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Issues:
1. Whether the rental compensation for requisitioned land should be assessed as income on a yearly basis or in a lump sum in the year of receipt. Analysis: The High Court of Bombay was faced with the issue of determining the tax treatment of rental compensation received by an assessee for land requisitioned by the government. The assessee's land was requisitioned by the Collector of Pune under the Bombay Land Requisition Act, and compensation was fixed at Rs. 5,995 per annum. The question was whether this compensation should be assessed as income yearly or in a lump sum in the year of receipt. The Tribunal held that the compensation accrued to the assessee year by year, following the provisions of the Bombay Land Requisition Act and the compensation rules. The Tribunal emphasized that once there is an absolute and vested right to receive compensation, it becomes legally due and receivable, even if quantified later. The High Court agreed with this view, citing the Supreme Court's judgment in a similar case regarding interest on enhanced compensation for land acquired under the Land Acquisition Act. The High Court noted that the Appellate Assistant Commissioner and the Tribunal were justified in concluding that the compensation amount was not to be treated as income in the year of receipt. Instead, the rental compensation for the requisitioned land should be assessed as income on a yearly basis from the relevant accounting years starting from 1962-63 onwards. The Court rejected the Revenue's argument that the amount should be treated as income in the year of receipt, emphasizing the principle that such compensation should be assessed on an accrual basis year by year. Referring to a Supreme Court judgment, the Court held that interest on compensation payable by the State accrued yearly and was taxable proportionately over the years between acquisition and payment. Therefore, the High Court answered the question in favor of the assessee, affirming that the compensation should be assessed as income on an accrual basis year by year. In conclusion, the High Court's judgment clarified the tax treatment of rental compensation for requisitioned land, emphasizing the accrual basis for assessing such income year by year. The decision aligned with established legal principles and previous court rulings, ensuring a fair and consistent application of tax laws in similar cases.
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