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TMI Blog1985 (3) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... , in respect of all the individuals and HUFs, trustees, etc. (except individuals above 65). As the preamble to the CDS Act shows, the scheme is devised in public interest, viz., in the interest of national economic development for compulsory deposit by certain classes of income-tax payers. Under article 31(2) of the Constitution of India in respect of acquisition of property in public interest, the Government has to give an amount which, though not justifiable with reference to quantum always bears the character of compensation and not interest. For understanding the concept of income, one can conveniently refer to some English decisions particularly Simpson v. Maurice's Executors 14 TC 580 (CA). The taxability of receipt is not to be judged by the label given to it but on the basis of its true character. The funds deposited by a British subject in a German Bank were confiscated during the First World War. The right to get back the same was revived in terms of armistice. The amounts returned were not merely original funds but also something more, worked out at 5 per cent per annum. It was held that this working is a mere measure of compensation and does not constitute interest at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tations are possible, the one in favour of taxpayer should be preferred. Reliance was placed on CIT v. Madho Pd. Jatia [1976] 105 ITR 179 (SC) and CIT v. M. M. Muthiah [1977] 109 ITR 463 (Mad.) in support. 6. In reply, Shri Walvekar submitted that we should not allow the issue to be contended by looking into the genesis of compulsory deposit or the words of article 31. We have to see the provisions as they are and not as they should or could have been. The Legislature has full powers to deem any receipt as income or to deem even a compensation as interest. Where the language is clear, as explained in Chandroji Rao v. CIT [1970] 77 ITR 743 (SC), there is no question of mixing up compensation with interest. Further, in this case there is no permanent deprivation of source of income which is the test for determining whether a receipt is capital or not [vide CIT v. Manna Ramji Co. [1972] 86 ITR 29 (SC) explaining Senairam Doongarmall's case relied upon by Shri Patel]. 7. Simpson's case is clearly distinguishable. Firstly, in that case no interest could be claimed as a matter of right as there was no such statutory right under the German law under which the funds were confiscated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only when there is delay. The compensation became ascertained and payable from the date of resumption. The provision for interest was made only because the compensation was payable in ten instalments. Under the CDS, the instalment returnable is a single indivisible item with no scope for splitting the same notionally into original deposit and interest thereon. Similarly, Manna Ramji Co.'s case deals with the question of revenue receipt in respect of compensation for taking over a godown under the Defence of India Act, the acquisition having resulted in shrinkage in volume of business. In CIT v. New India Assurance Co. Ltd. [1980] 122 ITR 633 (Bom.), it has been held that right of management of property or business is a property right. In the case before us also, the property rights are curtailed by statute. Shri Patel admitted that Maharajadhiraj Sir Kameshwar Singh No. 2's case deals with interest on advance tax, which also entails statutory compulsion. At the relevant time, interest was payable on the full amount. After 1-4-1952 interest became payable only on the advance tax in excess of regular tax. But none of the points now canvassed were taken up before their Lordships. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o scope whatever for any doubt on this issue. We agree with the departmental representative on this point. Besides, the facts of this case are similar to those in Chandroji Rao's case. The jagir was taken away under a statute, which itself deferred the dates of payment of compensation and awarded interest. The latter clearly bore the character of interest. CDS interest is no different. For this purpose, it is not necessary to have a separate express provisions in section 2(24) of the 1961 Act. The provisions of section 7(1) of CDS Act are comprehensive enough for the purpose. Further, the ratio of Maharajadhiraj Sir Kameshwar Singh No. 2's case cannot be lightly brushed aside on the plea that the decision would have been different if the new points now canvassed before us were canvassed before their Lordships. The ratio of the judgment is that when the Legislature itself specifies a receipt as interest, it acquires the character of interest income. Kettlewell Bullen Co. Ltd.'s case deals with receipt on account of loss, managing agency, and does not affect the above reasoning. 14. Coming to the question of possibility of two interpretations, we agree that in case of a genuine d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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