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Issues Involved:
1. Whether the extra amount of compensation amounting to Rs. 7,24,914 was income arising or accruing to the assessee during the previous year relevant to the assessment year 1956-57. Detailed Analysis: Issue 1: Whether the extra amount of compensation amounting to Rs. 7,24,914 was income arising or accruing to the assessee during the previous year relevant to the assessment year 1956-57. Facts and Background: The assessee, a limited company dealing in land, had its land requisitioned and subsequently acquired by the Government of West Bengal. Initially, the Land Acquisition Collector awarded Rs. 24,97,249 as compensation. Dissatisfied, the assessee appealed, and the arbitrator enhanced the compensation to Rs. 30,10,873. The State Government appealed this enhancement, depositing Rs. 7,36,691 in court, which the assessee withdrew after furnishing a security bond. The Income-tax Officer assessed this amount as income for the relevant year, a decision upheld by the Appellate Assistant Commissioner but overturned by the Tribunal. Tribunal's Decision: The Tribunal accepted the assessee's contention that the enhanced compensation amount of Rs. 7,24,914 had not accrued during the relevant assessment year 1956-57. The Tribunal noted that the enhanced compensation was under appeal, making the claim sub judice. The Tribunal also considered the security bond's terms, which indicated that the assessee had no absolute right to the extra compensation until the High Court's decision. Revenue's Argument: The revenue argued that the Tribunal's decision was erroneous, relying on the Supreme Court's reversal of a similar Punjab High Court decision. The revenue contended that the legal enforceable claim arose as soon as the arbitrator's award was made, making the enhanced amount accrue to the assessee. The revenue cited several cases to support the argument that the claim accrues upon the award, regardless of any pending appeal. Assessee's Argument: The assessee argued that the enhanced compensation could not be considered accrued income as the claim was still in jeopardy due to the pending appeal. The assessee maintained that the right to the enhanced amount was not established until the appeal was resolved. The assessee also argued that components like interest and monthly compensation included in the enhanced amount could not be considered income for the relevant year alone. Court's Analysis: The court reviewed various decisions, including those of the Punjab and Andhra Pradesh High Courts, which supported the view that compensation accrues only when it becomes determinate and payable. The court distinguished between a claim and an accrued amount, noting that the enhanced compensation was still under judicial scrutiny and thus not a determinate amount. The court emphasized that the mere withdrawal of the amount under a security bond did not make it accrued income, as the right to the enhanced compensation was unsettled. Conclusion: The court concluded that the enhanced compensation amount of Rs. 7,24,914 did not accrue to the assessee during the relevant previous year. The court answered the referred question in the negative, favoring the assessee and against the revenue. The court also noted that it did not need to consider the break-up of the amount into interest and monthly compensation due to the Tribunal's decision. Judgment: The question was answered in the negative, in favor of the assessee, and against the revenue. There was no order as to costs.
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