AJIT KUMAR SENGUPTA, J. - (1.) : In this reference under s. 256(1) of the IT Act, 1961, at the instance of the Revenue, the question that falls for determination is whether interest paid on the additional compensation by the Court under s. 28 of the Land Acquisition Act, 1894, is assessable for the relevant year in which it was awarded or was received by the assessee or such interest dates back to the date of dispossession and assessable from year to year on the basis of accrual.
(2.) THE facts of this case are in a narrow compass. A property at No.2, Dum Dum Road, Calcutta, was acquired by the Government of West Bengal under the Land Development and Planning Act, 1948. The Government took possession of the property on December 31, 1962. The Land Acquisition Collector awarded compensation of Rs. 1,87,570. The assessee went in appeal to the Land Acquisition Judge who by his order dated July 4, 1970, increased the compensation by Rs. 98,567. He also awarded interest on the enhanced compensation from the date of acquisition to the date of payment of compensation at the rate of 6 per cent per annum. The amount of interest up to November, 1970, was calculated to be Rs. 47,034. The ITO took the view that the entire interest was assessable in the asst. yr. 1971-72. He, therefore, included the interest of Rs. 47,034 in the assessment of the assessee. On appeal, it was submitted before the AAC that the interest accrued to the assessee from year to year from the date of taking possession of the property by the Government up to the date of payment of the enhanced compensation and that the interest accruing in any particular year was assessable in that year. The AAC accepted the assessee's contention. He computed the interest receivable in the year under consideration at Rs. 3,939 and held that this amount was taxable in the year under consideration and allowed relief to the assessee of Rs. 43,095.
(3.) AGGRIEVED by the order of the AAC, the Department came up in appeal before the Tribunal. It was submitted before the Tribunal by the Departmental Representative that the right to receive interest accrued to the assessee on July 4, 1970, when the Land Acquisition Judge decreed the payment of enhanced compensation along with interest. According to him, before the date of the decree, the assessee had no right to receive any compensation and interest. He urged that the interest computed by the ITO was rightly included in the assessment of the assessee. It was urged on behalf of the assessee that the right to receive the interest accrued to the assessee from the date of taking of possession by the Government as it was on the date of acquisition of the property that the enhanced compensation was also to be paid. He placed reliance on the decision in the case of T.N.K. Govindarajulu Chetty vs. CIT (1973) 87 ITR 22 (Mad) in support of his contention. The Departmental Representative, on the other hand, pointed out that the assessee did not maintain any accounts on the mercantile system and the decision in Govindarajulu Chetty's case (supra) was not applicable to the facts of the present case. The Tribunal, following the decision in the case of CIT vs. Sampangiramaiah (1968) 69 ITR 159 (Mys) and the decision in the case of T.N.K. Govindarajulu Chetty vs. CIT (supra) held that interest income is to be included in the assessment of the assessee on accrual basis in the respective years from the date the Government took possession of the property to the date of payment of the enhanced compensation. The Tribunal accordingly affirmed the action of the AAC.;