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Issues Involved:
1. Assessability of additional compensation received during the assessment year 1972-73. 2. Assessability of interest related to the additional compensation. Detailed Analysis: 1. Assessability of Additional Compensation Received During the Assessment Year 1972-73: The primary question was whether the enhanced compensation received by the assessee during the assessment year 1972-73 should be assessed in that year or in the year 1964-65 when the initial compensation was received. The Tribunal concluded that the capital gains arising from the transfer of the plot of land, which was compulsorily acquired by the Government, should be assessed in the assessment year 1964-65 and not in 1972-73. The Tribunal reasoned that the legal transfer of property occurred in 1963 when the Land Acquisition Collector's award was passed, and thus, the capital gains accrued during the period relevant to the assessment year 1964-65. This conclusion was based on the premise that the right to compensation is established at the time of the legal transfer or sale, not when the enhanced compensation is later determined. The Tribunal's decision was contested by the Commissioner of Income-tax, who sought a reference to the High Court. The High Court acknowledged the divergence of judicial opinion on this issue, citing cases from various High Courts that either supported the view that the right to compensation arises at the time of transfer or when the enhanced compensation is judicially determined. The High Court noted that the legislative amendment via section 155(7A) of the Income-tax Act, effective from April 1, 1974, allowed for the recomputation of capital gains upon the determination of enhanced compensation. However, this provision did not apply to the present case, as the enhanced compensation became payable during the assessment year 1972-73. 2. Assessability of Interest Related to the Additional Compensation: The second issue was whether the entire interest amount of Rs. 21,916 received by the assessee should be taxed in the assessment year 1972-73 or if it should be spread over the years from the date of acquisition to the date of actual payment. The Tribunal held that the interest should be spread over the relevant years, and only the portion of interest attributable to the assessment year 1972-73 should be taxed in that year. This decision was based on the principle that interest accrues year by year and should be assessed on an accrual basis rather than on a receipt basis. The High Court recognized the divergence in judicial opinions on this matter as well. Some High Courts, such as the Madras High Court and the Punjab and Haryana High Court, supported the view that interest should be spread over the years, while others, like the Mysore High Court and the Andhra Pradesh High Court, held that the entire interest amount should be taxed in the year when the civil court passed the decree granting enhanced compensation. Conclusion: The High Court concluded that both questions raised by the Commissioner of Income-tax involved substantial questions of law due to the differing judicial opinions. Consequently, the High Court directed the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, to state the case and refer the following two questions for its opinion: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the additional amount of compensation received by the assessee during the period relevant to the assessment year 1972-73 was assessable in the assessment year 1964-65? 2. Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the interest found payable to the assessee should be spread over and only that part of interest which related to the assessment year 1972-73 should be brought to tax in the assessment year 1972-73 and not the entire amount of interest which accrued to the assessee on account of the award of the civil court? The parties were directed to bear their own costs.
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