9911796707
|
Home
Issues:
Interpretation of Income Tax Act, 1961 - Accrual of interest income - Tax liability on interest accrued during specific assessment year. Analysis: The case involved a reference by the Income-tax Appellate Tribunal regarding the inclusion of an amount of Rs. 99,394 in the income of the assessee for the assessment year 1962-63. The dispute arose from the interest awarded to the assessee on compensation for land acquired by the government. The Tribunal held that only Rs. 6,927 of the interest accrued during the relevant assessment year, and the rest should not be included in the income. The Revenue appealed, arguing that the interest accrued only when the award was given in 1961, not when possession of the land was taken in earlier years. The court referred to Section 5(1)(b) of the Income Tax Act, which states that income accruing or arising to a person in India during a year is taxable. It cited precedents emphasizing that income accrues when the right to receive it becomes vested in the assessee. The court analyzed various Supreme Court judgments to determine when the right to receive interest accrued to the assessee in this case. The court rejected the Revenue's argument that the right to receive interest vested only when the award was given in 1961. It held that the right to compensation, including interest, accrued to the assessee when possession of the land was taken, as per the Land Acquisition Act. The court applied a legal fiction, deeming the 1961 award as part of the original awards from the 1940s, and held that the interest accrued over multiple years. Consequently, only a portion of the interest accrued during the specific assessment year, and the rest was rightly excluded from the assessee's income. In conclusion, the court ruled in favor of the assessee, affirming the Tribunal's decision to exclude Rs. 99,394 from the total income for the assessment year 1962-63. No costs were awarded in the case.
|
