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TMI Blog1973 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ) under the provisions of rule 75A(1) of the Defence of India Rules read with section 19 of the Defence of India Act. Thereafter, the State Government acquired the land permanently in exercise of the powers conferred on it by section 5 of the Requisition of Land (Continuance of Powers) Act, 1947. The notice of acquisition dated the 27th December, 1952, was published in the Calcutta Gazette dated 8th of January, 1953, and a sum of Rs. 24,97,249 was awarded as compensation by the Land Acquisition Collector to the assessee. The assessee being dissatisfied with the amount of the compensation paid to it preferred an appeal to the Court of Arbitrator, 24-Parganas, Calcutta. In that case, numbered as Land Acquisition Case No. 17 of 1955, the arbitrator gave an award in favour of the assessee on 29th July, 1955, and by his award the said arbitrator fixed the amount of the compensation at Rs. 30,10,873 for permanent acquisition of the land in place of Rs. 24,97,249 assessed by the Land Acquisition Collector. The amount of compensation for the acquisition of land was thus enhanced by the sum of Rs. 5,13,624 on which interest was to run at 5% per annum from the date of acquisition, that is, J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal. The first contention was that the amount of the compensation received by the assessee is not a receipt of a revenue nature and it could not, therefore, be included in the assessee's total income. The second contention was that, in any event, the amount did not accrue to the assessee during the relevant previous year ended on the 31st March, 1956. The Tribunal did not accept the first contention raised on behalf of the assessee and in the instant reference, we are not concerned with that aspect of the matter. The Tribunal, however, accepted the second contention of the assessee that the further sum of Rs. 7,24,914 was not taxable in the relevant assessment year 1956-57. The Tribunal noted that the amount of compensation for the acquisition was enhanced by the sum of Rs. 5,13,624 on which interest was to run at 5 per cent. per annum from the date of acquisition, i.e., January 8, 1953, till the date of payment and a further recurring compensation of Rs. 6,272 per mensem was also to be paid to the assessee from the date of the requisition, i.e., June 29, 1946, till the date of the acquisition, i.e., January 7, 1953. The Tribunal allowed the appeal of the assessee and the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that the decision of the Tribunal must be held to be erroneous and wrong, as the decision of the Punjab High Court on which the Tribunal relied has been subsequently set aside by the Supreme Court. He has drawn our attention to the decision of the Supreme Court in the case of Commissioner of Income-tax v. Jai Parkash Om Parkash Co. Ltd. [1964] 52 ITR 23 (SC). Mr. Sen contends that the mere fact that an appeal has been preferred is of no consequence in the matter of considering whether the income has accrued or not in a case where the assessee maintains the accounts on the basis of mercantile system. It is the contention of Mr. Sen that as soon as the award was made, a legal enforceable claim arose in so far as the assessee is concerned, to get payment of the said amount of enhanced compensation and the said enhanced amount must, therefore, be considered to have accrued to the assessee as and when the said award enhancing the compensation was made. Mr. Sen argues that though the question of receipt of the money is of no importance in a case where accounts are maintained on the basis of a mercantile system, in the instant case the assessee has further in fact received the mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the very foundation of the claim of the assessee to the said enhanced amount are in jeopardy. It is the contention of Mr. Murarka, the learned counsel for the assessee, that the enhancement was made by an order of the arbitrator in an appeal preferred against the order of the Collector. The said enhancement by the arbitrator is now pending further appeal. Unless the pending appeal is decided, it cannot be said that the assessee is entitled to receive the said enhanced amount or any portion thereof. The right and the claim of the assessee to the enhanced amount in its entirety are clearly in dispute and in jeopardy. According to Mr. Murarka, learned counsel for the assessee, at the present moment the claim to the enhanced amount is in the nature of assertion on the part of the assessee and unless the sum claimed is finally accepted by the court, it cannot be said that the assessee has any right or any claim to the enhanced amount or any portion thereof. Mr. Murarka has also contended that in the enhanced amount there were other amounts, namely, amount of interest and amount payable to the assessee on account of monthly compensation. Those amounts, in any event, argues the learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose sums are taxable which accrue as income, i.e., they must actually accrue or arise. No amount can be said to accrue unless it is actually due. Claim to an amount is not tantamount to the amount being due or in other words that the amount has accrued. In the instant case, the very foundation of the claim is in jeopardy If the appeal goes against the assessee, then nothing would be due. It is only if it goes in his favour that the amount will accrue. " Khosla C.J., after referring to various authorities, at page 724, observed : " In the case before us the profits, which the assessee is claiming, are entirely notional; he may get nothing at all, as the suit may go against him. That being so, it cannot be said that the failure of this suit has entailed actual loss to him, because it is deprivation of a notional profit--not an actual loss--which occurs on the date his suit ultimately fails in the High Court or the Supreme Court if an appeal is taken to it. In this view of the matter, it is quite clear to me that the income has not accrued and the amount was rightly excluded from the taxable income of the assessee." The court declined to issue a mandamus and dismissed the said app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1955-56 ? " It is not necessary to set out the facts in any detail and the same will all appear from the judgment. On behalf of the department it was contended that the right to compensation accrued on the date when possession was taken and, therefore, the compensation awarded by the Collector or the subsequently enhanced compensation, must all be included in the year in which the compensation was awarded by the Collector as that was the year in which the assessee was entitled to receive the same. The court observed : " On a consideration of the nature of acquisition proceedings, it appears to us that when lands are notified to be taken by the Government under the Land Acquisition Act, the owner of the land is entitled to payment of compensation at the market value on the date when possession was taken pursuant to a notification under section 3 of the Hyderabad Land Acquisition Act. It may be stated that on the date when land is taken possession of by the Government, no compensation has in fact been determined, but it has become only payable. The right of the owner is, therefore, an inchoate right." The court considered various decisions of the Supreme Court and also the decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the said case and also with the observations made by Khosla C.J. We may only note that this decision of the Andhra Pradesh High Court was in 1969, long after the decision of the Supreme Court in the appeal preferred against the decision of the Punjab High Court to which we have earlier referred. The decision of the Supreme Court in the case of E. D. Sassoon & Co. Ltd. v. Commissioner of Income-tax [1954] 26 ITR 27 (SC) need not detain us and this decision of the Supreme Court came to be considered by the Andhra Pradesh High Court in its judgment. This decision of the Supreme Court deals with the meaning of the terms " accrue or arise ". So far as this aspect as to the meaning of these expressions are concerned, there can now hardly be any dispute and controversy. In the case of Pope the King Match Factory v. Commissioner of Income-tax [1963] 50 ITR 495 (Mad), the Madras High Court was concerned with the question of allowability as a deduction in respect of a demand made for excise duty on an assessee. On the basis that the said demand was a legal liability and an enforceable one, the Madras High Court came to the conclusion that the said amount should be allowed as a deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in respect of a particular year. In the present reference, this aspect of the matter is not really relevant. In the case of Kedarnath Jute Mfg. Co. Ltd. v. Commissioner of Income-tax [1971] 82 ITR 363 (SC) the Supreme Court was concerned with the question of allowability as a deduction of a liability for payment of sales tax by a dealer. The dealer had disputed his liability to pay his sales tax and had preferred an appeal. Pending, however, the disposal of the appeal the dealer had claimed deduction of the amount which the dealer was liable to pay as sales tax on the basis of the assessment. Dealing with the question, the Supreme Court observed at page 366 : " Now under all sales tax laws including the statute with which we are concerned, the moment a dealer makes either purchases or sales which are subject to taxation, the obligation to pay the tax arises and taxability is attracted. Although that liability cannot be enforced till the quantification is effected by assessment proceedings, the liability for payment of tax is independent of the assessment. It is significant that, in the present case, the liability had even been quantified and a demand had been created in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to Rs. 48,660 was paid to the assessee in the previous year relevant to the assessment year 1956-57. The assessee's contention that the entire amount could not be assessed in 1956-57 did not find favour with the Income-tax Officer or the Appellate Assistant Commissioner. But the Appellate Tribunal held that interest to the tune of Rs. 42,577 being interest due for the accounting years 1951-52 to 1954-55, accrued in the previous year ending March 31, 1955, could not be included in the assessment for 1956-57 and only Rs. 6,082 pertaining to the period after 1st April, 1955, could be included in the assessment for 1956-57. On a reference to the High Court, the High Court affirmed the decision of the Tribunal. The Punjab High Court held that under section 34 of the Land Acquisition Act, the right to recover interest arises the moment the owner was deprived of his property under the Act and the rate at which he was entitled to interest was also specified. The view of the Punjab High Court was that the interest on compensation amount compensates him for the loss of income which would have accrued to him if possession had been taken after making the award under section 16 and after p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decree of the trial court was reversed by the appellate court, that is, on 8th April, 1960. The court is further of the view that, ordinarily, an assessee maintaining his accounts on the mercantile system is entitled to deduction only if the appropriate debit entry has been made in the account; but that is not an absolute rule and where a liability arises by operation of law, its deduction cannot be denied merely because it has not been entered in the accounts. The decision of this case really turned on the question of the principle of restitution contained under section 144 of the Code of Civil Procedure. This case, in our view, cannot be an authority for the converse proposition urged by the learned counsel for the revenue that in the event of the Government succeeding in the appeal the assessee will be entitled to claim appropriate deduction on the basis of the final order and the amount already awarded must, therefore, be held to have accrued to the assessee on the basis of the order of the Tribunal enhancing the amount awarded by the Collector in the first instance. On a consideration of these authorities, we are of the opinion that a compensation amount can only be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther compensation or the amount of the further compensation has not yet been adjudicated upon and decided. The said receipt is really the receipt of a particular sum pursuant to an order of court on the security bond executed by the assessee and on the basis of terms and conditions mentioned in the said bond. We are, therefore, of the opinion that the Tribunal in the instant case was right in coming to the conclusion that the said extra amount of compensation amounting to Rs. 7,24,914 was not income which accrued or arose during the previous year relevant to the assessment year 1956-57. We shall make it clear that in view of our answer to the question referred, we have not considered it necessary to go into the break-up of the said amount of Rs. 7,24,914 mentioned by the Tribunal and to the question whether the amount of interest, and compensation for occupation, if any, included in the said amount of Rs. 7,24,914 can be said to have accrued in the relevant year or in a particular year or in a number of years. We may observe that, in view of the decision of the Tribunal, the Tribunal has also not considered this aspect. We, therefore, answer the question in the negative and in f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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