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Issues Involved:
1. Assessability of interest income under the Income-tax Act, 1961. 2. Determination of the year of accrual of interest income. 3. Interpretation of relevant provisions of the Land Acquisition Act, 1894, and the Income-tax Act, 1961. Detailed Analysis: 1. Assessability of Interest Income under the Income-tax Act, 1961: The primary issue was whether the entire interest amounting to Rs. 31,659 received on March 1, 1964, or only a sum of Rs. 1,260 attributable to the year ending March 31, 1964, was assessable as income for the assessment year 1964-65. The Income-tax Officer held that the entire amount of Rs. 31,659 was liable to be taxed for the assessment year in question. This decision was confirmed by the Appellate Assistant Commissioner, who observed that the interest awarded under section 28 of the Land Acquisition Act, 1894, accrued only on the date of the judgment. The Tribunal, however, upheld the assessee's claim, ruling that only Rs. 1,260 was taxable for the relevant year. The High Court ultimately concluded that the entire amount of Rs. 31,659 accrued to the assessee on May 9, 1963, and thus was assessable for the assessment year 1964-65. 2. Determination of the Year of Accrual of Interest Income: The court examined whether the interest for 26 years amounting to Rs. 31,659 or only a proportionate interest amounting to Rs. 1,260 was assessable for income-tax for the assessment year 1964-65. The court noted that the interest accrued to the assessee only when the statutorily designated authorities determined the same. The High Court passed a compromise decree on May 9, 1963, awarding the interest, which was received on March 1, 1964. The court emphasized that the right to receive the interest accrued only when the court rendered it statutorily enforceable, i.e., on May 9, 1963. Therefore, the entire amount of Rs. 31,659 was considered to have accrued in the relevant accounting year and was assessable for the assessment year 1964-65. 3. Interpretation of Relevant Provisions of the Land Acquisition Act, 1894, and the Income-tax Act, 1961: The court discussed the scheme of the Land Acquisition Act, 1894, which provides for the acquisition of land for public purposes and the determination of compensation, including interest. Under section 28, the court can direct the payment of interest on enhanced compensation. The court also referred to section 34, which mandates the payment of interest if the compensation is not paid or deposited before taking possession of the land. The court interpreted section 5 of the Income-tax Act, 1961, which includes all income accrued during the previous year. It was held that the income is chargeable only when it accrues and not merely when it is claimable. The court cited the case of Khan Bahadur Ahmed Alladin & Sons v. Commissioner of Income-tax, which established that compensation accrues only when it becomes payable or enforceable. The court also discussed the case of Commissioner of Income-tax v. V. Sampangiramaiah, where the Mysore High Court held that interest under section 28 becomes payable when the court directs it. In conclusion, the court ruled that the entire amount of Rs. 31,659 accrued to the assessee on May 9, 1963, when the High Court passed the decree, making it assessable for the assessment year 1964-65. The court answered the question in the affirmative, against the assessee and in favor of the department, thereby confirming the assessability of the entire interest amount received.
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