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Issues:
1. Whether the enhanced compensation accrued to the assessee during the relevant accounting year? 2. Whether the right to receive compensation for acquired lands is a single and indivisible right? Analysis: 1. The case involved the assessment of an individual deriving income from various sources, including land transactions. The assessee's land was acquired by the Municipal Corporation, and compensation was awarded first by the Land Acquisition Officer and later enhanced by a civil court judgment. The dispute arose regarding the inclusion of the enhanced compensation in the assessment for the relevant accounting year. The Income Tax Officer (ITO) included the enhanced compensation despite the assessee's objection that it did not accrue during the accounting year. The Appellate Assistant Commissioner (AAC) ruled in favor of the assessee, leading to an appeal by the revenue before the Income-tax Appellate Tribunal. The Tribunal, following legal precedents, dismissed the appeal, stating that the enhanced compensation accrued outside the relevant accounting year. The High Court was then approached to address the legal questions arising from the Tribunal's decision. 2. The High Court addressed the first question by emphasizing that the right to receive compensation for acquired lands is a single and indivisible right. Referring to previous decisions, the Court highlighted that the right to receive enhanced compensation cannot be separated from the right to receive the original compensation. The Court cited case law to support the notion that the right to compensation arises as soon as the lands are acquired by the government, making it one comprehensive right. Therefore, the High Court answered the first question in favor of the revenue and against the assessee. 3. The Court further addressed the second question by delving into the concept of when income accrues or is deemed to accrue under the Income Tax Act. The Court analyzed legal principles and previous judgments to determine that unless the compensation becomes payable or enforceable, it cannot be said to accrue. The Court highlighted that the mere claim for enhanced compensation is not equivalent to the compensation actually being awarded and accepted by the proper forum. The Court differentiated between the right to receive compensation and the actual receipt of compensation, emphasizing that income tax is levied on tangible amounts, not on potential rights. Therefore, the Court answered the second question in favor of the assessee and against the revenue, stating that the enhanced compensation only accrues when it becomes payable, i.e., when the court accepts the claim. In conclusion, the High Court clarified the legal principles surrounding the accrual of compensation income and affirmed that the right to receive compensation for acquired lands is a single and indivisible right. The judgment provided detailed analysis based on legal precedents and interpretations of the Income Tax Act, ultimately deciding in favor of the revenue on the first issue and in favor of the assessee on the second issue.
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