1991 (3) TMI 118 - HC - Income Tax

Summary

Issues Involved:
1. Whether the amount of interest receipt on the mesne profits is income under the Income-tax Act.
2. Whether the entire interest receipt as per the judgment of the High Court passed on December 23, 1965, is assessable in the assessment year 1966-67.
3. Whether the Tribunal should have considered the question of the year or years in which the amount is to be assessed.

Summary:

Issue 1: Whether the amount of interest receipt on the mesne profits is income under the Income-tax Act.

The court examined whether the interest awarded on mesne profits is a revenue receipt taxable in the hands of the assessee. The court referred to the definition of "mesne profits" u/s 2(12) of the Code of Civil Procedure, which includes interest on such profits. The court cited precedents, including the Judicial Committee of the Privy Council and the Supreme Court, which held that mesne profits are in the nature of damages and thus a capital receipt, not a revenue receipt. The court concluded that mesne profits and the interest thereon are compensation for the loss of property or injury to capital, and therefore, not taxable as income.

Issue 2: Whether the entire interest receipt as per the judgment of the High Court passed on December 23, 1965, is assessable in the assessment year 1966-67.

Given the conclusion on Issue 1 that the interest on mesne profits is not a revenue receipt, the court found it unnecessary to address whether the entire interest receipt is assessable in the assessment year 1966-67. The court declined to answer this question.

Issue 3: Whether the Tribunal should have considered the question of the year or years in which the amount is to be assessed.

Similarly, due to the conclusion on Issue 1, the court found it unnecessary to consider whether the amount should be assessed in the year or years in which it accrued. The court declined to answer this question as well.

Conclusion:

The court held that the amount of interest received on mesne profits is not income (revenue receipt) under the Income-tax Act and thus not taxable. Consequently, the questions regarding the assessment year and the period of accrual were deemed irrelevant and were not addressed. The references were disposed of accordingly.