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Issues Involved:
1. Interpretation of Section 34 of the Land Acquisition Act. 2. Nature of the sum of Rs. 48,660 received as interest-whether it is a capital receipt or revenue receipt. 3. Applicability of Section 4(3)(vii) of the Indian Income-tax Act regarding casual and non-recurring receipts. Issue-Wise Detailed Analysis: 1. Interpretation of Section 34 of the Land Acquisition Act: The court examined the general scheme of the Land Acquisition Act, 1894, focusing on its provisions for determining compensation for acquired land. Section 34 mandates that if the amount of compensation is not paid or deposited before taking possession of the land, the Collector must pay interest at the rate of 6% per annum from the time of possession until payment. The court emphasized the importance of the terms "compensation" and "interest," noting that interest is a return or compensation for the use or retention of money. The court concluded that the interest mandated by Section 34 is a statutory obligation and represents a recompense for the delayed payment of compensation. 2. Nature of the sum of Rs. 48,660 received as interest-whether it is a capital receipt or revenue receipt: The court distinguished between capital and revenue receipts, explaining that compensation for the acquisition of land is a capital receipt, while interest for delayed payment of such compensation is a revenue receipt. The court stated, "The words 'such compensation' refer to the compensation mentioned in section 23 which in the hands of the person whose land is acquired would come as a capital receipt." However, the interest calculated under Section 34 is "the quid pro quo for the loss of income which would have been earned on the investment of the capital sum." The court referenced the Supreme Court's observations in Satinder Singh v. Umrao Singh, which clarified that interest is not a claim for damages but a compensation for the delayed possession of compensation. Consequently, the court held that the sum of Rs. 48,660 received as interest is a revenue receipt and not a capital receipt. 3. Applicability of Section 4(3)(vii) of the Indian Income-tax Act regarding casual and non-recurring receipts: The court addressed the argument that the interest amount was of a casual and non-recurring nature and thus exempt from tax under Section 4(3)(vii) of the Indian Income-tax Act. The court rejected this argument, stating, "A receipt of interest which is foreseen and anticipated cannot be regarded as casual even if it is not likely to recur again." The court further elaborated that the payment of interest under Section 34 is a statutory obligation and not a casual occurrence. It emphasized that the nature of the receipt, rather than its frequency, determines its taxability. The court concluded that the interest amount is not casual and non-recurring but a regular and anticipated receipt, thereby making it taxable. Conclusion: The court answered the referred question of law in the negative, holding that the sum of Rs. 48,660 received as interest under Section 34 of the Land Acquisition Act is a revenue receipt liable to tax under the Indian Income-tax Act. The Commissioner of Income-tax was entitled to the costs of the reference, assessed at Rs. 250.
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