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TMI Blog1972 (7) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... years 1957-58 to 1963-64, both years inclusive, and for the year 1965-66. For the relevant accounting periods relating to these assessment years the assessee had received amounts as jenmikaram payable under the provisions of the Act, the payments being received by the assessee from the Government as envisaged by the Act. The assessee contended before the Income-tax Officer that these payments of jenmikaram really represented payments of capital ; that such payments were as compensation for the deprivation of capital and, therefore, did not constitute income for the purpose of assessment under the Income-tax Act, 1961. This contention was negatived by the Income-tax Officer and the appeals by the assessee before the Appellate Assistant Commissioner failed. In further appeals before the Tribunal, the Tribunal found that the jenmikaram received by the assessee is compensation for deprivation of the rights of the jenmi and that such payments had to be treated as capital. This conclusion was reached by the Tribunal on the finding entered by it that the transfer of ownership of the land from the jenmi to the kudiyan was effected by the Act under the provision in section 3(1) thereof. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , gift or otherwise. (3) The jenmi's right to the jenmikaram shall be deemed to be immovable property..... 48. Apportionment of compensation money on land acquisition.--When the jenmi and the kanom-tenant cannot agree as to the apportionment as between them of the compensation money awarded or awardable on the acquisition of any land or portion of land comprised in any holding, under any law providing for the compulsory acquisition of land for public purpose, the portion due to each shall be determined in accordance with the following rules : (a) so much of the compensation money as is due to any buildings shall belong entirely to the kanom-tenant ; (b) the balance left after deducting the portion of compensation money referred to in rule (a) shall belong to the jenmi and the kanom-tenant in the proportion of the jenmikaram charged or chargeable on the land or portion of land and the average annual net produce of the land or portion of land, as the case may be : Provided that if the capitalised value of the jenmikaram is smaller than such share of the jenmi, the capitalised value alone shall belong to the jenmi and all the rest shall belong to the kanom-tenant." On behalf of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either that capital or for compensation for the deprivation of that capital. The provision in section 48 of the Act clearly indicates that, in the event of the property being acquired by the State Government, the capital of the jenmi as represented by his interests in the land acquired are liable to be paid to the jenmi and his capital is, therefore, returned to the jenmi if and when land is acquired for public purposes. Till such an event occurs the jenmikaram has to be paid and it is difficult to conceive that this payment of jenmikaram was towards capital, because if it was towards capital it certainly must go in diminution of the compensation awardable on land acquisition and the entire amount of the value of the interest of the jenmi in the land would not have been directed to be paid to the jenmi. The payments of jenmikaram are certainly not a return of capital in instalments. The only question then is whether it is a payment as compensation for deprivation of the right to a property. In this connection we have to observe that the residuary interest of the jenmi in the property gave them only a right to receive michavaram, renewal fees and puravaka dues and that after the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall extract a passage from the judgment : " It seems to us that where all owner of all estate exchanges a capital asset for a perpetual annuity, it is ordinarily taxable income in his hands. The position will be different if he exchanges his estate for a capital sum payable in instalments. The instalments when received would not be taxable income." In the case before us, we are not considering the rights and obligations of the jenmi and kudiyan arising out of any contract between them. In most of the cases decided, the question arose on the basis of all agreement where there have been either a purchase of what is called an annuity by the sale of a capital asset or an agreement by which there has been provision made for payment in instalments of an ascertained sum towards the value of capital transferred. It had been noticed often that cases arising in those circumstances were not easy to solve and that it was difficult to determine in a given case whether it was a purchase of an annuity or a return of capital. In the case before us, we think the payments towards jenmikaram is not towards return of capital. We say so for reasons which we have already indicated and which we may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the former holders unless there are clear and convincing circumstances to show that one or more items of payment do not form part of the compensation payable, we must hold that those payments are what they are said to be by the statute. We must give the word 'compensation' its normal and natural meaning. As seen earlier, in clause (e) of section 3 of the Act, the legislature definitely says that the holder or holders of the estate falling within clauses (b) and (c) of section 3 'shall be entitled only to compensation from the Government as provided in this Act'. From this, it follows that all payments made to them under the Act are compensation payable to them for taking over their estates. Statutes which take away others' property, by and large, provide for payment of compensation as from the date of taking. In the generality of those statutes, if immediate payment is not made at the time of taking, provision is made for payment of interest on the compensation payable as from the date of taking. In the Act, there is no provision for payment of compensation at the time of the vesting of the estates in the Government. Nor is there any provision for payment of interest on the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the creditor but was not paid or in other words was withheld from the creditor by the debtor after the time when the payment should have been made. Proceeding further, this court observed in that case that interest, whether it was statutory or contractual, represented the profit the creditor would have made if he had the use of the money which he was entitled to. In the cases before us, the assessees were not entitled to any compensation till the same was determined under section 39. Therefore, no amount, to which they were entitled, was withheld from them. Hence, on that account, they were not entitled to any compensation, in lieu of interest." It appears to us that the situation arising out of the promulgation of the Kanom Tenancy Act, 1955, substituting the obligation on the part of the kudiyan to pay jenmikaram in lieu of michavaram, etc. (it is in lieu of is clear from the Explanation to section 2(13) of the Act) indicates that there has been no deprivation of the income the jenmi used to receive from the land before the Act. There has been only a substitution of that income by the consolidated payment by way of jenmikaram under the Act. Therefore, we think, the principle of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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