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TMI Blog2000 (11) TMI 57X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in the circumstances of the case, the Tribunal was right in holding that the sums of Rs. 1,868 and Rs. 19,157 representing profit under section 41(2) and capital gains, respectively, should be deleted from the assessment ?" The two references arise out of cross appeals pertaining to the assessment year 1967-68 for which the relevant previous year ended on June 30, 1966. The assessee was carrying on the business of manufacture and sale of sugar. It had a factory for the manufacture of sugar in Hamira in the then State of Kapurthala, which was shifted to Iqbalpur (U. P.), pursuant to the decision of the Central Government, contained in their letter dated April 30, 1954. The building and the structures at Hamira along with the land appurtenant thereto, were requisitioned by the Deputy Commissioner, Kapurthala, by his order dated November 24. 1954, under the PEPSU Requisitioning and Acquisition of Immovable Property Act, 1954 (for short the "1954 PEPSU Act"), and it was delivered to one Jagatjit Distillery and Allied Industries Ltd., for the purpose of enabling them to set up a sugar factory. Later on, the property was de-requisitioned piece meal and its possession was delive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. The break-up of the compensation of the said amount, as given in the assessment order, was as under : Rs. (a) For use and occupation of the building for the period December, 1954 to February, 1959 1,47,109 (b) Reimbursement charges for vacation and reoccupation of the premises 3,600 (c) Compensation for Sheesham trees removed from the premises by Jagatjit Distillery and Allied Industries Ltd. 9,000 (d) Compensation received for demolition and removal of part of the building 46,997 (e) Compensation for demolition of railway siding and removal 24,975 ------------------ 2,31,681 ------------------ He treated the entire amount as a revenue receipt and brought it to tax accordingly. The assessee took the matter in appeal to the Appellate Assistant Commissioner (in short the "AAC"). The Appellate Assistant Commissioner took the view that the compensation paid for the use of the requisitioned premises and for vacation and reoccupation of the properties, amounting to Rs. 1,50,709, was liable to tax as revenue receipt. He also held that it had been rightly assessed in the assessment year in question as income had accrued, when the same was determined in terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crual will be in the assessment year 1964-65 and not 1963-64 ; and (e) that there was no accrual in the assessment year 1967-68. The Tribunal also observed that while coming to the said conclusion it had taken note of the assessee's argument that taxability of any part of the receipt, if at all, could be considered only in the assessment year 1967-68. The Tribunal accordingly held that since the question of assessability of the amount of compensation in the assessment year 1967-68 had already been considered in its earlier order, it was not necessary to reconsider the issue afresh. Thus, it was held that no part of the compensation accrued or arose in the year in question, viz., assessment year 1967-68. Accordingly, the Tribunal deleted the addition of Rs. 1,75,709, sustained by the Appellate Assistant Commissioner. The Tribunal also rejected the plea of the Revenue that the assessee having itself declared in its return Rs. 1,868 and Rs. 19,157 as profit under section 41(2) and capital gains, respectively, it should not be permitted now to urge as an additional ground before the Tribunal that the amounts are not assessable to tax. Observing that the assessability of the entire am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty had been taken on lease for the period of requisition ; (ii) the Tribunal did not examine as to whether the income could also be said to have accrued only after it was quantified and if that was so then it could be said to have accrued only after January 7, 1964 (beyond assessment year 1963-64), when the assessee received payment under interim orders of the High Court; (iii) the Tribunal may not be right when it reached the conclusion that the compensation accrued to the assessee in the assessment year 1965-66 ; and (iv) in the instant case, a liability to pay compensation on the part of the Government and correspondingly of the assessee to receive, had accrued immediately on taking over the possession of the requisitioned property. The court finally answered the question, namely, as to whether any part of compensation of Rs. 2,75,610 was assessable in the assessment year 1963-64 as follows : "We cannot accept the argument advanced on behalf of the Department that a right accrued in favour of the assessee to receive compensation on the making of the award and if the compensation or part thereof represented income, such income accrued on June 7, 1962, and that the pendency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but short of receipt, when the right to receive the income becomes vested in the assessee, it is said to accrue or arise. There fore, mere receipt of income is not the only test of chargeability to tax (see Keshav Mills Ltd. v. CIT[1953] 23 ITR 230 (SC)). If income accrues or arises, it may become liable to tax. It is, therefore, manifest that if an assessee acquires a right to receive income, the income can be said to accrue to him, though it may be received later on. The question as to the point at which income could be said to "accrue" or "arise" to an assessee for the purpose of the Indian Income-tax Act, 1922, came up for consideration in E. D. Sassoon and Co. Ltd. v. CIT [1954] 26 ITR 27 (SC). In the majority judgment it was explained that the words "arising" or "accruing" described a right to receive profits and that there must be a debt owed by somebody. It was observed that it cannot be said that an assessee has acquired a right to receive the income or that income has accrued to him unless and until there is created in favour of the assessee a debt due by somebody. On the connotation of the word "debt", in Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and the cases where the right to receive the payment was admitted and only the quantification of the amount payable was left to be determined in accordance with the settled or accepted principles. In other words, in the former case, when the right to receive compensation is in dispute, there is no "debt" created in favour of the assessee while in the latter case, when the right to receive is admitted, a debt is created immediately on requisition or acquisition as the case may be. In the light of the aforenoted principle of law laid down in Hindustan Housing and Land Development Trust Ltd.s case [1986] 161 ITR 524 as we have observed above, what has to be examined in the present case is as to whether it was the right of the assessee to receive the amount of compensation which was in dispute in the State Government's appeal. If it was so, it cannot be said that he had acquired a right to receive the income or that income had accrued to it, and the amount held to be a revenue receipt by the Tribunal will be taxable in the assessment year 1967-68. On the contrary, if the appeal was only on the question of mere quantification of the amount to be received by the assessee the income ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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