A.N.Sen, J. - (1.) In this reference under Section 66 of the Indian Income-tax Act, 1922, the following question of law has been referred to this court: "Whether, on the facts and in the circumstances of the case, the extra amount of compensation amounting to Rs. 7,24,914 was income arising or accruing to the assessee during the previous year relevant to the assessment year 1956-57?"
(2.) The facts material for the purpose of this reference have been fully set out in the statement of the case and may be briefly noticed. The assessee is a limited company dealing in land. Certain plots of land measuring more or less 19.17 acres, equivalent to about 57 bighas 19 cott., in the village Kankulia, P. S. Tollygunge, District 24-Parganas, which belonged to the assessee were requisitioned by the Government of West Bengal by an order dated 21st June, 1967 (sic) under the provisions of Rule 75A(1) of the Defence of India Rules read with Section 19 of the Defence of India Act. Thereafter, the State Government acquired the land permanently in exercise of the powers conferred on it by Section 5 of the Requisition of Land (Continuance of Powers) Act, 1947. The notice of acquisition dated the 27th December, 1952, was published in the Calcutta Gazette dated 8th of January, 1953, and a sum of Rs. 24,97,249 was awarded as compensation by the Land Acquisition Collector to the assessee. The assessee being dissatisfied with the amount of the compensation paid to it preferred an appeal to the Court of Arbitrator, 24-Parganas, Calcutta. In that case, numbered as Land Acquisition Case No. 17 of 1955, the arbitrator gave an award in favour of the assessee on 29th July, 1955, and by his award the said arbitrator fixed the amount of the compensation at Rs. 30,10,873 for permanent acquisition of the land in place of Rs. 24,97,249 assessed by the Land Acquisition Collector. The amount of compensation for the acquisition of land was thus enhanced by the sum of Rs. 5,13,624on which interest was to run at 5% per annum from the date of acquisition, that is, January 8, 1953, till the date of payment. The arbitrator also directed that further recurring compensation at Rs. 6,272-10-4 per mensem would be paid to the assessee from the date of the requisition, that is, June 29, 1946, till the date of the acquisition, that is, January 1, 1953. Against the order of the arbitrator the State Government preferred an appeal to the High Court which was initially numbered as Appeal From Original Decree No. 159 of 1955. During the pendency of that appeal on April 25, 1956, the State Government deposited a sum of Rs. 7,36,691 which the assessee was permitted to withdraw, on furnishing the security bond on May 9, 1966, which was executed by the assessee and on the basis of which the assessee was allowed to withdraw the money deposited by the State Government The said security bond executed by the assessee came to be considered by the Tribunal and one of the clauses of the said security bond noted by the Tribunal reads as follows: "Now the condition of this security bond is that if the High Court by its decision in the said appeals preferred by the Government will reduce the amount of award of this court, the excess amount received by the Hindus-than Housing and Land Development Trust Ltd. shall be duly paid back both to the Arbitrator of 24-Parganas, Calcutta, or its successor-in-office, then and in such case or if the High Court by its decision will not in any way reduce the amount of the said award, this bond shall be void and of no effect otherwise it shall remain in full force and effect."
(3.) On receipt of the amount on the basis of the aforesaid bond executed by the assessee, the assessee credited the said amount in its suspense account on that date, namely, May 9, 1956. The Income-tax Officer proceeded to assess the said amount as income of the assessee which had accrued to the assessee in the relevant year. Against the decision of the Income-tax Officer the assessee preferred an appeal to the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, however, affirmed the order of the Income-tax Officer and dismissed the appeal, as the Appellate Assistant Commissioner was of the opinion that the said income had accrued in the relevant year to the assessee which maintains its accounts on a mercantile basis. The assessee then appealed to the Tribunal. Two contentions were raised on behalf of the assessee before the Tribunal. The first contention was that the amount of the compensation received by the assessee is not a receipt of a revenue nature and it could not, therefore, be included in the assessee's total income. The second contention was that, in any event, the amount did not accrue to the assessee during the relevant previous year ended on the 31st March, 1956. The Tribunal did not accept the first contention raised on behalf of the assessee and in the instant reference, we are not concerned with that aspect of the matter. The Tribunal, however, accepted the second contention of the assessee that the further sum of Rs. 7,24,914 was not taxable in the relevant assessment year 1956-57. The Tribunal noted that the amount of compensation for the acquisition was enhanced by the sum of Rs. 5,13,624 on which interest was to run at 5 per cent. per annum from the date of acquisition, i.e., January 8, 1953, till the date of payment and a further recurring compensation of Rs. 6,272 per mensem was also to be paid to the assessee from the date of the requisition, i.e., June 29, 1946, till the date of the acquisition, i.e., January 7, 1953. The Tribunal allowed the appeal of the assessee and the Tribunal held that the said sum of Rs. 7,24,914 could not be said to have accrued to the assessee in the relevant previous year. The Tribunal noted that there is an appeal preferred by the State Government against the amount ordered pending before the High Court challenging the validity of the enhanced amount and the said appeal was filed by the Government within the relevant year of account and the position, therefore, was at the end of the relevant year the claim of the assessee to receive the additional amount was sub judice. The Tribunal also considered that the assessee had to execute security bond before it was permitted to withdraw the said amount deposited by the State Government in court and the Tribunal considered the terms and conditions of the said bond and the effect of the said bond and in its order the Tribunal has referred to one of the conditions of the bond which we have already set out. The Tribunal was of the view that under the circumstances the assessee had no absolute right to receive extra amount of compensation until the decision of the appeal by the High Court. The Tribunal referred to the decision of the Punjab High Court in the case of Commissioner of Income-tax v. Jai Parkash Om Parkash Co. Ltd. [1961] 41 ITR 718, 722 (Punj) and relied on the following observations of the court in the said decision : "The scheme of the Act would show that only those sums are taxable which accrue as income, i.e., they must actually accrue or arise. No amount can be said to accrue unless it is actually due. Claim to an amount is not tantamount to the amount being due or in other words that the amount has accrued. In the instant case, the very foundation of the claim is in jeopardy. If the appeal goes against the assessee, then nothing would be due. It is only if it goes in his favour that the amount will accrue.";