1975 (12) TMI 55

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..... of compensation was quantified and ascertained under Chapter 5 of the Orissa Estates Abolition Act, 1951 ? (2) Whether, in the facts and circumstances of the case and in the absence of accounts maintained by the assessee either in mercantile or cash system, and in view of sections 4 and 5 of the Income-tax Act, 1961, income arising to the assessee by way of interest is assessable to tax when it accrued or when it was received ? " Assessee was the ex-proprietor of the erstwhile Kanika Estate which was abolished under the provisions of the Orissa Estates Abolition Act (1 of 1952). In the accounting year ending on March 31, 1965, the assessee, along with the compensation for the estate, received a sum of Rs. 26,007 by way of interest statu .....

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..... have accrued as income during the year in question. The Appellate Tribunal has come to the conclusion that the interest in respect of the compensation due has to be charged in the year in which it accrued or has become due to the assessee. Placing reliance on the provision of section 37(3) of the Orissa Estates Abolition Act, and sections 4 and 5 of the Income-tax Act, the Tribunal held that income that accrues or arises in a particular year becomes chargeable in that year and only when accounts are maintained on cash basis, such income may be charged in the year in which it is received. Accordingly, the Tribunal accepted the assessee's claim and gave relief. The Income-tax Officer as also the Appellate Assistant Commissioner have clearl .....

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..... ompensation. The two questions that have been referred to us are indeed one and we accordingly reframe the question thus : " Whether, on the facts and in the circumstances of the case, the interest paid to the assessee during the year could be assessed as income of the year or the interest had to be spread over in the manner claimed by the assessee ? " Our answer to the reframed question is : On the facts and in the circumstances of the case, the total interest is assessable during the year of receipt, namely, assessment year 1965-66. The Appellate Tribunal in paragraph 13 of its decision required the Income-tax Officer to examine the claim of expenses. That part of the direction must be sustained and the Income-tax Officer should .....

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