1990 (4) TMI 5 - HC - Income Tax

Summary

Issues Involved:
1. Whether the compensation of Rs. 60,000 for loss of earnings from brick manufacturing business is a revenue receipt.
2. Whether the compensation of Rs. 1,250 for readymade earth is a revenue receipt.
3. Whether the entire interest of Rs. 48,526 on the enhanced compensation is taxable in the assessment year 1967-68.

Issue-wise Detailed Analysis:

1. Compensation for Loss of Earnings from Brick Manufacturing Business:
The Tribunal held that the sum of Rs. 60,000 received by the assessee as compensation for the loss of earnings from the brick manufacturing business represented a revenue receipt. The assessee argued that the compensation was for the forced closure of the business due to land acquisition, which resulted in the loss of the profit-making apparatus, and thus should not be treated as revenue income. The court referred to the Supreme Court decision in Senairam Doongarmall v. CIT, which held that compensation for the destruction of a source of income is not income. The court concluded that the compensation paid to the assessee for the loss of earnings due to the acquisition of land could not be regarded as a revenue receipt. Therefore, the first question was answered in the negative and in favor of the assessee.

2. Compensation for Readymade Earth:
The Tribunal held that the sum of Rs. 1,250 received by the assessee as compensation for readymade earth lying on the acquired portion represented stock-in-trade and was thus a revenue receipt. The assessee's advocate conceded that the Tribunal's view was correct based on the materials before it. Accordingly, the second question was answered in the affirmative and in favor of the Revenue.

3. Taxability of Interest on Enhanced Compensation:
The Tribunal held that only the interest accrued in the previous year relevant to the assessment year 1967-68 was taxable, reversing the Commissioner of Income-tax's directive to include the entire amount of Rs. 48,526 in the total income for that year. The court referred to the Supreme Court decision in Rama Bai v. CIT, which concluded that interest on enhanced compensation is taxable only in the year it accrues. Thus, the question was answered in the negative (sic) and in favor of the assessee.

Conclusion:
- Question No. 1 (assessee): Answered in the negative and in favor of the assessee.
- Question No. 2 (assessee): Answered in the affirmative and in favor of the Revenue.
- Question No. 1 (Revenue): Answered in the negative (sic) and in favor of the assessee.

There was no order as to costs.