1983 (4) TMI 37 - HC - Income Tax

Summary

Issues:
Assessment of interest awarded by Land Acquisition Officer under s. 34 of the Land Acquisition Act for the assessment year 1970-71.

Analysis:
The case involved 11 respondents who were members of an HUF owning agricultural lands acquired by the Govt. of Andhra Pradesh under the Land Acquisition Act. The lands were acquired in parts on different dates, with an award passed by the Land Acquisition Officer in 1969, including compensation and interest at 4%. The dispute arose regarding the assessment year for the interest awarded. The Revenue contended that the interest accrued only in the year of the award, 1969, thus assessable in 1970-71. On the other hand, the assessees argued that interest accrued yearly from the date of possession and should be taxed in relevant assessment years. The AAC and further appeals ruled in favor of the assessees, leading to this reference before the High Court.

The Appellate Tribunal, citing a decision of the Orissa High Court, emphasized that interest under s. 34 of the Land Acquisition Act was a future payment arising from a present obligation, irrespective of quantification. It distinguished this interest from that under s. 28, which depended on court orders for enhancement of compensation. The Tribunal held that interest under s. 34 accrued when possession was taken, with quantification dependent on the Land Acquisition Officer's award. Rejecting the Revenue's argument that interest accrued only upon the award, the High Court concurred with the Tribunal's view. It noted that interest under s. 34 arose when possession was taken, constituting a recurring obligation until quantification. This was distinct from interest under s. 28, which accrued upon court orders for enhanced compensation. Therefore, the interest awarded with compensation should be assessed yearly from the date of dispossession.

In conclusion, the High Court answered the reference question negatively, favoring the assessees. The judgment clarified that interest under s. 34 of the Land Acquisition Act accrued from the date of dispossession, necessitating annual assessment from that point onwards. The decision underscored the distinction between interest under s. 34 and s. 28, emphasizing the continuous nature of the obligation under s. 34 until quantification by the Land Acquisition Officer.