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TMI Blog1986 (3) TMI 117X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of West Bengal acquired the demised property on 24-12-1979. A settlement was arrived at between the assessee and the Government of West Bengal. On the basis of said settlement, the High Court passed an order dated 28-2-1980. By this order, the Government of West Bengal was to pay Rs. 11 lakhs to the assessee towards the compensation for the acquisition of the property. Secondly, the Government had also to pay another sum of Rs. 2 lakhs to the assessee in consideration of the assignment of the decree for the mesne profit and eviction. Thus, by virtue of the order of the High Court dated 28-2-1980, a sum of Rs. 2 lakhs became payable by the Government of West Bengal to the assessee towards mesne profit. 3. The assessee considered the aforesaid sum of Rs. 2 lakhs as rent receivable by her. Another order dated 6-9-1985 of the High Court clarified their earlier order dated 28-2-1980 by saying that the mesne profit related to the period from May 1970 to February 1980. The assessee calculated the proportionate sum relevant to the assessment year 1980-81 at Rs. 22,570. The assessee offered the above sum to tax as income from property relating to the previous year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Mulla's commentary on the Code Of Civil Procedure, Thirteenth edn., p. 929 for the proposition that the mesne profit is virtually a claim for the damages and that wrongful possession is the very essence of a claim for mesne profit. In order to support this argument, Shri N. K. Poddar relied on the following cases : (1) CIT v. Rani Prayag Kumari Debi [1940] 8 ITR 25 (Pat.) : In this case, the assessee was deprived of certain movable and immovable properties. She filed a suit and obtained a decree for the recovery of the movables and immovables and also damages for wrongful detention of the properties. It was held that the damages received by the assessee for wrongful-detention of her properties was not a revenue receipt as it was not paid under any contract to pay any interest. (2) CIT v. J. D. Italia [1983] 141 ITR 948 (AP) : In this case the land of the assessee was unauthorisedly occupied and civil suit instituted by the assessee for recovery of possession was decreed in his favour. During the pendency of the appeal the parties arrived at a compromise whereunder the assessee was paid a sum of Rs. 40,000 described as interest. It was held that the receipt was essenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear because of the clarification dated 6-9-1985 of the High Court stating that the mesne profit related to a period of about 10 years, viz., from May 1970 to February 1980. In this connection, he referred to the decision in the cases of CIT v. Sachindramohan Nandy [1984] 146 ITR 597 (Cal.) and CIT v. Deoki Nandan Sons [1982] 138 ITR 225 (Delhi). In the former case, it was held that where the assessee does not indicate the method of accounting followed by him, in the ordinary course, the receipt cannot be assessed to tax on the basis of cash system of accounting. In the later case, it was held that interest awarded by the Court under the Land Acquisition Act accrued day by day throughout the years from the date of taking over possession till the payment of compensation. Finally, he urged that the income had to be assessed under the head 'Income from house property' because it was in the nature of additional rent. 7. Shri S. Dasgupta, the learned representative for the department, on the other hand, supported the order of the authorities below on the grounds stated in their orders. Then, he referred to the decision in the case of CIT v. Siewart Dholakia (P.) Ltd. [1974] 95 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit is in the nature of damage which the Court may mould according to the justice of the case. In the case of Gopal Das Khetry 59 CWN 229, it has been held that wrongful possession of the defendant is the very essence of a claim of mesne profit. In the case before us, the assessee received the sum of Rs. 2 lakhs by transferring her right to receive mesne profit. That right, in our opinion, was a capital asset. It accrued in full on 28-2-1980. The excess of Rs. 2 lakhs over the cost of acquisition plus improvement, if any, would give rise to a surplus which is, in our opinion, assessable under the head 'Capital gains'. After considering all the relevant facts and circumstances of the case and the case laws cited before us, we come in the conclusion that the sum of Rs. 2 lakhs was received in full on 28-2-1980 on the transfer of a capital asset. Thus, the surplus, if any, arising out of the transfer is assessable under the head 'Capital gains'. Hence, we do not agree with the revenue authorities that it is a revenue receipt. Similarly, we do not agree with the assessee that it did not agree in full during the previous year under consideration. We do not agree with both the parties r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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