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TMI Blog1982 (6) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Land Acquisition Act, 1894. The learned Additional District Judge,Delhi, by his judgment dated14-4-1976in LAC No. 744/65, and 209/68 enhanced the compensation by a sum of Rs. 23,01,119.47. 3. TheUnionofIndiafiled an appeal in the Delhi High Court which bears No. 244 of 1976. An application for stay was also made. The Delhi High Court by its judgment dated 3-8-1976 in Appeal No. 244 of 1976 directed that 'The amount in dispute in the appeal must be deposited in the Court below within two months and the same will be payable to the respondents on furnishing security for restitution to the satisfaction of the Additional District Judge.' 4. An application dated24-8-1976, was made on behalf of the recipients of the enhanced compensation and it was pleaded that the enhanced compensation may be distributed to the various applicants as per Schedule 'A' on their furnishing security of the whole amount. A security bond was executed on16-9-1976and submitted in the Court of the learned Additional District Judge,Delhi. The details of the break-up of the sum of Rs. 23,01,119.47 are as under: --------------------------------------------------------------------------------------------- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------- ---------------------- 23,01,119.47 12,77,448.75 10,23,670.72 ------------------------- ---------------------- The aforesaid amount was received in September 1976 by the different claimants, including the assessee, after furnishing the security for restitution to the satisfaction of the Additional District Judge,Delhi. 5. The previous year for the assessment year 1977-78 ended on31-3-1977. The assessee filed his return of income and enclosed, the following note with the return of income: "By order of the Addl. District Judge, Delhi, in LAC No. 209 of 1968 dated 14th April, 1976, the compensation for acquisition of agricultural land was enhanced and was directed to be paid with interest since the date of possession, i.e., 4-2-1964. Against the said judgment and order of the Addl. District Judge, the Union of India filed an appeal, being RFA No. 244/76, which was admitted and is pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the taxability of the aforesaid amount of interest pertaining to the assessee in this year. He observed that the assessee was a salaried employee and as he did not maintain any books of account, the income from interest on enhanced compensation had to be taxed on receipt basis. He thus brought to tax the sum of Rs. 52,496 being the interest on enhanced compensation awarded by the learned Additional District Judge,Delhi. In support of the case, the ITO relied on the judgments in CIT v. Raja S.N. Bhanja Das Deo [1977] 106 ITR 748 (Ori.) and M. Jairam v. CIT [1979] 117 ITR 638 (Ker.). 6. Aggrieved, the assessee filed an appeal to the Commissioner (Appeals). It was submitted that the Union of India had filed Appeal No. 244 of 1976 in the Delhi High Court and the amount of enhanced compensation was allowed to be paid only on furnishing of adequate security for restitution to the satisfaction of the Additional District Judge,Delhi. The submission made was that the amount of enhanced compensation, as well as interest, was not final because an appeal had been filed in the Delhi High Court and, therefore, it could not be said that any right to receive the income from interest had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gar, who allowed enhanced compensation, was set aside by the Gujarat High Court. The point that he made was that since the judgment and award of the Civil Judge had been set aside by the Gujarat High Court, there was no enhanced additional compensation allowed to the assessee and, hence, there was no question of any interest on the enhanced compensation which was required to be taxed in that case. He referred to the judgment in Mrs. Khorshed Shapoor Chenai v. ACED [1980] 122 ITR 21 (SC), wherein it has been held that where lands are compulsorily acquired under the Land Acquisition Act, there are no two rights, one, a right to receive compensation and the other a right to receive extra or further compensation ; that the claimant has only one right which is to receive compensation for the lands at their market value on the date of the relevant notification and it is this right which is quantified by the Collector under section 11 and by the Civil Court under section 26 of that Act. He submitted that this judgment was against the judgment of the Gujarat High Court in Topandas Kundanmal. He referred to the judgment in CIT v. Smt. Sankari Manickyamma [1976] 105 ITR 172 (AP), wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct Judge, Delhi, may be set aside by the High Court, or on further appeal, by the Supreme Court. He did not dispute the fact that the amount of enhanced compensation had been received by the recipients on furnishing security for restitution to the satisfaction of the Additional District Judge. He, however, submitted that the judgments of the Additional District Judge, Delhi, gave rise to a contingent right and on the basis of the contingent right it could not be held that either any income on account of interest had accrued to the assessee, or had been received by the assessee, which was required to be taxed under the Act. He disputed the submission of the learned departmental representative that the judgment of the Gujarat High Court in Topandas Kundanmal was distinguishable. He also disputed the submission of the learned departmental representative that the judgment in Mrs. Khorshed Shapoor Chenai was against the view of the Gujarat High Court. He submitted that in the judgment in His Highness Maharaja Yashwant Rao Pawar, there was no appeal against the enhanced compensation allowed by the Court and the only dispute was regarding the year in which the interest of Rs. 43,431, for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be regarded as having survived and kept alive which the claimant prosecutes in the Civil Court. It is not correct to say that no sooner has the Collector made has award under section 11 than the right to compensation is destroyed or ceases to exist or is merged in the award or that what is left after the award with the claimant is a mere right to litigate the correctness of the award. The claimant can litigate the correctness of the award because his right to compensation is not fully redeemed but remains alive which he prosecutes in theCivil Court. This, however, does not mean that the evaluation of this right done by theCivil Courtsubsequently would be its valuation as at the relevant date for the purpose of either the ED Act or the WT Act. It is the duty of the assessing authority under either of those enactments to evaluate the property (the right to receive compensation at market value on the date of the relevant notification) as on the relevant date (i.e., the date of death under the ED Act or the valuation date under the WT Act.). In the case of the right to receive compensation, which is property, the estimated value can never be below the figure quantified by the Collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash system of account. The High Court has held that there is a distinction between the amount awarded as compensation and the interest payable on such compensation. The distinction is apparent from section 34 of the Land Acquisition Act itself. The interest awarded to the assessee and the other co-owners is based on the following decision pertaining to interest, inter alia, contained in paragraph 24 of the judgment dated 14-4-1976 of the Additional District Judge, Delhi: "(iii) Interest at 6 per cent per annum under section 4(3) of the Land Acquisition (Amendment and Validation) Act, 1967 on the market value from 13-11-1962 till the date of payment by the Collector inasmuch as declaration under section 6 (dated 9-4-1964) of the Act was made more than three years after the date of Notification under section 4 of the Act. However, the amount already paid by the Collector towards this item shall be deducted. (iv) Interest at 6 per cent per annum on the enhanced amount under section 28 of the Act from the date of dispossession of the claimants till the date of payment of the amount in court by the LAC provided that interest will not be paid twice for the same period." It was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l amount of compensation as well as to the interest. Against this judgment of the Gujarat High Court, the Special Leave Petition was filed before the Supreme Court but it was dismissed on9-3-1977. In Addl. CIT v. New Jehangir Vakil Mills Co. Ltd. [1979] 117 ITR 849 (Guj.) the view taken in Topandas Kundanmal has been affirmed. 13. The view of the Andhra Pradesh High Court in Khan Bahadur Ahmed Alladin Sons was followed by the Gujarat High Court in Topandas Kundanmal. In Smt. Sankari Manickyamma, the Andhra Pradesh High Court applied its earlier judgment in Khan Bahadur Ahmed Alladin Sons and held that the interest on the enhanced compensation accrued to the assessee only when the compromise decree was passed by the High Court on9-5-1963, since awarding interest on enhanced compensation is in the discretion of the Court. The view of the Kerala High Court in M. Jairam and George Paul Puthuran is similar to the view of the Andhra Pradesh High Court referred to above. The Calcutta High Court in Hindusthan Housing Land Development Trust Ltd. has also held that the compensation amount could be considered to have accrued or arisen only when the said amount has become determinate a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een held that the right to receive interest under the Land Acquisition Act is based on the concept that the owner of the land entitled to receive compensation is kept out of the land by being dispossessed and has not received the compensation representing the market value of such land. Interest accrues during the intervening period between dispossession on one side and payment of compensation on the other, out of statutory provision. The Orissa High Court has followed the aforesaid judgments of the Mysore High Court in Sampangiramaiah and the Punjab Haryana High Court in Sham Lal Narula. In Addl. CIT v. Virendra Singh [1979] 118 ITR 923 (All.), it has been held that the right to interest under section 34 of the Land Acquisition Act, 1894, accrued on the date on which the Collector took possession of the property. It was a right in praesenti which recurred from day to day throughout the years in between the two events, namely, dispossession and actual payment, and continued to accrue in each of the succeeding years and only that amount of interest income could be taxed in a particular assessment year which accrued in that year. It may be stated that in the aforesaid judgment the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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