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TMI Blog1940 (10) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... us is concerned. It appears that two houses belonging to the assessee's father Ramji Das Bhargava, were acquired by the Improvement Trust under the Land Acquisition Act in 1927, and possession was taken on the 11th November 1927. The amount awarded by the Land Acquisition Officer was ₹ 13,225; but Ramji Das Bhargava did not accept this as adequate and referred his claim to the Tribunal which has seisin of such matters, and the Tribunal on 6th April, 1931, increased the amount of compensation to the high figure of ₹ 97,640. The Tribunal also directed the Improvement Trust under the provisions of Section 28 of the Land Acquisition Act to pay interest at 6 per cent, per annum from the date of taking possession of the property to the date of payment of ₹ 97,640. The Improvement Trust appealed against this order to the High Court, but the appeal was dismissed; and thereafter the sum of ₹ 97,640 plus ₹ 49,660 as interest, was paid to the four sons of Ramjidas Bhargava, who had meanwhile died. The assessee's share of the interest money was ₹ 12,415. The Income-tax Officer was of opinion that this money was taxable, and income was according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t clause provides that the Act shall not apply to, Any receipts not being receipts arising from business or the exercise of a profession, vocation or occupation, which are of a casual and non-recurring nature, or are not by way of addition to the remuneration of an employee. The decision on which the taxing authorities have relied is Commissioner of Income-tax, U.P. v. Jagmohandas Rastogi AIR 1929 Oudh 125; 3 ITC, 274. In that case one of the parties to a partition suit put his decree into execution. The other party applied for stay pending at the hearing of an appeal which he had preferred in the Privy Council and a stay order was passed which was conditional upon his giving security to the extent of ₹ 95,000 and paying interest thereon into court at 6 per cent. per annum at regular intervals. The interest was so paid and was received by the party who had taken out execution. The question before the Chief Court was whether this interest was income to which the Income-tax Act applied, and the learned Judges answered it in the affirmative. At page 126, column 1 they say: Owing to Indra Prasad taking the case to their Lordships of the Judicial Committee the enjoy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rdships say at page 592 (of 1932 A.L.J.): ...................the sums which the appellant seeks to charge can, in their Lordships' opinion, only be taxable if they are the produce, or the result, of carrying on the agencies of the oil companies in the year in which they were received by the respondents. But when once it is admitted that they were sums received, not for carrying on this business, but as some sort of solatium for its compulsory cessation, the answer seems fairly plain. Further on we have this observation: Their Lordships will only add that the reasoning of this judgment would apply equally if the appellant based his claim on head (vi) 'other sources' and the corresponding provisions of Section 12. The next authority to which we are referred is Commissioner of Income-tax, Madras v. B.J. Fletcher [1937] 5 ITR 428 ; 1937 ALJ 1403. In that case the question before their Lordships was whether a bonus which had been paid to the employee of a company on retirement from a fund which the company had constituted was liable to income-tax. Under the rules governing the constitution of the fund, allotments were made from time to time by the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who sold the debentures belonging to himself, and his brother, is not an auctioneer and the commission which was earned, if it can be said in the circumstances that he earned commission, did not arise out of the business in which he was engaged nor was it in any way connected therewith. The learned Judges considered the decision of their Lordships in Shaw Wallace Co.'s case (supra) , and they disagreed with the view which was taken by a Bench of this Court in Gaya Prasad Chhotey Lal, In re [1935] 3 ITR 177 ; 1935 ALJ 405 to the effect that the observations of the Privy Council..........should be taken in connection with the facts of the particular case and that the Board did not intend to lay down any general principle. The Judges of the Full Bench say: In our opinion, the intention of the Board was to enunciate a working definition of income for the guidance of the Courts in India. Learned counsel for the assessee has next drawn our attention to some English decisions, and we shall proceed to consider them- while at the same time bearing in mind the warning which was issued by the Judicial Committee in the case of Shaw Wallace and Co. The first of these ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one, some more of those of the other. In Commissioners of Inland Revenue v. Ballantine [1924] 8 Tax. Cas. 595, additional costs, loss and damage incurred by a firm of contractors against a railway company was referred to arbitration on the 1st March 1916. On the 14th January 1921 the arbiter awarded the firm a certain sum, mainly as damages, together with interest thereon at 5 per cent, per annum from a certain date in 1918. At page 611 the Lord President observes: Now it is familiar that an assessment of the kind may contain as one of its constituent elements an allowance in respect that the claimant has lain for a long time out of his remedy. The propriety of such an allowance may depend on the character of the claim, and its amount may depend on many considerations of which time is only one. But an interest calculation is a natural and legitimate guide to be used by an arbiter in arriving at what he thinks would be a fair amount. In most cases in which such an allowance is a constituent of an award it does not separately appear, but is slumped along with other elements in the gross sum discerned for; but there is nothing to prevent an arbiter, if he thinks it just an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t its quality, or is it compensation estimated and measured in terms of interest? Further on he says: 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 interest so as to attach income-tax to it. In Commissioners of Inland Revenue v. Barnato [1936] 20 Tax Cas. 455, Slesser, L.J., observes that: Where on the consideration of the realities of the case, it emerges that the money is paid as interest and not paid merely as a means of measuring damages, there it can properly be said that it satisfies the requirement of Case 3, R.1, of Schedule D that the tax shall extend to any interest of money. These and other English authorities were considered by a Full Bench of the Patna High Court in Commissioner of Income-tax, Bihar and Orissa v. Rani Prayag Kumari Debi [1939] 1940, 8 ITR 25 ; AIR 1939 Pat. 662. Manohar Lall, J., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re on all fours with the facts of the case which is now before us-but from them and from the other authorities to which we have referred and certain authorities to which we shall now refer, as well as from a consideration of the principles applicable to the Indian Income-tax Act, we think that we shall be able to arrive at a decision. In the Revenue Divisional Officer, Trichinopoly v. Venkatarama Ayyar [1935] 59 Mad. 433 , it was held that where Government has taken urgent possession of certain lands before the award under the Land Acquisition Act was made, interest on the amount awarded can be given to the person entitled for the period between the date of taking possession by Government and the payment of compensation money, even in a case which does not exactly fall under Sections 16 and 17 of the Land Acquisition Act, on the principle that the right to receive interest takes the place of the right to retain possession. This view was in accordance with the decision in Inglewood Pulp Paper Co., Ltd. v. New Brunswick Electric Power Company [1928] AIR 1928 PC 287, where their Lordships of the Privy Council at page 290 say: It is now well established that on a contract for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate owner's right to retain the property. If the interest awarded under Section 28 of the Land Acquisition Act is income, it must have a source. It seems to us, that there are only two possible sources, either the property or its equivalent in money, and as we have already said, we do not think that this interest can be said to have arisen from either of these. It is not the fruit of a tree -to borrow the simile used in Shaw Wallace's case-but was compensation or damages for loss of the right to retain possession; and it seems to us that Section 28 was designed as a convenient method of measuring such damages in terms of interest. Under Section 28 the awarding of interest is not mandatory, but is discretionary with the court; and so the claimant is not entitled to it as of right under any rule of law. Our conclusion is that this sum of ₹ 12,415 is not income and is not assessable as such to tax. It was not without considerable doubt and hesitation that we have arrived at this decision, for there is much to be said on the other side; but upon the whole matter we think that this is the correct view to take and we also bear in mind that where the interpretation of a fis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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