due. Therefore, as long as the compensation is not quantified, it is difficult to hold that interest was accruing on yearly basis. On the terms of the statute, the right to interest would accrue only when the compensation gets quantified though, for purposes of working out the quantum of interest to be paid to the ex proprietor, the rate indicated on annual basis has to be taken into account. This being the position, we are of the view that the Tribunal went wrong in holding that interest was accruing to the assessee year after year since abolition of the estate till payment of the compensation."

(3.)ON this reasoning, this Court held that the total interest was assessable during the year of receipt, namely, asst. year 1965 66, and not in any earlier year. Our answer to the second question, therefore, is : On the facts and in the circumstances of the case, the Tribunal was not justified in holding that only the instalment due referable to the year under consideration, namely, Rs. 1,245, as disclosed by the assessee was assessable.