COMMISSIONER OF INCOME TAX Vs. YASHWANT RAO PAWAR HIS HIGHNESS MAHARAJA

JUDGEMENT

(1.) BY this reference under s. 256(1) of the IT Act, 1961 (hereinafter referred to as "the Act"), the Tribunal, Indore Bench, Indore, has referred the following question of law for the opinion of this Court :

(2.) THE assessee, His Highness Maharaja Yashwant Rao Pawar of Dewas (junior), an individual, derived income, among others, from agricultural land belonging to him. Some agricultural land measuring 73.39 acres belonging to the assessee was acquired by the State Government on March 23, 1965. THE possession of the land acquired was taken over by the Government on March 30, 1965. THE Land Acquisition Officer offered an amount of Rs. 3,57,251 as compensation to the assessee for the land acquired. On a reference made at the instance of the assessee by the Land Acquisition Officer the Court enhanced the amount of compensation by Rs. 2,07,000 by its decree dated February 7, 1970. This enhanced amount of compensation included an interest of Rs. 43,431 for the period from April 1, 1965, to March 31, 1968, under the provisions of s. 28 of the Land Acquisition Act. THE enhanced amount of compensation including the interest was received by the assessee in the previous year relevant to the asst. yr. 1970-71. Before the ITO it was contended on behalf of the assessee that the income-tax was chargeable on the amount of interest in question by spreading over the same in the years to which the interest related. THE ITO took the view that the right to receive the interest accrued to the assessee on the date when the enhanced compensation was awarded to him, i.e., on February 7, 1970, and that as such the entire amount of interest was assessable to tax in the asst. yr. 1970-71. In the appeal preferred by the assessee, the AAC affirmed the order of the ITO. On further appeal by the assessee, the Tribunal held that the assessee has been assessed on due basis even in respect of the earlier asst. yr. 1966-67, the interest income will have to be spread over in the various years. THE appeal was, therefore, partly allowed and the ITO was directed to include the proportionate interest which accrued in the accounting year relevant to the assessment year in appeal. At the instance of the Revenue, the Tribunal has referred the aforesaid question of law for the opinion of this Court.

(3.) WHEN any land is acquired under the provisions of the Land Acquisition Act (hereinafter referred to as "the L.A. Act"), the Collector is required to make an award of compensation which in his opinion can be allowed for the land under s. 11 of the L. A. Act. Sec. 16 of the L.A. Act empowers the Collector to take possession of the land when he has made an award under s. 11 thereof and thereupon the land absolutely vests in the Government free from all incumbrances. In case of emergency the possession of the land can also be taken before the award is made under s. 17 of the L.A. Act. Sec. 34 of the L. A. Act enjoins the Collector to pay interest on the amount of compensation @ 6 per cent p.a. if the amount of compensation is not paid or deposited on or before taking possession of the land, from the time of so taking possession until it shall have been so paid or deposited. Thus, interest payable under s. 34 of the L.A. Act is a determinate amount and is not dependent upon any order of the Collector or any other authority. If the possession of the land is taken without payment or deposit of the amount of compensation the person whose land is acquired has a right to receive interest on the amount of compensation awarded and the rate of interest also is fixed by the law. Therefore, interest payable under s. 34 of the L.A. Act accrues or arises from the time the possession of the land is taken and the amount of compensation is not paid or deposited and it accrues from year to year until the amount of compensation is so paid or deposited. The person whose land is acquired has a right to receive such interest under the provisions of the law.