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TMI Blog1982 (4) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Land Acquisition Act, 1894 on public expenses for a public purpose i.e. setting up an Urban Estate (Phase II) in area of Tehsil and District Patiala. In this land notified for acquisition, the land of the assessee was included. Thereafter by a Notification dt. 11th March, 1971 u/s 6 of the Land Acquisition Act, 1894, published in the Government Gazette (Extraordinary), the land of the assessee was acquired. The assessee, however, did not feel satisfied with the compensation fixed for acquisition of his land by the Acquisition Collector vide his award dt. 23rd March, 1971. Therefore, the assessee filed an appeal against that award before the District Judge, Patiala. The District Judge, Patiala vide his judgment dt. 31st Oct., 1975 held as under: "The claimants are also entitle to 15 per cent solarium due to the compulsory acquisition on the enhanced price besides 6 per cent interest from the date of the taking of actual possession of the land on enhanced amount. The additional compensation in accordance with the judgment received by the assessee was Rs. 1,59,000. The interest on the basis of the above judgment received by the assessee was Rs. 39,862. Hence the contentiou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended to make it compulsory on the court to grant interest at a particular rate alone. Further, the words following "may direct" clearly show that the Legislature intended s. 28 to be mandatory and the section confers a statutory right on the owner of the property to receive interest at the rate mentioned in s. 28". It was contended that s. 28 of the J K Land Acquisition Act is in pari materia with s. 28 of the Land Acquisition Act, 1894 (Act 1 of 1894) and, therefore, the meaning given to the word "may" by the court may be applied in the case before us. 6. The ld. counsel for the assessee further submitted that in the case of State of U.P. vs. Jogendra Singh AIR 1963 SC 1618, the Supreme Court gave the meaning of "may" in the context where it can have the meaning of "must" or "shall". In this regard, he referred to the observations of the Court that the word "may" generally does not mean "must" or "shall". But it is well settled that the word "may" is capable of meaning "must" or "shall" in the light of the context. Where a discretion is conferred upon a public authority coupled with an obligation, the word "may" which denotes discretion should be construed to mean a command ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds Kundanmal, M. Jairam and Maharaja Yashwant Rao, the Gujarat, Kerala and M.P. High Courts have dissented from the judgment in the case of Dr. Sham Lal Narula but sitting as we are in the jurisdiction of the Punjab Haryana High Court, the judgment of the Court has a binding force on us. 10. The ld. counsel for assessee submitted that the Mysore High Court in the case of CIT vs. V. Samapangiramaiah (1968) 69 ITR 159 (Mys) had held that the Appellate Tribunal was right in holding that the entire amount of interest received on enhanced compensation was not assessable in the assessment year of receipt and that only the proportionate interest referable to the particular assessment year was assessable in that year. The court has further held that there was a complete acquisition of right to recover the accumulated interest on the amount awarded by the Land Acquisition Officer when possession was taken, and, on the enhancement, and to subsequent interest, so long as it ran but was not paid. Such interest was income which accrued in the year in which it became so recoverable. The attribution of the whole interest to the year of receipt was manifestly wrong. It was submitted by him th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee is a fallacious one. It was further submitted that the Supreme Court has not laid down time of accrual and in the case of Dr. Sham Lal Narula 53 ITR 151, the issue really was the nature of compensation and not the time of accrual of interest. He reiterated that the authorities cited by him in the note submitted to the Bench and to which the ld. counsel for the assessee has made reference, are in favour of the revenue and really applicable to the facts of the case and as such decisive in determining the issue before us. He contended that the assessee has not pointed out any judgment in his favour and, therefore, the orders of the authorities below required no interference at the instance of the assessee. 13. In the rejoinder, the ld. counsel for the assessee submitted that in awarding interest u/s 28 the discretion of the Court referred to by the ld. Deptl. Rep. is only with regard to the compensation but interest rate is fixed and as such as pointed out by the Mysore High Court which has been followed by the Punjab and Haryana High Court, interest u/s 28 is also taxable only on accrual basis. The orders of the authorities below may, therefore, be reversed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s interest". The Hon'ble Supreme Court noted this case and the exposition of the expression "interest" in the case of Dr. Sham Lal Narula (1964) 53 ITR 151 (SC) and observed that the above passage abstracted by us indicates that interest, whether it is statutory or contractual, represents the profits the creditor might have made if he had the use of the money or the loss he suffered because he had not that use. It is something in addition to the capital amount, though it arises out of it. The Court further observed at page 154 that interest pertains to the domain of payment after the compensation has be ascertained. It is a consideration paid either for the use of money or for forbearance from demanding it after it has fallen due. Therefore, the Land Acquisition Act itself makes a clear distinction between the compensation payable for the land acquired and the interest payable on the compensation awarded and while interpreting s. 34, since the Legislature had expressly used the word "interests" with its well known connotation, the Court held that it was reasonable to give that expression the natural meaning it bears, 15. In the course of the judgment, the Hon'ble Court held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the previous year relevant to that assessment year. The contention of the assessee before the Hon'ble High Court of Punjab in reference was that the interest had to be spread over the various year in which it had accrued due. This contention had not found favour with the ITO as well as with the AAC but the Tribunal had held that only the interest referable to the relevant assessment year could be brought to tax. The Hon'ble Court observed that the premise that the right to no part of the interest was born until the Land Acquisition Officer made his arithmetic cannot have the support of reason. There was a complete acquisition of the right to recover the accumulated interest on the amount awarded by the Land Acquisition Officer when possession was taken and on the enhancement when the appropriate decree made such enhancement and to subsequent interest so long as it ran but was not paid. Such interest became the income which accrued in the year in which it became so recoverable. The court particularly observed that the attribution of the whole of that interest in the year of receipt is manifestly impossible. 17. We have already seen that the Hon'ble Supreme Court has likened the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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