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Issues:
1. Characterization of interest under section 28 of the Land Acquisition Act as revenue or capital receipt. 2. Assessment of the entire interest amount in the assessment year 1967-68. 3. Consistency in assessing interest on accrual basis for different assessment years. Analysis: The judgment by the Andhra Pradesh High Court addressed three key issues referred by the Income-tax Appellate Tribunal. The first issue involved determining whether the interest paid under section 28 of the Land Acquisition Act should be considered as additional compensation representing a capital receipt or a revenue receipt. The court clarified that interest received is deemed a revenue receipt, following established legal principles. The second issue focused on the assessment of the entire interest amount of Rs. 73,295 in the assessment year 1967-68. The court relied on previous decisions to conclude that the entire interest received should be included in the income of the accounting year in which it is received, rather than being proportionately distributed over a period. Regarding the third issue, the court addressed the argument that the Income Tax Officer (ITO) had assessed similar interest on an accrual basis for subsequent assessment years, and thus should maintain consistency in the assessment for the year 1967-68. However, the court emphasized that each assessment year is distinct, and past assessments do not dictate future decisions. The court reiterated that the method of accounting adopted by the assessee is irrelevant in determining the tax treatment of interest under the Land Acquisition Act. Consequently, the court ruled in favor of the Department and against the assessee on all three questions referred, emphasizing the application of legal principles over accounting methods in tax assessments.
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