2000 (5) TMI 172 - AT - Income Tax

Summary

Issues:
- Nature of interest received by the assessee for the period prior to the passing of the acquisition award - whether capital or revenue income.

Analysis:
1. The appeals were filed by the Revenue against the common order passed by the Commissioner (Appeals) relating to assessment years 1991-92 and 1992-93, arising from regular assessments under section 143(3) of the Income-tax Act, 1961.

2. The Respondent-assessee, an individual engaged in trading cycles and agriculture, had some lands proposed for acquisition. The lands were taken possession of with consent, and compensation was awarded with interest specified for the period before the formal declaration of the award.

3. The Assessing Officer treated the interest as revenue income, but the assessee contended it was capital in nature due to deprivation of land use. The Commissioner (Appeals) agreed with the assessee, stating that the interest was compensation for deprivation and hence capital in nature.

4. The Revenue appealed, arguing that interest on compensation is income as per Supreme Court rulings. The Respondent argued that interest was capital, relying on High Court decisions.

5. The Tribunal examined the legal position, distinguishing between possession and ownership transfer in land acquisition. The interest for the period before the award was considered compensation for deprivation of property, hence capital in nature.

6. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that the interest received by the assessee was capital in nature as it was compensation for being deprived of property enjoyment. The appeals of the Revenue were dismissed.