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income-tax Officer Vs. Arvind Narain - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Delhi
Decided On
Judge
Reported in(1982)2ITD292(Delhi)
Appellantincome-tax Officer
RespondentArvind Narain
Excerpt:
1. the assessee is an individual and he, along with certain other co-owners, owned 194 bighas and 6 biswas of agricultural land, including land in dispute measuring 49 bighas 13 biswas, in village malikpur chhawani, delhi. this land was acquired by delhi administration for a public purpose, namely, the planned development of delhi. the notification under section 4 of the land acquisition act, 1894, bears no. f. 15(iw)59-lsg dated 13-11-1959. the notification under section 6 of the land acquisition act, 1894, bears no. f.4(14)/61-lsg dated 9-4-1964. the land acquisition collector by his award no. 1748, announced on 30-11-1964, categorised the entire land under acquisition in two blocks as follows : 2. feeling aggrieved by the said award, a reference was made under section 18 of the land.....
Judgment:
1. The assessee is an individual and he, along with certain other co-owners, owned 194 bighas and 6 biswas of agricultural land, including land in dispute measuring 49 bighas 13 biswas, in village Malikpur Chhawani, Delhi. This land was acquired by Delhi Administration for a public purpose, namely, the Planned Development of Delhi. The Notification under Section 4 of the Land Acquisition Act, 1894, bears No. F. 15(iw)59-LSG dated 13-11-1959. The Notification under Section 6 of the Land Acquisition Act, 1894, bears No. F.4(14)/61-LSG dated 9-4-1964. The Land Acquisition Collector by his award No. 1748, announced on 30-11-1964, categorised the entire land under acquisition in two blocks as follows : 2. Feeling aggrieved by the said award, a reference was made under Section 18 of the Land Acquisition Act, 1894. The learned Additional District Judge, Delhi, by his judgment dated 14-4-1976 in LAC No.744/65, and 209/68 enhanced the compensation by a sum of Rs. 23,01,119.47.

3. The Union of India filed an appeal in the Delhi High Court which bears No. 244 of 1976. An application for stay was also made. The Delhi High Court by its judgment dated 3-8-1976 in Appeal No. 244 of 1976 directed that The amount in dispute in the appeal must be deposited in the Court below within two months and the same will be payable to the respondents on furnishing security for restitution to the satisfaction of the Additional District Judge.' 4. An application dated 24-8-1976, was made on behalf of the recipients of the enhanced compensation and it was pleaded that the enhanced compensation may be distributed to the various applicants as per Schedule 'A' on their furnishing security of the whole amount. A security bond was executed on 16-9-1976 and submitted in the Court of the learned Additional District Judge, Delhi. The details of the break-up of the sum of Rs. 23,01,119.47 are as under : BREAK UP OF THE SUM OF RS. 23,01,119 SENT BY LAC VIDE LETTER DATED 25-8-1976 TO THE COURT OF SHRI JAGDISH CHANDRA, ADDITIONAL DISTRICT JUDGE, IN LAC NO. 209/68 RAVINDER NARAIN V. UNION OF INDIA AND PAID TO THE CLAIMANTS :--------------------------------------------------------------------------------------SI.Name of claimants Share of Total Enhanced InterestNo. claimants compensa- tion and--------------------------------------------------------------------------------------1 2 3 4 56--------------------------------------------------------------------------------------1. Mrs. Shakuntala Rani 6/78 1,77,009.19 98,264.82 78,744.372. Ravinder Narain HUF 3/78 88,504.60 49,135.42 39,369.183. Arvind Narain HUF 4/78 1,18,006.13 65,509.89 52,496.244. Ravinder Narain Indl.

3/78 88.504,60 49,135.42 39,369.185. Mrs. Manju Narain 7/78 2,06,510.72 1,14,642.30 91,868.426. Rajan Narain 7/78 2,06,510.72 1,14,642.30 91,868.427. Sajan Narain 7/78 2,06,510.72 1,14,642.30 91,868.428. Rasika Narain 6/78 1,47,507.66 81,887.36 65,620.309. Sarika Narain 5/78 1,47,507.66 81,887.36 65,620.3010. Arvind Narain Indl.

4/78 1,18,006.13 65,509.89 52,496.2411. Rewa Narain 9/78 2,65,513.78 1,47,397.23 1,18,116.5512. Ruchi Narain 9/78 2,65,513.78 1,47,397.23 1,18,116.5513. Ashiina Narain 9/78 2,65,513.78 1,47,397.23 1,18,116.95 The aforesaid amount was received in September 1976 by the different claimants, including the assessee, after furnishing the security for restitution to the satisfaction of the Additional District Judge, Delhi.

5. The previous year for the assessment year 1977-78 ended on 31-3-1977. The assessee filed his return of income and enclosed the following note with the return of income : By order of the Addl. District Judge, Delhi, in LAC No. 209 of 1968 dated 14th April, 1976, the compensation for acquisition of agricultural land was enhanced and was directed to be paid with interest since the date of possession, i.e., 4-2-1964. Against the said judgment and order of the Addl. District Judge, the Union of India filed an appeal, being RFA No. 244/76, which was admitted and is pending in the Hon'ble High Court at Delhi. In the said appeal, the Union of India is contesting the entire amount of enhancement of compensation and interest thereon and had applied for stay of the operation of the aforesaid judgment of the Addl. District Judge.

Thereupon the High Court directed that the amount payable under the said judgment be payable only upon furnishing security to the satisfaction of the Addl. District Judge, for restitution of the entire amount of compensation and interest. Accordingly, security for restitution was furnished by way of Bank Guarantee for the entire amount of compensation and interest thereon. Upon accepting the said Bank Guarantee for restitution of the entire amount, the payment was made to the assessee by about the end of September, 1976. The assessee received a sum of Rs. 65,509.89 by way of enhanced compensation and Rs. 52,496.24 by way of interest thereon since the date of possession. As the said amounts are received subject to restitution and final decision in the aforesaid appeal, the aforesaid amount received by way of interest is not included in the return of income for the assessment year 1977-78 and will be included in the year in which the compensation is finally determined in appeal. This is as per the decisions of the High Courts that the amount of interest on enhanced compensation would be treated as income only in the year in which the decision on compensation becomes final in appeal. This is so held by the Andhra Pradesh High Court in the case of Khan Bahadur Ahmed Alladin & Sons v. CIT [1969] 74 ITR 651 and the Gujarat High Court in the case of Topandas Kundanmal v. CIT [1978] 114 ITR 237. Accordingly, as per legal advice taken, the assessee has not included the said amount of interest in the return of income for the purposes of payment of tax for the assessment year 1977-78.

The ITO did not accept the assessee's submission that the interest on the enhanced compensation, which accrued to the assessee in this year and which was also received by the assessee in this year, did not constitute the income of the assessee for this year.

He did not follow the judgment of the Gujarat High Court in Topandas Kundanmal v. CIT [1978] 114 ITR 237, as according to him, this judgment was not binding upon the ITO in Delhi. The ITO also observed that the fact that an appeal had been filed by the Union of India would not affect the taxability of the aforesaid amount of interest pertaining to the assessee in this year. He observed that the assessee was a salaried employee and as he did not maintain any books of account, the income from interest on enhanced compensation had to be taxed on receipt basis. He thus brought to tax the sum of Rs. 52,496 being the interest on enhanced compensation awarded by the learned Additional District Judge, Delhi. In support of the case, the ITO relied on the judgments in CIT v. Raja S.N. Bhanja Das Deo [1977] 106 ITR 748 (Ori.) and M.Jairam v. CIT [1979] 117 ITR 638 (Ker.).

6. Aggrieved, the assessee filed an appeal to the Commissioner (Appeals). It was submitted that the Union of India had filed Appeal No. 244 of 1976 in the Delhi High Court and the amount of enhanced compensation was allowed to be paid only on furnishing of adequate security for restitution to the satisfaction of the Additional District Judge, Delhi. The submission made was that the amount of enhanced compensation, as well as interest, was not final because an appeal had been filed in the Delhi High Court and, therefore, it could not be said that any right to receive the income from interest had accrued to the assessee, either at the time when the enhanced compensation was awarded or at the time when the enhanced compensation and interest was received after furnishing adequate security. It was submitted that against the judgment of the Gujarat High Court in Topandas Kimdanmal (supra), a Special Leave Petition had been filed before the Supreme Court, but this petition was dismissed on 9-3-1977. In the light of the aforesaid judgment of the Gujarat High Court against which the Special Leave Petition filed by the revenue had been dismissed, it was pleaded that the amount of interest, if any, could be taxed not in this year but only when the position regarding the enhanced compensation became final. The Commissioner (Appeals) accepted the assessee's submission and deleted the sum of Rs. 52,496 from the present assessment. He observed that the enhanced compensation could get determined after the decision of the appeals and the interest could be calculated only on the final determination of the enhanced compensation and until then, it could not be said that interest had accrued to, or had been received by, the assessee. According to the Commissioner (Appeals), the judgments relied on by the ITO did not lay down that when the enhanced compensation was contested in appeal the interest on such enhanced compensation could be treated as having accrued before such final determination. The revenue is in appeal against this order of the Commissioner (Appeals).

On the facts and in the circumstances of the case, the Commissioner (Appeals) erred in directing the deletion of an amount of Rs. 52,496, rightly assessed by the Income-tax Officer as the income of the assessee for the assessment year 1977-78.

The learned departmental representative submitted that the interest on the enhanced compensation had been allowed under Section 28 of the Land Acquisition Act and though the position regarding the taxability of such interest would be the same as would be the position regarding the taxability of interest allowed under Section 34 of the Land Acquisition Act but such interest on enhanced compensation would be taxable in one year. He submitted that the judgment in Topandas Kundanmal (supra), which was relied on by the Commissioner (Appeals), was distinguishable on facts because in that case the award of the Civil Judge, S.D.Jamnagar, who allowed enhanced compensation, was set aside by the Gujarat High Court. The point that he made was that since the judgment and award of the Civil Judge had been set aside by the Gujarat High Court, there was no enhanced additional compensation allowed to the assessee and, hence, there was no question of any interest on the enhanced compensation which was required to be taxed in that case. He referred to the judgment in Mrs. Khorshed Shapoor Chenai v. ACED [1980] 122 ITR 21 (SC), wherein it has been held that where lands are compulsorily acquired under the Land Acquisition Act, there are no two rights, one, a right to receive compensation and the other a right to receive extra or further compensation ; that the claimant has only one right which is to receive compensation for the lands at their market value on the date of the relevant notification and it is this right which is quantified by the Collector under Section 11 and by the Civil Court under Section 26 of that Act. He submitted that this judgment was against the judgment of the Gujarat High Court in Topandas Kundanmal (supra). He referred to the judgment in CIT v. Smt. Sankari Manickyamma [1976] 105 ITR 172 (AP), wherein it has been held that the right to receive compensation or interest accrues to the person from the date when the statutorily designated authority has determined the same. Till then, what was left with the person is only the right to claim compensation and interest, if awarded. The distinction between right to claim and right to receive compensation is too vital to be ignored of.

Under Section 4 of the Income-tax Act, what is liable to tax is income received or accrued during the relevant previous year, and not mere claim to receive. In this judgment, the earlier judgment of the Andhra Pradesh High Court in Khan Bahadur Ahmed Alladin & Sons (supra) was applied. He submitted that the interest on enhanced compensation accrued on the date of the award, viz., 14-5-1976. He pointed out that the date of receipt of interest was sometime in September 1976, which date fell during the year of account. In support of his submission that the interest on the enhanced compensation accrued on the date of the judgment of the Additional District Judge (viz. 14-4-1976), he referred to the judgments in CIT v. His Highness Maharaja Yashwant Rao Pawar [1981] 127 ITR 650 (MP), CIT v. Hindustan Housing & Land Development Trust Ltd. [1977] 108 ITR 380 (Cal.), M. Jairam (supra), E.D. Sassoon & Co. Ltd. v. CIT [1954] 26 ITR 27 (SC), and strongly relied on the judgment in George Paul Puthuran v. CIT [1980] 126 ITR 168 (Ken). He thus submitted that the order of the Commissioner (Appeals), should be reversed and that of the ITO should be restored.

8. The learned counsel for the assessee first pointed out that in the award No. 1748, announced on 30-11-1964, the total amount awarded by the Land Acquisition Collector was Rs. 8,54,010.26 but no interest was allowed. He filed a copy of the judgment dated 14-4-1976 of the Additional District Judge, Delhi, in LAC No. 744/1965 and 209/1968, wherein the total enhanced compensation allowed was Rs. 23,01,119.47 inclusive of interest of Rs. 10,23,670.72. He submitted that the possession of the land acquired was taken on 13-11-1962. He submitted that there was no dispute on the point that compensation as such, on the agricultural land was not taxable. He submitted that the Union of India had filed an appeal, being R.F. Appeal No. 244 of 1976, before the Delhi High Court and it was quite likely that as in the case of Topandas Kundanmal (supra), the judgment of the Additional District Judge, Delhi, may be set aside by the High Court, or on further appeal, by the Supreme Court. He did not dispute the fact that the amount of enhanced compensation had been received by the recipients on furnishing security for restitution to the satisfaction of the Additional District Judge. He, however, submitted that the judgments of the Additional District Judge, Delhi, gave rise to a contingent right and on the basis of the contingent right it could not be held that either any income on account of interest had accrued to the assessee, or had been received by the assessee, which was required to be taxed under the Act. He disputed the submission of the learned departmental representative that the judgment of the Gujarat High Court in Topandas Kundanmal (supra) was distinguishable. He also disputed the submission of the learned departmental representative that the judgment in Mrs. Khorshed Shapoor Chenai (supra) was against the view of the Gujarat High Court. He submitted that in the judgment in His Highness Maharaja Yashwant Rao Pawar (supra), there was no appeal against the enhanced compensation allowed by the Court and the only dispute was regarding the year in which the interest of Rs. 43,431, for the period from 1-4-1965 to 31-3-1968, under Section 28 of the Land Acquisition Act, was to be taxed. According to him, this judgment was distinguishable on facts. He then referred to the judgment in George Paul Puthuran (supra) and pointed out that there was no appeal against the judgment of the Subordinate Judge who had allowed enhanced compensation and there was no bank guarantee given for the purpose of obtaining the amount of enhanced compensation. That judgment was also distinguishable.

Similarly, the judgment in M. Jairam (supra), which was followed in George Paul Puthuran (supra), was also distinguishable on facts.

According to him, the other judgments relied on by the learned departmental representative were also distinguishable. He referred to the judgment in Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 (SC), wherein it has been held that the receipt spoken of in Section 4(1) of the Indian Income-tax Act, 1922 is the first receipt after the accrual of the income [see the decision of the Supreme Court in Keshav Mills Ltd. v. CIT [1953] 23 ITR 230]. He supported the order of the Commissioner (Appeals) and pointed out that as there was no accrual of income because the judgment of the Additional District Judge, Delhi, was in appeal, no debt could be said to have accrued in favour of the assessee and, hence, no income from interest was liable to be taxed either on accrual basis or on receipt basis.

9. We have carefully considered the rival submissions. In Mrs. Khorshed Shapoor Chenai (supra) the Supreme Court has held as under : Where lands are compulsorily acquired under the Land Acquisition Act there are no two rights, one a right to receive compensation and the other a right to receive extra or further compensation: the claimant has only one right which is to receive compensation for the lands at their market value on the date of the relevant notification and it is this right which is quantified by the Collector under Section 11 and by the Civil Court under Section 26 of that Act. The Collector's award under Section 11 is nothing more than an offer of compensation made by the Government to the claimant whose property is acquired.

If the offer is acquiesced in by total acceptance the right to compensation will not survive but if the offer is not accepted or is accepted under protest and a reference is sought by the claimant under Section 18 the right to receive compensation must be regarded as having survived and kept alive which the claimant prosecutes in the Civil Court. It is not correct to say that no sooner has the Collector made has award under Section 11 than the right to compensation is destroyed or ceases to exist or is merged in the award or that what is left after the award with the claimant is a mere right to litigate the correctness of the award. The claimant can litigate the correctness of the award because his right to compensation is not fully redeemed but remains alive which he prosecutes in the Civil Court. This, however, does not mean that the evaluation of this right done by the Civil Court subsequently would be its valuation as at the relevant date for the purpose of either the ED Act or the WT Act. It is the duty of the assessing authority under either of those enactments to evaluate the property (the right to receive compensation at market value on the date of the relevant notification) as on the relevant date (i.e., the date of death under the ED Act or the valuation date under the WT Act.).

In the case of the right to receive compensation, which is property, the estimated value can never be below the figure quantified by the Collector because under Section 25(1) of the Land Acquisition Act the Civil Court cannot award any amount below that awarded by the Collector ; the estimated value can be equal to the Collector's award or more but can never be equal to the tall claim made by the claimant in the reference nor equal to the claim actually awarded by the Civil Court inasmuch as the risk or hazard of litigation would be a detracting factor while arriving at a reasonable and proper value of this property as on the date of the deceased's death. The assessing authority will have to estimate the value having regard to the peculiar nature of the property, , . .(pp. 22-23) We may also refer to the provisions of Section 155(7A) inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974. On a reading of the aforesaid judgment of the Supreme Court and the provisions contained in Section 155(7A) with retrospective effect from 1-4-1974, the position appears to be that on transfer of a capital asset the enhanced compensation even if awarded later would relate back to the date of the transfer. This would appear to be the position so far as the taxability of capital gains under Section 45 is concerned.

In the aforesaid judgment, the Supreme Court has also held that it would be the duty of the assessing authority under either of the enactments (Estate Duty Act or Wealth-tax Act) to evaluate this property (right to receive compensation at market value on the date of relevant notification), as on the relevant date (being the date of death under the Estate Duty Act and valuation date under the Wealth-tax Act).

10. In the recent judgment in CIT v. Santi Devi [1981] 7 Taxman 281, the Calcutta High Court has held that only the proportionate amount which pertains to the accounting year should be assessed in that year and not the whole amount of interest, under Section 34 of the Land Acquisition Act, received by the assessee in the year of account. In paragraph 20 of the aforesaid judgment, it is noted that it was argued before the High Court that all the High Courts unanimously held that the right to receive interest under Section 34 of the Land Acquisition Act accrues as soon as the property of the assessee is acquired by the Government and the interest accrues each year, and the receipt of interest in a particular year cannot be assessed to tax in that particular year unless the assessee follows the cash system of account.

The High Court has held that there is a distinction between the amount awarded as compensation and the interest payable on such compensation.

The distinction is apparent from Section 34 of the Land Acquisition Act itself. The interest awarded to the assessee and the other co-owners is based on the following decision pertaining to interest, inter alia, contained in paragraph 24 of the judgment dated 14-4-1976 of the Additional District Judge, Delhi: (iii) Interest at 6 per cent per annum under Section 4(3) of the Land Acquisition (Amendment and Validation) Act, 1967 on the market value from 13-11-1962 till the date of payment by the Collector inasmuch as declaration under Section 6 (dated 9-4-1964) of the Act was made more than three years after the date of Notification under Section 4 of the Act. However, the amount already paid by the Collector towards this item shall be deducted.

(iv) Interest at 6 per cent per annum on the enhanced amount under Section 28 of the Act from the date of dispossession of the claimants till the date of payment of the amount in court by the LAC provided that interest will not be paid twice for the same period.

It was not clarified before us whether the total amount of interest of Rs. 10,23,671, included any amount of interest under Section 34 of the Land Acquisition Act. If any amount of interest has been awarded which can be considered to be interest under Section 34 of the Land Acquisition Act, then that part of interest certainly has to be taxed in respect of the year to which such interest relates.

11. The further question that requires to be determined is regarding the interest allowed under Section 28 of the Land Acquisition Act. The question for consideration is whether such interest is to be taxed as and when the interest is finally determined or it is to be taxed in different years to which the interest may relate even after it is finally determined. The revenue's contention is that interest on enhanced compensation should be taxed on the date of accrual, viz., 14-4-1976, which is the date of the judgment of the Additional District Judge, Delhi. The revenue, of course, has no objection if, against the figure of interest allowed by the Additional District Judge, Delhi, the figure finally determined is adopted as and when available. The assessee's contention, on the other hand is that the right to receive interest would arise only when the interest is finally determined either in the appeal before the High Court or before the Supreme Court.

12. There is a divergence of judicial opinion, on the question regarding the taxability of the interest allowed on enhanced compensation under Section 28 of the Land Acquisition Act. In Topandas Kundanmal (supra) it has been held that it is only on the final determination of the amount of compensation that the right to that income in the nature of compensation would arise or accrue and till then there is no liability in praesenti in respect of the additional amount of compensation claimed by the owner of the land sought to be acquired. If an assessee has not an inchoate right and has not acquired any vested right to enhanced or additional compensation, over and above what has been offered to him by the Land Acquisition Officer, it cannot be said that he has a vested an complete right as to the interest on such account. It is only when the amount of compensation is adjudicated upon by the court and it is only when the court awards interest on such enhanced amount of compensation that the assessee has an enforceable right to the principal amount of compensation as well as to the interest. Against this judgment of the Gujarat High Court, the Special Leave Petition was filed before the Supreme Court but it was dismissed on 9-3-1977. In Addl. CIT v. New Jehangir Vakil Mills Co. Ltd. [1979] 117 ITR 849 (Guj.) the view taken in Topandas Kundanmal (supra) has been affirmed.

13. The view of the Andhra Pradesh High Court in Khan Bahadur Ahmed Alladin & Sons (supra) was followed by the Gujarat High Court in Topandas Kundanmal (supra). In Smt. Sankari Manickyamma (supra), the Andhra Pradesh High Court applied its earlier judgment in Khan Bahadur Ahmed Alladin & Sons (supra) and held that the interest on the enhanced compensation accrued to the assessee only when the compromise decree was passed by the High Court on 9-5 1963, since awarding interest on enhanced compensation is in the discretion of the Court. The view of the Kerala High Court in M. Jairam (supra) and George Paul Puthuran (supra) is similar to the view of the Andhra Pradesh High Court referred to above. The Calcutta High Court in Hindusthan Housing & Land Development Trust Ltd. (supra) has also held that the compensation amount could be considered to have accrued or arisen only when the said amount has become determinate and payable. The amount awarded by the Collector in the first instance was clearly a determined amount and was payable, and the said amount had already suffered tax. With regard to the enhanced amount which was subsequently fixed by the order of the arbitrator, the said amount could not be said to be determinate as the said amount was pending appeal in the High Court (sic). The Madhya Pradesh High Court in His Highness Maharaja Yashwant Rao Pawar (supra) has held that the entire income from interest on the enhanced compensation was assessable in the assessment year 1970-71, and the Tribunal was not justified in holding that the amount had to be spread over the previous years. The Madhya Pradesh High Court has followed the judgments in Hindusthan Housing & Land Development Trust Ltd. (supra) and E.D. Sassoon & Co. Ltd. (supra). There are certain other judgments in which a different view has been taken. In CIT v. V. Sampangiramaiah [1968] 69 ITR 159 (Mys.), it has been held that 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 was income which accrued in the year in which it became so recoverable, within the meaning of Section 4(1)(b)(i) of the Indian Income-tax Act, 1922. The attribution of the whole of that interest to the year of receipt was manifestly wrong. In CIT v. Dr.

Sham Lal Narula [1972] 84 ITR 625 (Punj. & Har.), it has been held that under Section 34 of the Land Acquisition Act, the right to recover interest arises the moment the owner is deprived of his property under the Act. The rate at which he is entitled to interest is also specified. The interest accrues each year and is payable as such after possession is taken from the owner. In T.N.K. Govindarajulu Chetty v.CIT [1973] 87 ITR 22 the Madras High Court has held that the liability to pay interest would arise when the compensation amount due to the assessee had not been paid in each of the relevant years and the method of accounting of the assessee being mercantile, the accrual of interest will have to be spread over the years between the date of acquisition and the date of actual payment. In Joyanarayan Panigrahl v. CIT [1974] 93 ITR 102 (Ori.), it has been held that the right to receive interest under the Land Acquisition Act is based on the concept that the owner of the land entitled to receive compensation is kept out of the land by being dispossessed and has not received the compensation representing the market value of such land. Interest accrues during the intervening period between dispossession on one side and payment of compensation on the other, out of statutory provision. The Orissa High Court has followed the aforesaid judgments of the Mysore High Court in Sampangiramaiah (supra) and the Punjab & Haryana High Court in Sham Lal Narula (supra). In Addl. CIT v. Virendra Singh [1979] 118 ITR 923 (All.), it has been held that the right to interest under Section 34 of the Land Acquisition Act, 1894, accrued on the date on which the Collector took possession of the property. It was a right in praesenti which recurred from day to day throughout the years in between the two events, namely, dispossession and actual payment, and continued to accrue in each of the succeeding years and only that amount of interest income could be taxed in a particular assessment year which accrued in that year. It may be stated that in the aforesaid judgment the Allahabad High Court had enhanced the compensation as awarded by the Land Acquisition Officer. The Allahabad High Court has followed the judgment of the Mysore High Court, Punjab and Haryana High Court, Madras High Court and Orissa High Court referred to above.

14. We have now to consider as to which line of judgment should be followed in the case of the present assessee and the other co-owners, in respect of whom also the revenue is in appeal before us. We have already pointed out that after the judgment of the Supreme Court in Mrs. Khorshed Shapoor Chenai (supra), wherein it has been held that where lands are compulsorily acquired under the Land Acquisition Act, there are no two rights, one a right to receive compensation and the other a right to receive extra or further compensation, the claimant has only one right which is to receive compensation for the lands at their market value on the date of the relevant notification and it is this right which is quantified by the Collector under Section 11 and by the Civil Court under Section 26 of that Act. We have also pointed out that for the purpose of capital gains the date of dispossession will be the material date and the total amount of compensation whether awarded by the Collector or enhanced by the Courts later on, will have to be taken into consideration on the date of dispossession. This is now implicit in the provisions of Section 155(7A), inserted by the Finance Act, 1978, with retrospective effect from 1-4-1974. We have also referred to the case laws above, wherein it has been held that so far as the interest allowed under Section 34 of the Land Acquisition Act is concerned, it should be spread over in the years to which the interest relates. Such being the position in respect of the compensation either awarded originally or enhanced subsequently by the Civil Courts and also the interest awarded under Section 34 of the Land Acquisition Act, 1894, we see no reason why the interest on enhanced compensation should be treated differently from the interest awarded under Section 34 of the Land Acquisition Act. Even in the present case the interest has been awarded from 13-11-1962 to 30-6-1976 at the rate of 6 per cent per annum. Though there is a line of judgments which lay down that the interest would accrue only when the right to receive extra compensation along with interest is finally determined, as already stated, the extra compensation even though finally determined has to relate back to the date of dispossession of the land, for purposes of computation of income from capital gains. Therefore, we would prefer to follow the line of judgments, wherein it is held that the interest should be taxed in the years to which it actually relates. This is subject to the condition that the interest finally determined only is to be brought to tax but such interest is to be brought to tax in the years to which the interest actually relates. We may humbly submit that while deciding the judgment in the case of Topandas Kundanmal (supra) against which Special Leave Petition filed by the Commissioner was dismissed by the Supreme Court, the judgment of the Supreme Court in Mrs. Khorshed Shapoor Chenai (supra), was not before their Lordships of the Gujarat High Court. We, thus, modify the order of the Commissioner (Appeals) accordingly, and direct that only that amount of interest on enhanced compensation is to be brought to tax in this year which actually pertains to the relevant previous year pertaining to this assessment year.


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