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TMI Blog1939 (9) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... f the then Raja. Upon his death Raja Shiva Prasad Singh, a collateral, took possession of all these properties as the owner of the Jharia Raj. In 1919 the assessee along with two other co-widows of the late Raja instituted a suit for recovery of possession of the whole of the impartible Raj including the moveable and immovable properties thereof chiefly on the ground that Raja Shiva Prasad Singh was not the rightful owner and that the three Ranis as heirs of their deceased husband were entitled to succeed to the Raj and all other properties left by the previous Raja. The defendant, Raja Shiva Prasad Singh, claimed to be in rightful possession of all the properties in suit as the rightful Raja and also relied upon certain deeds called bantannamas executed by the plaintiffs by which the Ranis were alleged to have relinquished their claims for consideration. He also pleaded that the acquisitions made by the Raja were accretions to the Raj and therefore belonged to the defendant by virtue of his right of ownership to the impartible Raj. The history of the litigation is elaborately set out in Shiba Prasad Singh v. Prayag Kumari Debi (I.L.R. 61 Cal. 711). The decision of the Calcutta Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B.S. In the previous year the assessee admittedly received a sum of Rs. one lakh which according to the terms of the compromise just set out was credited in the proportion of six annas towards the capital (Rs. 37,500) and the balance (Rs. 62,500) towards damages. The Income-tax Department taxed the assessee on among other items this sum of ₹ 62,500 which was asserted as being income received by the assessee in the previous year. The contention of the assessee that this amount was not income but merely an amount received by her on account of damages awarded to her for the detention of her properties was overruled. The question for consideration, therefore, is whether the sum of ₹ 62,500 received by the assessee by way of damages awarded to her by a decree in the circumstances stated above is assessable to income-tax. As has been pointed out by the Lord President in Renfrew Town Council v. Commissioners of Inland Revenue (19 Tax Cas. 13 at page 18) "the question is never more embarrassing than when it is concerned with payments in the nature of compensation or damages. The Income Tax Rules are of little assistance when it becomes necessary to distinguish between a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he obligation in respect of this interest was fixed by admission No. 9 representing the consent agreement of the parties at the stage when the case was before Romer, J. (See per Lord Wright towards the end of his judgment). Lord Justice Slesser in his judgment pointed out that it is important to turn to the statement of claim upon which Captain Barnato ultimately succeeded in obtaining money through the process of the order of the Court the investigation and ultimate compromise, to see whether there is any suggestion in that statement of claim that damages in the sense in which they were claimed, or said to have been claimed, in the case of the National Bank of Wales (1899, 2 Ch. 629) were ever demanded at all and he pointed out that the whole matter was put as on a basis of wrongful accounting and failure to account for matters which ought to have been accounted for and made this important observation: "It seems to me that such a demand for an account and inquiry as to the administration of the trusts and the partnership is wholly different from a claim sounding in damages or anything like damages". Towards the end of his judgment he also indicates that "where o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the payee according to the circumstances of the payee and the character of the injury". In Schulze v. S.W. Bensted (7 Tax Cas. 30) Lord Johnston observed: The question is whether a sum paid under decree eo nomine as interest on a principal sum recovered by the pursuers in an action, was interest in their hands which fell to be assessed to income tax. Where a pursuer recovers damages with interest from the date of decree, I do not think that that interest is chargeable. It is part of the damages. But where a sum is due on a definite date, with interest from the date of advance and decree goes out the case is different. The interest ought to have been in the creditor's hands on the stipulated date, and is none the less interest when it is recovered along with the principal under the decree. Between these two cases there may be many, some partaking more of the characteristics of the one, some more of those of the other;" and at the same page he later on observed that in the circumstances of the case "there was restored to the trust a principal sum which ought throughout to have been in the trustee's hands and bearing interest, and there was also restored ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separately appear, but is slumped along with other elements in the gross sum decreed for; but there is nothing to prevent an arbiter, if he thinks it just and reasonable in a particular case, to make the allowance in the from of an actual interest calculation from a past date until the sum fixed as at that date is paid. In all such cases, however-whether the allowance is wrapped up in a slump award or is separately stated in the decree-the interest calculation is used in modum aestimationsis only. The interest is such merely in name, for it truly constitutes that part of the compensation decerned for which is attributable to the fact that the claimant has been kept out of his due for a long period of time". Simpson v. Executors of Bonner Maurice as Executor of Edward Kay (14 Tax Cas. 580) has an important bearing on the question which is now before us. In that case a naturalized British subject, domiciled and ordinarily resident in the United Kingdom,had at various dates deposited securities, stocks and shares in banks in Germany with instructions to collect the interest thereon; he died during the Great War. Before the termination of the war, however, the interest and divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 3 and 4 William IV, Chapter 42, under which you can make interest payable in respect of a debt or sum certain, payable by virtue of a written instrument at a certain time, or after a demand has been made giving notice that interest will be charged. Now it is quite clear that there was no contract made by the Germans to pay this interest. The duty to pay compensation was imposed upon them by the Treaty. The Statute does not apply it, and the root of the payment is the duty to pay compensation. So far as English law goes, as pointed out by Lord Herschell and the others, and much as they would desire to impose a liability to pay interest, yet interest cannot be given under English law by way of damages for the detention of the debt;" and he concluded his remarks thus: "For withholding this sum, for preventing Mr. Kay, or his executors, exercising the power of disposition over his property, the Germans have been compelled to pay compensation. The way to estimate that compensation or damages-the sensible way no doubt-would be by calculating a sum in terms of what interest it would have earned. That has been done, but the sum that was paid has not been turned into interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 19 days if there had been separate charters for those respective periods entered into by the shipowners for the ships for that time". In Burma Steamship Company, Limited v. Commissioners of Inland Revenue, (16 Tax Cas. 67), the appellant company jointly with another company bought a motor vessel second-hand and immediately placed it in the hands of repairers for overhaul. But the time stipulated for completion of the overhaul was exceeded and the owning companies claimed from the repairers damages calculated by reference to the estimated profit which would have been earned by the vessel had she been trading during the excess time taken for overhaul. The claim having been compromised and the repairers having paid certain sums towards the amount agreed upon, the question arose whether the sum was assessable to income-tax. The Court of Session, Scotland, came to the conclusion that the amount received was a trading receipt and should be included in the computation of the Company's profits. This group, therefore concerns with the receipts of damages or compensation in the course of business or trade carried on by a trader. The present case falls, in my opinion, within t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of J.H. Pattinson v. Srimati Bindhya Debi (I.L.R. 12 Pat. 216). In a recent case decided by their Lordships of the Judicial Committee in Bengal Nagpur Railway Company Limited v. Ruttanji Ramji (L.R. 65 Indian Appeals, 66) Sir Shadi Lal delivering the judgment of the Board cited with approval the decision of the House of Lords in 1893 Appeal cases, 429 and also the decision of the Lord Tomlin in Main and New Brunswik Electrical Power Company Limited. v. Alice M. Hart (1929 Appeal Cases, 631) and came to the conclusion that "in the absence of any usage or contract, express or implied or of any provision of law to justify the award of interest on the decretal amount for the period before the institution of the suit, interest for that period could not be allowed by way of damages caused to the respondents for the wrongful detention of their money by the railway company."
For the reasons given above I would answer the question formulated at page 8 of the paper book in the negative. The assessee is entitled to ₹ 500 as cost from the Commissioner.
Harries. C.J.--I agree.
Fazl Ali, J.--I agree.
Reference answered in the negative. X X X X Extracts X X X X X X X X Extracts X X X X
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