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TMI Blog1965 (4) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... esumption of the all jagir lands in the quondam State of Gwalior. On the resumption of his jagir the assessee became entitled to receive compensation under section 3(1) of the Act as determined in accordance with the principles laid down in the Schedule to the Act. The compensation amount payable to the assessee, as also to other jagirdars, whose jagirs were resumed under the Act became due from the date of resumption and carried simple interest at the rate of 2 1/2 per cent. per annum from the date of resumption till the date of payment. Section 15 of the Act provided that the amount of the compensation would be paid in maximum ten annual instalments. In the assessment years in question the Income Tax Officer, Gwalior, brought to tax the interest amount on compensation which accrued to the assessee in the relevant as counting periods. The assessment against the ex-jagirdar, assessee, was as an individual. He claimed that the amount of interest which accrued to him was a part of the compensation payable to him for the resumption of his jagirs, and that it was a capital receipt not liable to tax under the Income Tax Act. The Income Tax Officer rejected this contention and so did the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the various clauses of section 4(1) shall ensue. Section 8 of the Act then made a provision for the assessment of compensation and the procedure for the determination of the amount of compensation. A jagirdar on the resumption of his jagir lands became entitled to receive compensation at seven times his net income determined in accordance with Schedule I to the Act. Section 8 ran thus : "8. Duty to pay compensation. - (1) Subject to the other provisions of this Act, the Government shall be liable to pay to every jagirdar whose jagir land has been resumed under section 3, such compensation as shall determined in accordance with the principles laid down in Schedule I. (2) Compensation payable under this section shall be due as from the date of resumption and shall carry simple interest at the rate of 2 1/2 per cent. per annum from that date up to the date of payment : Provided that no interest shall be payable on any amount of compensation which remains unpaid for any default of the jagirdar, his agent or his representative-in-interest." Schedule I to the Act is important. It laid down the principles for determining the compensation payable to a jagirdar whose jagir l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en so paid." Shri Adhikari, learned Advocate-General appearing for the department, submitted that section 8 itself made a distinction between the amount awarded as compensation and interest payable on the amount so awarded; that in the determination of the amount of the compensation in accordance with the principles laid down in Schedule I, no amount as "interest" was included; that as under section 10 of the Act the amount of compensation became payable to the jagirdar in maximum ten annual instalments and not immediately on resumption, the interest paid to him under section 8(2) was not any compensation paid to him for loss of his right to possession of the resumed jagir but was given to him for the deprivation of the use of the money representing the compensation for the resumed jagir; that the interest awarded to the jagirdar was thus in true sense "interest" and not a capital sum of compensation estimated in terms of interest; that, therefore, the Tribunal was wrong in holding that the interest amount which accrued to the assessee as compensation was a capital receipt not liable to tax and that it should have been held that it was a revenue receipt li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature would have made provision for interest not in section 8 itself but elsewhere separately. The question whether the interest received by the assessee was a capital or a revenue receipt depends on whether the interest amount did, or did not, form a constituent of the commutation sum which was paid to the assessee as compensation for the loss of his jagir. There is no dispute that the commuted amount received by the assessee as compensation for the loss of his jagir was a capital receipt not liable to be taxed. The question whether a receipt is capital or income has been considered in many cases. But, as pointed out by the Supreme Court in Commissioner of Income Tax v. Rai Bahadur Jairam Valji and Kettlewell Bullen and Co. Ltd. v. Commissioner of Income Tax, though various rules have been enunciated as furnishing a key for the solution of the question, no single test as infalliable or no single criterion as decisive in the determination of the question can be formulated and the question must ultimately be decided on the facts of the particular case. In Kettlwell Bullen and Co. Ltd. v. Commissioner of Income Tax, it was observed : "It may be broadly settled that what is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions in Schedule I shows that the interest amount provided by sub-section(2) of section 8 does not in any way from an element in the calculation of the compensation in accordance with the principles laid down in Schedule I. There is nothing in the section 8 or Schedule I or section 15 to indicate that the interest amount payable to a jagirdar under sub-section(2) of section 8 was added to the compensation amount determined in accordance with Schedule I; and that the total amount was made payable in maximum ten annual instalments. The express provisions of section 8 and Schedule I thus clearly show that the statutory interest payable to a jagirdar under sub-section(2) was not any compensation paid to him for being kept out of the compensation amount for a period of time extending up to ten years after resumption of his jagir when it became due to him on the date of the resumption of the jagir. The interest paid to a jagirdar under sub-section(2) was thus not a constituent of the compensation amount received by him under sub-section(1) but was a separate amount which was "interest" in the true sense on the compensation amount for the loss of the jagir. The fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e interest provided thereby is on the compensation determined under sub-section (1) read with Schedule I and not as part of it. When section 8 itself uses the word "interest" in contradistinction to the amount of compensation and when in the calculation of the compensation amount in accordance with the principles laid down in Schedule I, "interest" does not at all the enter, there can be no reason for thinking that the by using the expression "the amount of compensation payable to a jagirdar under section 8" in section 13, and like expression in sections 14 and 15, the legislature intended to make the interest payable under section 8(2) as part of the compensation for loss of jagir and included interest in sections 14 and 15. Having regard to the distinction made by sub-sections (1) and (2) between compensation and interest thereon and to the provisions of Schedule I, the expression "the amount of compensation payable to a jagirdar under section 8" used in section 13, or like expressions used in section 14, means only the amount of compensation payable under sub-section (1) of sections 8 and not the total sum of compensation as determined in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and words and not left such an intention to be inferred from a provision dealing with the payment of compensation together with interest thereon for discharge of the Governments liability to pay compensation in respect of the resumed jagir. Learned counsel for the assessee referred us to Inglewood Pulp and paper Co. v. New Brunswick Electric Power Commission and Satinder Singh v. Umrao Singh and contended on the basis of the those authorities that the right to receive interest took the place of the right to retain possession of the jagir lands; and that, therefore, the statutory interest provided by section 8(2) was nothing but a provision for calculation of interest as part of the compensation amount payable to a jagirdar for the loss of his jagir. We are unable to accept this contention. The decisions relied on by learned counsel no doubt lay down that upon the expropriation of land under statutory power, whether for the purpose of private gain or of good to the public at large, the owner is entitled to interest upon the principal sum awarded from the dare when possession was taken, unless the statute clearly shows a contrary intention. But they also point out that when su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that case the Supreme Court held that the statutory interest paid under section 34 of the Land Acquisition Act, 1894, on the amount of the compensation awarded for the period from the date the Collector had taken delayed payment of the compensation and was, therefore, a revenue receipt liable to tax under the Income Tax Act, and that this amount of interest was not compensation for the land acquired or for depriving the claimant of his right to possession but was paid to the claimant for the use of his money by the State. The reasoning given by the Supreme Court in support of the above conclusion applies equally here and on that reasoning there can be no escape from the conclusion that the statutory interest paid to a jagirdar under section 8(2) of the Act on the amount of compensation is a revenue receipt liable to tax under the Income Tax Act. In Narulas case, the Supreme Court no doubt observed that if interest on the amount of compensation determined under section 23 of the Land Acquisition Act had been a part of the compensation or given in consideration of the compulsory nature of the acquisition, the legislature would have provided for it in section 23 itself. But this o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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