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TMI Blog1982 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... s the income of the assessee for the assessment year 1966-67 ? " The Land Acquisition Collector acquired the " Rani Bagan " property measuring 6.959 acres belonging to the assessee. The date of acquisition was 29th August, 1963, and the date of the award was 29th March, 1966. For the period of 2 years and 7 months a sum of Rs. 35,19 was allowed as interest by the Land Acquisition Collector. It was common ground that in the subsequent year the District judge further allowed a sum of Rs. 1,05,643 as interest. The ITO treated the entire interest receipt of Rs. 35,190 as income of the year in question which the AAC upheld in appeal. The appeal was taken up to the Tribunal and it was contended that interest had accrued in each of the years fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally during the many years which preceded the assessment year 1962-63, so long as the assessee did not maintain his accounts on the mercantile basis, the interest received by him during the previous year relating to the assessment year 1962-63 could be taxed during that assessment year. In support of this argument he depended upon the observations in Gajapathy Naidu's [1964] 53 ITR 114 (SC), in which there was an explanation of the familiar rule that income is taxable when it accrues or is earned, if the assessee's accounts are maintained on the mercantile basis, and when it is received, if the method of accounting is the cash system. But this elucidation does not take the Department far enough. The mercantile system which, when regularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rew our attention to a decision of the Gauhati High Court in the case of N. R. Sirker v. CIT [1978] 111 ITR 281, where the Gauhati High Court observed that where the assessee did not indicate the method of accounting followed, either cash system or mercantile system, in that case in the ordinary course, the receipt should be taxed on the cash system. But this observation of the Gauhati High Court, it must be remembered, was made not in the context of interest received in land acquisition compensation award case, where the basic principle is that the interest is the compensation that is paid for the deprivation of the right of the use of the land. In that view of the matter, we do not think that the decision of the Gauhati High Court would b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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