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Issues Involved:
1. Whether the sum of Rs. 21,153 is interest or part of the capital. 2. The date of receipt of the amount for tax assessment purposes. 3. Whether the sum of Rs. 21,153 is taxable as income or considered damages for wrongful detention of money. Detailed Analysis: Issue 1: Nature of the Sum of Rs. 21,153 The appellant contended that the sum of Rs. 21,153 should be deducted from the total income assessed, arguing that it is not income but part of the capital. The facts reveal that the appellant's father was a partner in a firm whose assets were evaluated by a Panchayat in 1928, but the amount due was not paid until 1938. An additional sum was awarded by a subsequent Panchayat as interest. The appellant argued that this additional sum was not interest but part of the capital. However, the court found that the sum was indeed interest awarded due to the delayed payment of the principal amount. Issue 2: Date of Receipt of the Amount The appellant argued that if the sum is treated as interest, it should be considered received on the date the hundi was handed over (2nd April 1938), not the date it was cashed (9th May 1938). The court referred to the decision in the Maharaja of Dharbanga v. Commissioner of Income-tax, where it was held that a liability discharged by promissory notes is not equivalent to cash. The court concluded that the date of cashing the hundi is the actual date of receipt, making it fall within the relevant accounting year. Issue 3: Taxability of the Sum as Income or Damages The appellant's representative argued that the amount received was by way of damages for wrongful detention of money and not taxable as income. The court examined precedents, including Commissioner of Income-tax, Bihar and Orissa v. Rani Prayag Kumari Debi, where damages for wrongful detention were held not liable to income tax. The court also considered Behari Lal Bhargava v. Commissioner of Income-tax, which held that interest awarded as compensation for loss of possession was not assessable as income. The court concluded that the sum of Rs. 21,153 was in the nature of damages for wrongful detention of money, not contractual interest, and thus not liable to tax. Conclusion: The court allowed the appeal, setting aside the assessment of the sum of Rs. 21,153. The sum was determined to be damages for wrongful detention of money, not taxable as income. The court referred the question of law to the High Court, affirming that the sum received was in the nature of damages and not assessable under the Income-tax Act. The final judgment emphasized that the amount awarded was for wrongful detention and of a casual and non-recurring nature, thus not liable to tax.
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