S. Ranganathan, J.
(1) This income-tax reference raises a basic question relating to the concept of accrual of income in the context of the interest payable on the amount of compensation determined in acquisition cases. It arises out of the assessment of the Fazilka Electric Supply Co. Ltd. for the assessment year 1963-64 for which the relevant previous year ended on 31-3-1963.
(2) The assesses company was a licensee under the Punjab Electricity Supply Act. This business was taken over by the Government of Punjab on 23-7-1949 in pursuance of proceedings under Section 7(1) of the Indian Electricity Act, 1910. These proceedings had started with the issue of a letter by the Secretary B to the. Government of Punjab dated 13-3-1947 by Which he gave notice to the assessed company that the Punjab Government had decided to purchase the electricity supply undertaking of the assessed by exercising the option given in clause 9(1) of the license granted to the assessed read with Section 7(2) of the Indian Electricity Act, 1910. The Government of Punjab fixed a compensation of Rs. 3,17,691 as payable to the assessed in respect of the undertaking. The assessed company did not agree to this compensation and agitated for an increase of the compensation. amount. On 5-5-1952, the assessed company addressed 3 letter to the Secretary to the punjab Government slating that the valuation of the undertaking placed by the Government of Punjab was grossly inadequate and wholly incorrect and that the correct value of the lands, buildings and all other effects of the' undertaking E would be Rs. 10^0,000. By this letter the assessed purporte to refer to arbitration? the dispute regarding the question of valuation in accordance with Section 7(1) and 52 of the Indian Electricity Ace read with Clause 13 of the license granted to the assessed in 1934. The assessed's claim under clause 9(1) of the license read with Section 7(2) of the Act amounted to Rs. 10,80,000 besides interest up to the date of payment. By the above letter the assessed purported to L. Jagraj, Straw Board ., Saharanpur,U.P. as its arbitrator in the matter and requested the Government to appoint their arbitrator without undue delay so that the proceedings might start. It appears that there was a delay on the part of the Government in appointing its arbitrator whereupon the company nominated Mr. Jagraj as the sole arbitrator in the case. There were some legal proceedings and the appointment of Shri Jagraj as arbitrator was set aside by the Court. After this the Government nominated Shri Sodagar Singh as their arbitrator.' The proceedings before Mr. Jagraj and Mr. Sodagar Singh started on 5-10-1953 and continued before the said Board of Arbitrators for some time. Thereafter there were. a -number of changes of arbitrators deteils of which it is unnecessary to record here and the proceedings for arbitration continued till 17-4-1961 but no final conclusion was reached by the arbitrators who could not agree between themselves as to the proper valuation of the assessed's undertaking. On 25-4-1961 the Electricity Board and the company referred the dispute to Shri Mehar Chand Mahajan, former Chief Justice of India, as Umpire. The learned Chief Jastice entered on the reference as an Umpire on- 5-7-1961 and announced his , on 30-7-1961. He determined the fair market value of all the items of the undertaking at Rs. 6,25,000 to which was to be added 20% as solarium for compulsory purchase under the terms of the license and thus fixed the purchase price of the undertaking as on j) 23-7-1949 at Rs. 7,50,000: Having done this. the learned Chief Justice proceeded to 'say:
THEex-licensee has also claimed in the reference interest on the claim.' I award him interest on the amount unpaid at 41/2% for a period of eight years only taking into consideration the time that was wasted during or before the arbitration owing to his dilatory conduct or spsnt in the proceedings to get the appointment of Mr. Yagraj as sole arbitrator set aside. I have also looked at.the provisions of the amendment made in 1939 in the Electricity Act section 7 about interest, though this provision has since then been repealed. Rs. 3,17,691 has already been paid by the State to the Company. The-balance due is Rs. 4,32,309. On this amount I allow the interest @41/2% for eight years which works out to Rs. 1,55,623. Thus the company is entitled to the payment of a sum of Rs. 5,87.927.'
(3) On 23-11-1961, an application was made to the Sub-Court Ferozepur for making the award of the Umpire' a ride of the Court. This was done on 28-9-1962. The entire amount of interest viz., Rs. 1,55,620 was paid to the assessed company through the court on 13-2-1963.
(4) During the assessment proceedings of the assessed for the assessment year 1963-64 a question arose regarding the assessability to tax of the interest amount of Rs. 1,55,620 which had been received by the assessed during the previous year. - The assessed' had not returned this amount of interest for taxation. Its plea was that the sum represented a capital receipt and alternatively that it was a casual receipt not assessable to tax. It was also contended that even if the amount is treated as taxable only the interest attributable to the previous year, i.e., the period of -12 months from 1-4-1962 to 31-3-1963 could be brought to charge in the assessment year 1963-64 and not the balance. Since the interest awarded by the arbitrator was only for a period of eight years the assessed was ineffect contending that no part of interest was taxable for the assessment year presently in question.
(5) The Income-tax Officer did not accept the claim of the assessed. He was of opinion that the interest did not represent a capital or a casual receipt but was an item of income receipt which was liable to tax. He also held that the assessed had become entitled to receive the interest of Rs. 1,55,628 during the previous year. It could not be bifurcated on an accrual basis as suggested by the assessed as the period of eight years with reference to which it was granted had not been specified by the arbitrator.
(6) The assessed preferred an appeal to the Appellate Assistant Commissioner who confirmed the assessment. In regard to the contention, that the interest should be allocated to the several years to which it related, the Appellate Assistant Commissioner held that, in this case, the source of the interest was .the award made by the Umpire as embodied in the decree of the Court and that no question of its being allocated on a year to year basis arose. He pointed out, that the purchase price having become payable on 23-7-1949 and the award having been made a rule of the court only in February, 1963, there was a delay of about 14 years. Interest had been awarded only in respect of 8 years. and it could not be said that the interest awarded related to any particular years or period.
(7) The assessed preferred a further appeal to the Income-tax Appellate Tribunal. Before the Tribunal, the assessed did not press its contentions that the amount of interest was not at all taxable. The only contention that was urged before the Tribunal was that no part of it could be said to have accrued or arisen in the previous year relevant to the assessment year under appeal. It was claimed that the amount was assessable in equal proportions in the previous years relevant to the assessment years 1950-51 to 1957-58.
(8) There was a difference of opinion between the two members who heard the appeal. The Accountant Member came to the conclusion : (i) that the award became enforceabie only on the day when it was made a rule of the court; (ii) that though (he company was more or less following the mercantile system of accounting, it was difficult to say that the assessed was consJstently following any system of accounting; (iii) that the Umpire in awarding the assessed interest was only giving effect to the statutory provisions in this regard though he curtailed the period for which the interest must payable to the assessed; and (iv) that the right to receive interest must be treated as having accrued to the assessed company from year to year over a period of eight years from the date of acquisition. The learned Judicial Member held (i) agrccing with the Accountant Member, that the award assumed finality only on the date on which it was made a rule of the court, namely, 28-9-1962, a date which fell within the previous year with which we are concerned; ( ii) that the assessed was being assessed on whatever system it was following and that the present claim that interest had accrued from the beginning was inconsistent with the books of account which contained no entries regarding the accrued intrest even in relation to the undisputed amount of compensation which had been paid on 7-4-1951; (iii) that. in any event assuming that the company had a vested right to receive interest on the delayed payment of purchase money under the statute, the source of the interest awarded in the present case was not the statute but the award itself; and (iv) that the entire I CO/8J--1. interest .had accrued only on the date of the award and was rightly assessed, in the assessment year in question.,
(9) Inview of the difference of opinion between the two members, the matter was referred to the Vice-President of the Tribunal who .agreed with the conclusion of the learned Judicial Member. He took the view- that the price fixed by the Umpire could' not be said to have become due. to the assessed at any time before 'the award was given. It followed as alogical corollary that the interest attributable to the enhanced price.. 'could not arisa earlier than the determination of the additional price itself, In these circumstances, he thought, the controversy whether the interest was awarded in terms , the Act or whe, ther it was given by the arbitrator suo motu was somewhat remote from the central issue in the case. He agreed that the two members who had heard the appeal earlier that the award could not be said to halve become enforceable until it was made a rule of the court. So.far as the method of accunting employedbythe.assessedw^s concerned, he Was of opinion that the method of accounting, 'followed by theas.sessee was somewhat neutral in effect as the assessed was claiming that the amount in dispute was a capital and no adverse inference could, thereforee, be drawn against it by reason only of the fact that it had failed to make entries in .its books, of account in the earlier, years in regard to the amount of interest. However, he observed that in the view he took in regard to the date on which the interest had'accrued, this aspect became,academic. .He. concluded that the amount, whether: on accrual or receipt basis, was rghtly'taxed for the assessment yearl963-64..
(10) The result of the aboveorders was that the assessed ' J was held liable to pay tax on the entire amount of interest in I he assessment year in question.
(11) The assessed has, thereforee, obtained a reference to this court by the lneome-tax Appellate 'Tribunal. The questions of law referred for our'dfecision read as follows! 1. Whether on the facts and in the circumstances of the case the conclusion of the Tribunal that the right to receive interest amounting to Rs. 1,55,628, 'did not arise under the Indian Electricity Act read with Punjab electricity Act, 1939 but emanated from the award given by the Umpire is Justified in law? 2. Whether on 'the facts and in the circumstances of the case the Appellate Tribunal was justified in law in holding that the entire interest of Rs. l,55.628 was liable to be taxed in assessment year '1963-64 and not the proportionate amount relatable to that years.'
(12) At the outset, we may deal with an attempt by the concouasel for the assesses to cut short the whole controversy. His contention is that, even assuming that the intorest arises only. when awarded and not earlier, the relevant date to beconsidered is 31-7-1961 when* the award was published and not 28-9-1962 when it Wag made a rule of court. This'contention, if accepted, makes the Interest taxable for assessment year 1962-63 and the assessed gets relief so far as the year presently tinder consideration, that is, assessment year 1963-64, is cerned.This contention has to be rejected for two reasons. In the first' place it is not open to the: assessed to. raise this question before us. On this aspect, all the three members of the Tribunal who heard the appeal have taken a concurrent view and held that, though the award Was made in July. 1961 it became enforceable and conferred a right en the assessed to recover the amount of enhanced.compensatio and interest thereon only when it was made a-rule of Court in September, 1962 which is a date falling within the previous year. A copy of the reference application filed' by the assessed under Section 256(1) shows that a reference on this question was not sought by the assessed .No doubt; the first question suggested 'bv the assessed in its application was in the following terms : Whether on the facts and in 'the eircumistences of the rase was the Appellate Tribunal justified in holding. the sum of Rs. 1,55,6281- is the income of the assessed liable to be taxed in the assessment year 1963-64?' Even if it could be said that this question is comprehensive enough to raise the point now sought to be raised by the learned counsel, the Tribunal declined to refer this question as well as another question posed by the assessed relating to its method of accounting and the assessed has not pursued the matter further under Section 256(2). This aspect of the matter has, thereforee, not been - referred to us and it is not open to the assessed to raise the issue before us. Secondly, even on the merits' the plea is not tenable. An award of an arbitrator that is not filed in court and made a rule of court has no force or validity. It has no effective value and it cannot create, extinguish or pass any title or interest. Nobody can rely on such award by way of attack or defencs in any proceeding whatsoever. Indeed, in such a case, the parties are not barred even fron. filing a suit on the original cause of action. No party can be prejudiced or benefited by the mere existence of such an award. It may be that effect can be given to the award if both parties consent to abide by its terms. But that will be on 'the ground that the parties have by mutual agreement settled a dispute between themselves and perhaps in that situation the liability can. be said to have been admitted and so to have accrued 'when the award is given. But where proceedings are taken under section 14 of the Arbitration Act the position is different. In such a case, until the proceedings in .court conclude, the award as such is unenforceable. Moreover, when the award is filed into court and a decree on its terms sought, it is open to the court to. consider it in all its aspects. The court can set aside, modify or remit the award for fresh consideration and it cannot be taken for granted that the court will make a decree on its terms. We are, thereforee, of opinion that the assessed did not get an enforceable right (which is what is material for purposes of accrual) until the award had been made a role of the court. This is also the view taken, by the Allahabad High Court in A.P.S. Cold Storage & Ice Factory v. C3T : 119ITR709(All). We uphold the view taken by the Tribunal on this point.
(13) It will be convenient at this stage to refer to the large number of cases which have dealt with the present issue and then apply the principle emerging from their discussion to the facts of the present case: 1. Sampangiramiah V. Commissioner of Income-tax : 69ITR159(KAR). In this case, the assessed's property was acquired under the Land Acquisition Act and possession thereof was taken by the Government on February 19, 1949. On 2-6-1949, the Land Acquisition Officer determined the. compensation payable at Rs. 46,000^ (Rs. 21- per sq. yard) and J) this amount was duly paid to the assesses on 31-12-1949. But there was a reference to the District Judge under Section 18 of the Land Acquisition Act and the .District Jhdge enhanced the compensation to Rs. 5 per sq. yard. From the decree made by the District Judge, both the assessed and the Land Acquisition Officer appealed to the High Court. The High Court by a decree dated 30-3-1956 enhanced the compensation to a sum calculated at Rs. 71- per sq. yard. There was again appeals to the Supreme Court by both the parties but those appeals were dismissed on 7-3-1961. In the final result, a sum of Rs. 2,02,2651- was received by the assessed on 12-10-1961, i.e., previous year relevant for assessment year; 1962-63, comprising a sum of Rs. 1,15,0001- by way of compensation and .a sum of Rs. 87,2651- by way of Interest. The interest received represented he interest payable on the enhanced compensation from the date on which possession was taken (namely, 19-2-1949) till 12-10-1961 (namely, the date of the payment). 'the income-tax Officer assessed the entire sum of Rs. 87265 as the income of the assessed forthe assessment year 1962-63. The Appelate Tribunal however, took the view that the assessed could be taxed only on that part of the interest amount as was attributable to the period from 1-4-1961 to 12-10-1961 Which fell during the relevant previous year. The Tribunal observed that though the amouat payable to the assessed was determined only in 1961 after the judgment of the Supreme Court, the assessed all along. possessed the right to receive interest' payment from 1949 itself and, thereforee, the .proportionate interest referable to each successive year during the period from February, 1949 to October 12, 1961 was assessable in the respective year. The High Court endoresd the conclusion of the Tribunal.that only the interest for the period from 1.4.1961 to 12.10.1961 was assessable in the assessment year 1962-63, observing that the principle on which the finding of the Tribunal rested was that which emerged from the decision of the Supreip.e Court in the case of Sassoon & Co. Ltd. V. Cet : 26ITR27(SC). At this stage it must be 'pointed out that the court in this case was concemeil with assessment year 196,2-63 (previous year 1.4.-1961 to 31.3.1962). Even on the arguments addressed by the Revenue in the case, the assessed became entitled to interest. as a result of the judgment of the Supreme Court dated 7-3-61 which, fell in the eearlier assessment year 1961-62 and. what happened in the financial year 1961-62 was only the quantification and payiaent. So far as the assessment year 1962-63 was concerned it appears dear on the-facts, only the interest for the period from .1-4-1961 to 12-10-1961 could besaid to have accrued. However, this decision is of help here for two reasons. (i) In the course of judgment, the court dealt with the issue of.accrual. In repellin'g the contention that 'the right to no part of the interest was born until the Land Acquisition Officer made his'arithtnetic after the Supreme Court disposed of the appeaals'the Court-observed. Now when possession. Was taken by the Land Acquisition Officer, he became liable to'pay interest until the amount, awarded by him was paid, and. the assessed acquired the right to recovor it from him. The direction of the District Judge for the. payment of interest on the enhanced compensation, which his decree made on 28.2.1951, incorporated, produced the right to recover such interest at least on the date of that decree. Then again when compensation was. further enhanced by the former High Court of Mysore which mads asimilar direction for the payment of interest on such enhanced- compensation, all that interest which that amount so earned from February 19, 1949 became immediately due and payable under an executable decree.' It will be sees from these observations that the High Court did not agree with the view taken by the Tribunal that the right to recoil interest had accrued on 19-2-1949 itself and that the interest, even on the enhanced compensation amounts, attributable to the period from February.l9, 1949 to 0ctoberl2, 1964 should be apportioned yearwise and assessed in the relevant previous year. On the other hand, it held, so far as the enhanced amounts of compensation and interest awarded thereon are concerned, that they accrued only on the dates of the respective orders and thereafter. ii) A contention urged on behalf of the Department that whether the amount had been accruing earlier or not, it was 'taxable in the hands of the assessed for the year 1962-63 as it had been received during the relevant previous year and as there was no finding that the assessed had been maintainig his accounts on the mercantile basis. The court, however, did not accept this contention and' simply rejected it observing : in the case. before us, in which the Appellate Tribunal did not find that method of accounting employed was the one or the other (i.e. the cash or the mercantile system), the income became taxable when it became legally due and recoverable, for, it is then that- it accrued.' This aspect of the matter may require reconsideration in an appropriate case for, where there is no method of accounting bidding on the Income-tax Officer, it can be argued, there is no reason why income should not be assessable on accrual or receipt as the language of Section 5(l)(a) is wide enough. 2. Khan Bahadui- Ahmed Alladin & Sons v. Commissioner of Income Tax : 74ITR651(AP). This was a case relating not to interest but to the amount of compensation itself, which was assessable because it related to an item of stock-in-trade. In this case, the asscssee firm purchased an estate from the Government of India a portion of which was subsequently acquired by the Government under the Land Acquisition Act on 23-6-1954. The collector gave an award on 10-12-1954 determining the compensation payable to the assessed at Rs. 1,25,1311- and this amount was paid to the assessed on 22.3.1956. There was a reference to the civil court which on 12.12.1956 enhanced the compensation and further appeal to the High Court was dismissed. The Income-tax Officer assessed the sum of Rs. 1,25,1311- in the assessment year 1957-58 for which the previous year was the period from 1.10.1955 to 30.9.1956 apparently on the basis of the date on which the compensation was paid. However, the Appellate Assistant Commissioner on appeal, held that the amount was assessable for assessment year 1956-57. He pointed out that the award had been given on 10.12.1954 and hence the amount of compensation was assessable in the assessment year 1956-57 and net 1957-58. The Income-tax Officer thereupon mada reassessment for 1956-57 and, in so doing, he included not only the amount of Rs. 1,25,131 originally awarded but also the additional compensation awarded by the order dated 12-7-1956. Again, (here was an appeal. This time the Appellate Assistant Commissioner held that only the amount awarded on 10-12-1954 could be assessed in the assessment year 1956-57 and that the additional compensation had accrued only on 12-12-1956 and could be assessed only in the assessment year 1957-58. But the Tribunal reversed the order of the Aac and upheld the assessment as made by the officer holdig that the right to receive ccmpensation but accrued on 23-6-1934 when the land was taken (Tver and that whatever was the amount of compensation payable, it should be attributed to that dae and he assessment year relevant thereto. On a reference, the High Court upheld the view of the Appellate Assistant Commissioner. It was pointed out that though compensation became payable on the date when the land was taken over by the Government, the right of the owner to compensation was an inchoate right to have the compensation determined and paid to him. The Court proceeded in observe:
WHATis the income, that can be said to have accrued to him on that date which can be assessed to lax in the year of assessment? If the actual amount of compensation has not been fixed, no income could accrue to him. It cannot becontended that the mere claim by the assessed, after taking- possession at a particular rate or for a certain sum is the compensation. It is the amount actually awarded by the Collector or subsequently decreed by the court which accrues to him, and the respective amounts. whether awarded by the Collector or the court accure on the respective dates on which the award or the decree is passed. Income tax is not levied on a mere right to receive compensation; there must be something tangible, something in the nature of a debt, something in the nature of an obligation lo pay an ascertained amount. Till such time, no income can be said to' have accrued.'
The court observed that by no stretch of imagination could it be said that the right to enhanced compensation, which had not yet been accepted by the proper forum, viz., the court, had also become payable on the date when the original compensation became payable for being included in 4hat year of assessment. To hold otherwise, it was pointed out, would be entitling the Income-tax Officer to re-open an assessment and re-compute the entire income on the basis, of the 'final compensation as determined by the last appellate court which was an uniustifiable proposition. The court relied, in support of this conclusion, on certain decisions, including Sampangiramiah's case discussed earlier. Though this decision pertains to the question of accrual of the compensatiOn.amount, the same principle should apply to the question of accrual of interest as well for where the principal amount itself has not accrued, interest in respect thereof can hardly accrue. It may also be pointed out that the contention urged on behalf of the Department in this case would cause harassment to the assessed in two ways : (i) by increasing the rate of tax by subjecting to tax all the compensation amount in One year though receivable in different years and (ii) by making it difficult for the assessed to claim any refunds or rectifications in the event of the compensation amounts getting reduced at the stages of appeal because of rules of limitation. It would also- be prejudicial to the Revenue itself because of 'the rules of limitation making it impossible for the Department either to keep the assessment indefinitely open until the final compensation figure is determined or to re-open the assessment from time to time to include the additional comjpensations subsequently declared. 3.CIT v. Dr. Sham Lal Narula. : in this case,the assesseds land was acquired by the Stat Government under the provisions of the Land Acquisition Act and the assessed was deprived of the possession of the land on 15.10.1951. The interest, on the amount of compensation. amounting to Rs. 48.660, was paid to the .assessed in the previous, year relevant to the assessment year 1956-57. The 'assessed contended that the entire amount could not be assessed in 1956-57 but should be spread over the earlier years as well. The Appellate Tribunal held that interest to the tune of Rs. 42,577.50 being interest due for the accounting years 1951-52 to 1954-55, accrued in the previous year ending on 31.3.1955. and could .not be assessed in the assessment year 1956-57 but that balance of Rs. 6,082.50 pertaining to the period after 1st April 1955 could be included in the assessment 'year 1956-57 and this view was upheld on reference. The court 'relied, in coining. this conclusion, on the decision in Smpangiramiah which was extensively quoted and on the provisions of section 34 of the Land Acquisition Act which entitles the owner to interest from the date .of dispossession and also specifies the rate at which it is to be paid: The reasoning of Alladin was not accepted. This case is interesting for a number of reasona : (a) In the first place, it is necessary to point out how the Tribunal came to hold that. a substantial part of the interest pertaining to the period from 1951-52 to 1954-55 had accrued in the previous year ending on 31.3.1955 though possession had been taken over on 15.10.1951 itself, li appears that the lands of the-assessed had been acquired on 21.6.1950 by a notification undercertain local land acquisition statutes and the proceeding for acquisition were finalised under the Indian Act which had 'subsequently replaced the local enactments. On 11-10-1953 a notification was, issued withdrawing the acqiaisition proceedings but the assessed challenged the validity of this notification. On 12.2.1955 the Pepsu High Court decided that the notification withdrawing the lands from the acquisition was not valid and it was as a result of this. order of the High Court that the acquisition of the land was confirmee. The Tribunal held, thereforee, that the assessed's right to .compensation crystallised on this date and, thereforee, the compensation and even earlier interest accrued only on this date. The controversy before the High Court related only to the deletion by the Tribunal of Rs. 42,557.50 from the assessment for the assessment year 19(5657. Though the High Court has confirmed this, the .discussion in the judgment negatives the Tribunal's conclusion that the said amount had to beassessed in assessment year 1955-56 and 'caUs for a spread over of the interest from 15.10.1951 onwards as contended for by the assessed though this was an aspect ir'relevant in relation to assessment year 1956-57. (ii) The report of the cas.e shows that' the award in the case had been -made on, 30.9.1955 but the accrual as held by the High Court, will even be from the earlier date of dispossession. So also, it appears that there was a reference from the award and an enhancement the dates of which are not known and the interest received was on the enhafaced compensation amount. To the extent the decision holds that interest on the amount awarded must be treated to have accrued earlier to the award and that the interest. on the enhanced amount should be also deemed to have accrued from the long anterior date of dispossession, the ruling does not appear to be in accord with Sampangiramiah. (iii) This decision clearly proceeds on the footing that as a right to be paid interest on the compensation amount springs under Section 34 from the date of dispossession, the accrual of interest on the compensation amount whether it is the one originally awarded or subsequently modified must start from that date and be spread over from year to year until it is actually paid though the determination of these amounts takes place very much later. It is an approach basically different from Sampangiramiah and Alludin. (iv) An argument was addressed' in this case also on behalf of the revenue that since the assessed maintained no accounts the interest could be assessed on receipt basis. The argument was rejected as futle as there was no question of the assessed, a property owner, having to keep any accounts. This may explain why no accounts were kept but, with respect, the decision docs not consider the impact of Section 5 (taxation on accrual or receipt basis) in the absence of a system of accounting binding on the assessed and the officer. 4. Govindarajulu Chetty v. CIT : 87ITR22(Mad) : Narula's case just referred to, relates to the Subsequent stage after the High Court and the Supreme Court had disposed of earlier proceedings in which the very taxability of interest amounts was challenged. Vide Shamlal Narula v. CIT- : 53ITR151(SC) .and Govindarajulu Chetty v. CIT- : 66ITR465(SC) , answering the issue .against the assessed. That issue having been settled, the mode of taxability of the interest receipts came up for consideration in the decision .that is being presently noticed. In this case the assessed firm owned a property which was first requisitioned by the government of India under the defense of India Act and later acquired by it by a notification dated 24-5-1949 under the Requisitioned Land (Continuance of powers) Act, 1947. The collector gave an award determining the compensation payable to the assessed at Rs. 2,40,000. The assessed sought a reference to an arbitrator who fixed the compensation payable to the assessed at Rs. 3,67,666 with interest at. 6% per annum from 24-5-1949. There was an appeal to the High Court which fixed the compensation due to the assessed at Rs. 5 lacs and confirmed the order of the arbitrator in other respects. On the basis of the order of the High Court a sum of Rs. 6,28,716 was received to the assessed : Rs. 2.54,885 during the accounting years which ended on 13-4-1955 and Rs. 3,73,831 during the accounting year ending on 12-4-1956. relevant respectively for the assessment years 1955-56 and 1956-57. The sum received by the assessed included a sum of Rs. 1,28,716 by way of interest. The Income-tax Officer took the view that the amounts received by the assessed in each of the previous years aforesaid included a proportionate interest component. He, thereforee, E brought to tax a sum of Rs. 50,592 in the assessment year 1955-56 and Rs. 78,124 in the assessment year 1956-57, the allocation being on the basis of the total amounts received in. the respective years. The plea of the assessed was that the interest receipt of Rs. 1.28.716 should be assessed by apportioning it to the several respective years to which the interest is relatable. The High Court accepted this contention. It observed:
INthis case the assessed has acquired a right in present against the Government to get the compensation for the land acquired even on the date of the notification, and to get interest on the amount of compensation if payment of the same is postponed for some reason or the other. From the mere fact that a compensation was fixed ultimately by this court, it cannot be said that the liability to pay either the compensation or the interest thereon arose only on the date of such fixation.'
and again: In thts case tde liability to pay interest would arise when the compensation, amount due to the assessec had not been paid, in each of the relevant years. thereforee, the accrual of interest has to be spread over the years between the date of acquisition till it was actually paid.' It will be noticed that in this case the entire compensation and interest were paid only after the decision of the High Court and the attempt of the 'Department was to tax the entire amount of interest in the year in which it was received. An award had been given and an cnhancement made even earlier but the report of the decision decs not Indicate their dates. The date. of'the order of' the High Court. is also not known and if it had preceded the commencement of the accounting year relevant for the assessment year 1955-56, only that portion of the interest which was referable to the respective previous years could have been taxed in the two years in question and the portion regarding the earlier years was not directly in issue. But the principle on the basis of which interest is taxable in cases was discussed and laid down clearly on the same basis as the Punjab High Court in Narula's case; viz. that the right to receive interest under section 34 (and even Section 28) of the Land Acquisition Act arises by virtue of the statute and that the orders made under the Act determining the compensation merely quantify and give effect to that right and that thereforee, the interest must be deemed to accrue from the date on which the compensation is payable initially or the date of the acquisition. In this- case. the Department also sought to raise a contention that, even though the assessed had maintained its accounts according to the mercantile system of accounting, the amounts could be taxed in the year of receipt, on the basis of the receipt notwithstanding the earlier accrual as the Income-tax Officer has an option to assess the income by way of interest either on the basis of accrual or on the basis of receipt. This contention was, if we may say so with respect, rightly rejected. This case follows and applies Narula's case (Supra) two extends of land were acquired and taken possession of on' 11-61954 and 10-11-1957 respectively. The assessed was offered compensation by the competent authority on 7-6-1957 and 11-8-1958 respectively. The assessed objected to the amount and the matter was referred for. arbitration. Apparently the arbitrator enhaced the compensation and ultimately on 30-1-1961 the. entire compensation was paid to the assessed along with an interest of Rs. 16,460 in respect of the period from 11-6-1954 and 10-11-1957 respectively' up to the date of paynment.'The entire income was assessed for the assessment year 1961-62 by the officer while the 'assessed contended that it should be apportioned among assessment years 1957-58 to 1961-62 in the manner tabulated at page 109 of the report. The assesseds contenion was upheld relying on Sampangiramiah and Narula. The one additional feature about this case was that the-relevant statute did not provide for the payment of interest but this was held to make Do difference. Here again the fact that the assessed maintained .no accounts was held to make no difference. The lands of the assessed in this case were acquired in 1933. The compensation awarded was alleged to beinadequate for the proceedings followed.. Ultimately on May 9, 1963, the High Court passed acompromise decree awarding the asses- see additional compensation of Rs. 22,9041-. The assessed also became entitled to interest of Rs. 31,569)- at the rate of 6% on the above amount which,was received on 1-3-1964. The Income-tax Officer' sought to bring; this interest amount to tax as income Of assessment year 1964-65'but the Tribunal accepted tile assessed's contention that it had to be spread over 26 years during which it had accrued the High Court following the principle in the Alladin case held that the enhanced compensation as well as the interest thereon accrued only on 9-5-1963 as the grant of increased compensation was in the discretion of the court. 7. Commissioner of Income Tax v. Raja S. N. Bhanja Deo : : 106ITR748(Orissa) The asscssee was the proprietor of an estate which having been abolished and taken over, the assessed became entitled to compensation. This was sometime in 1952 relevant for the assessment year 1953-54. The assessed received the compensation amount due to him on 31-3-1965 and along with it interest amounting to Rs. 26,0071-. The assessed claimed that the net interest (after deducting expenses) should be apportioned and spread over the twelve assessment years from 1953-54 to 1965-66 and this claim was accepted by the Tribunal. The High Court, however, took a different view. It distinguished its earlier decision in Joynarayan Panigahi's case and observed : On facts we find difference between the reported case and the case in hand. There is no material here at all to hold that before compensation was finalised, the quantum of interest could at all be worked out because under the statutory provisions interest is a percentage of the compensation that becomes due. thereforee, so long as the compensation is not quantified, it is difficult to hold that interest was accruing on yearly basis. On the terms of the statute right to interest would accrue only when the compensation gets quantified though, for purposes of working out the quantum of interest to be paid to the ex-proprietor the rate indicated on annual basis has to be taken into account. This being the position, we are of the view that the Tribunal were wrong in holding that interest was accruing to the assessed year after year since abolition of the estate till payment of compensation.' the decision was followed in Commissioner of Income Tax v. Bhanja Deo 1978 111 Itr 178. Tcpandas Kundanmal v. Cif : 114ITR237(Guj) : In this case, the assessed's lands were acquired and the Land Acquisition Officer made an award on 18-7-1962 offering a compensation of Rs. 24,293. On a reference, the compensation was enhanced to Rs. 5,04,824 and an interest of Rs. 61,416.90 for the period 15-8-1960 to 31-8-1963 was also worked out. The State Government preferred an appeal and the assessed filed cross-objections therein. Pending their disposal, the assessed was permitted to withdraw a sum of Rs. 50.000 on furnishing security. Eventually the appeal of the State Government was allowed and the assesses had to repay the amount withdrawn by him with interest. Pending these proceedings the Income-tax Officer included, for the assessment year 1964-65, the additional compensation of Rs. 4,80,531 and interest of Rs. 61,417 which the assessed was awarded by the District Judge. So far as the compensation amount was concerned, it was taxable, in terms of Section 45, in the year of transfer. But the general question of accrual became relevant in the context of the interest amount. It is in this context that the court had to consider the time of accrual of the principal amount of compensation. The court observed in this regard:
ITis, thereforee clear having regard to the provisions of the Land Acquisition Act that the compensation awarded by the Land Acquisition Officer is nothing more than an offer to the person whose land is sought to be acquired and if that offer is not accepted. the acquisition proceedings are not concluded and the owner has the statutory right of having the question determined by the court and it is the amount of compensation which the court may mine that would bind both the owner and the Collector. In other words, as said by the Supreme Court in Harish Chandra's case, : 1SCR676 , that it is on the amount thus detemined judicially that the acquisition proceedings would be concluded. If the real nature of the award and the right of the party who is not satisfied with the other made in the award is, as pointed out in Harish Chandra's case, : 1SCR676 , how can it lie said much less urged successfully -that the said offer creates enforceable right to the enhanced compensation because in the ultimate analysis it is 'this right of the claimant to the additional compensation that is to be judicially determined and with winch we are concerned in this case. In other words, the legal position which emerges is that there is no liability in presenti to pay an enhanced compensation till it is judicially determined by the final court since the entire question, namely, whether the offer made by the Land Acquisition Officer is inadequate and the claimant is entitled to an additional compensation and if yes, at what rate is in flux till the question is set at rest finally, we do not think that any enforceable right to a particniar amount of compensation arises. The offer made by the Land Acquisition Officer, by his award, if not accepted by a claimant would not result automatically in a liability to pay additional compensation as claimed by a party aggrieved. Inhere is no doubt a liability to pay a compensation as offered by the Land Acquisition Officer., But that is far from saying that that liability is a liability to pay additional compensation or enhanced compensation as claimed by a party aggrieved. If there is an existing liability. the mee fact that the payment is postponed to future would not detract that liability from becoming a debt but the liability to pay unliquidated damages or additional compensation which are inchoate or contingent would not create a debt. We are, thereforee, of opinion that if an aggrieved party whose land is acquired does not accept the offer made by the Land Acquisition Officer in his award, he has a right to seek reference under section 18 for getting the question of the compensation determined by the court and it is on the amount thus determined judicially that the owner would be entitled to enforce that right for a particular sum. It is on the final determination. In our opinion, 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 presenti in respect of the additional amount of compensation claimed by the owner of the land sought to be acquired.'
IT is no doubt true that he has a right to be awarded interest on the amount of compensation from the date of possession till the date of payment. Nonetheless the vested and enforceable rights to receive such interest would accrue or arise only if the designated authorities under the Land Acquisition Act ultimately determine that the assessed is entitled to enhanced or additional amount of compensation. Till then it cannot be urged successfully that his right to interest has accrued or arisen irrespective of the claim of the additional compensation being finally adjudicated upon by the courts. An incidental question agitated before us is whether the Income-tax Officer should hold up assessment proceedings till the question is finally determined which may in some cases result in the proceedings being time-barred. We do not think that such a question can justifiably arise in the view which we are taking of the matter, since, in our opinion, the right to the income of compensation or interest arises or accrues when the question is finally determined by the designated authorities under the Land Acquisition Act.'
The court differed from the view expressed by the Mysore, Punjab, Madras and Orissa High Courts and followed the view expressed by the Andhra Pradesh High Court. 9. Jairam v. Commissioner of Income Tax : : 117ITR638(Ker) In this case the lands were acquired on 11-5-1962 under the Land Acquisition Act and compensation was awarded. On a reference, the court awarded additional compensation. and interest thereon from 1 1-5-1962. The two assesseds received interest of Rs. 10,322 and Rs. 16,705 in the accounting year relevant for assessment year 1970-71 and was taxed thereon. The assessec, however, claimed that the interest should be spread over between 1962 and 1969 for purposes of assessment. The High Court, following Sampanigramiah and Alladin and dissenting from Narula and Govindarajulu Chetty rejected this contention. The Orissa judgments are not referred to. The Court observed : We have given the matter our careful attention. The arguments appear so nicely and evenly balanced, that a choice is not altogether easy. On the one side is the view that acquisition proceedings start the trial which may blow up in stages, of dispossession, award, payment, reference to court, excess compensation and interest, and so on; and once the spark had been lighted at one end, the avenue is open till the end, although it may not travel to the bitter end. This, however, according to this view, would not prevent the right 'arising' or accruing'. On the other view, the mere prospect of making a reference and earning excess sation and interest, cannot be regarded as a right or income 'arising' or 'accruing', when riddled with many imponderables, such as the actual making of the reference, the award of excess compensation, and the further award of interest thereon. It appears to us that income by way of interest on excess compensation under S. 28 of the Central Act S.30 of the Kerala Act) cannot be regarded as having 'accrued' or be 'deemed to have accrued' from-the moment of dispossession or of the notification under S. 4 At these stages, it cannot invariably be predicated that the assessed would file an application for reference in the court for excess compensation, or that the court would enhance the compensation; or even if it does so, that It would award interest on the excess compensation. In an allied sphere, considering the provisions of the General Clauses Act, with respect to the expression right accrued' and 'vested right', it has been ruled that a mere right to' take advantage of the provisions of a statute, without anything done to effectuate that right, is not a 'right accrued' within the meaning of the section see, for instance, the discussion in Narayanaswami v. Inspector of Police, Air 1949 Mad. 307, paras 37, 38, 92, 93. 132, 133. We think that the right to interest on the excess compensation can be said to arise, and income by way of such interest can be said to accrue, only when the court decrees interest while awarding excess compensation. This seems to follow from the exposition in Sassoon's case : 26ITR27(SC). which we have noticed earlier. The principle is also stated by the Mysore High Court in Commissioner of Income Tax v. Sampangiramaiah : 69ITR159(KAR) , in the passage that we have emphasised. Chief Justice Jagan Mohan Reddy's statement of principle with respect to .excess compensation, in Khan Bahadur Ahmed Alladm & Sons v. Commissioner of Income Tax : 74ITR651(AP) , is appealing and the same consideration should apply to interest on excess compensation. The right to excess compensation and to interest thereon cannot be said to 'arise' or 'accrue', on the date of dispossession, much less, on. the date of the S. 4 notification. On these dates the prospect of a reference and its outcome are alike uncertain, and even if the claimant succeeds on reference in the first instance before the court, the State's right of appeal throws, as the Chief Justice points out, a further element of fluctuation in the scale. We are unable to accept the contrary ruling of the Madras High Court in T. N. K. Govindarajulu Chetty v. Commissioner of Income Tax : 87ITR22(Mad) or of the Punjab and Haryana High Court in Commissioner of Income Tax v. Dr. Shyam Lal Na-rula .' It may be pointed out that this decision understands Sampangiramaiah in the way we have done earlier and that though the case concerned interest under Section 28 of the Land Acquisition Act on the grant of which the court has discretion, the decision is not based on that circumstance; it is based on the considgration that the interest on the enhanced compensation can arise only when it is granted and cannot be held, in anticipation, to accrue as from [he date of dispossession itself. 10. Addl. Commissioner of Income Tax v. Virendra Singh : : 118ITR923(All) In this case lands were taken possession of in February, 1959 and compensation and interest thereon paid as awarded. There was a reference and further appeal and as a result of the High Court's order dated 28-9-1967 the assessed received interest of Rs. 1,68,176 on 16-12-1967 which was attempted to be taxed for 1968-69. This decision following the Punjab, Madras & Orissa views holds 'that the right to interest under S. 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 presenti which recurred fromday to day throughout the years in between the two events, namely, dispossession and actual payment and continuod to accrue in each of the succeeding years and only that amount of intrest income could be taxed in a particular assessment year which accrued in the relevant previous year. 11. Motilal Chaddami Lal Jain v. Cit, 1980 118 Itr 949 This has considered the taxability of the interest awarded on enhanced compensation. The enhanced compensation was awarded by the District COurt on 31-5-1971 and the assessment was of a sum of Rs. 1,09,492 received towards interest during the previous year relevant for the assessment year 1973-74 which commenced on 18-11-1971. Though the Tribunal had observed that the interest must be taken to have accrued from year to year, the High Court had only to hold that, for the assessment year 1973-74, only the interest attributable to the previous year could be said to have accrued on the mercantile system followed by the assesses. 12. Commissioner of Income Tax v. Sri Ram Gopal : 1980 123 Itr 387 arrived at the same conclusion. None of the several earlier decisions appear to have been cited or considered. The facts of the case were somewhat special in that. there were certain original awards about the time of taking possession which, in addition to some cash compensation, allotted alternative sites to the assessed. This did not materialise and eventually an award was made in 1961 and the interest paid there under was sought to be taxed in assessment year 1962-63. It was held that the award of 1961 should be deemed to be a part and parcel of the earlier awards and that the interest should be deemed to have accrued year after year from the dates of the earlier awards. 13. George Paul Puthuran v. Commissioner of Income Tax : : 126ITR168(Ker) -The Kerala High Court following its earlier decision in Jairam and disseating from Virender Singh upheld the view taken by the Tribunal that the interest; on enhanced compensation granted on a Inference by the sub-court could be taxed only in respect of the year in which the sub-court' determined the compensation and granted interest and could not be spread over the entire period from. the. date of dispossession to the date of the decree. 14. Commissioner of Income Tax v.H. H.Maharaja YeshwantPawar : 127ITR650(MP) The Madhya Pradesh.High Court followed Kerala High Court's view inpreference to that of the Allahabad. Mysore, Punjab and Orissa views. It also relied upon a decision of the Calcutta High Court in Commissioner of Income Tax v. Hindustan Housing Development Trust Ltd., : 108ITR380(Cal) where the facts were somewhat involved. There, the interest was awarded by an arbitrator who on appeal from, the award had enhanced the compensation. But the State Government had preferred an appeal and the assesses had been allowed to draw the amounts awarded only on furnishing security. It was held that the assessed's right to recover the amount being in dispute and jeopardy, interest could not besaid to have accrued or arisen until it became determinate and payable. The above -survey of the. .decisions shows a clear-cleavage of opinion between the High Courts on this issue. .All the decisions have applied the principles regarding accrual as enunciated, in Sassoon's case, : 26ITR27(SC) & Gajapathy Naidu's case, : 53ITR114(SC) viz., that income accrues at the point of time when a right to. receive that income is created in the assessed. If we view the subject matter of taxation in the abstract as the compensation or interest thereon receivable by an-assessed when his property 'is -taken away,, then clearly the right to compensation or interest, thereon will arise as from the date of dispossession both under the relevant statutory provisions as well as the earlier provisions in the Constitntion which prohibited the deprivation of property without 'But If'we consider the subject-matter as the assessed's entitlement to a particular, amount which has been awarded to him, such entitlement clearly can be said to have crystallised only on the date on which the amount is awarded to him finally with no dispute 'possible in regard thereto. The former view proceeds on the principle that where a- right clearly exists, the delay .in Quantification or even a dispute regarding the same is immaterial and irrelevant : a principle settled beyond doubt in regard to accrual of, liabilities by the decision of the Supreme Court in the Kedanath Jute Manufacturing Company's case, : 82ITR363(SC). The latter proceeds on the view that so long as it is not known and cannot be stated with any certainty whether any enhanced compensation at all would be given or whether, even if it is given by the District Court or High Court, it will ultimately be sustained, it would be-futile and impractical to talk of any income having accrued.
(15) As pointed out by the Kerala High Court in Jai Ram v. Commissioner of Income Tax : 117ITR638(Ker) the issue raised is really one E of great nicety. Shri Aggarwal, learned counsel for the assessed urged that we should take the view of the Punjab, Madras and Allahabad High Courts. He pointed out that -income is said toacieniewhen a right to receive such income vested.in the assessed. It was immaterial that at the point of time when such a right was created in the assessed it might not be possible-to exactly quantify the amount of such income. In the. case of liabilities, he pointed out, it has been held in the Kedar Nath Jute Manufacturing case : 82ITR363(SC) that 'an amount of debility is debitable irrespective of any 'existing dispute in regard thereto or in regard to its quantification. Shri Aggarwal urged that the rule cannot be different in regard to the accrual of income. He also urged that there is also no equity in taxing the entire interest received by an assessed in one or two years relevant to the previous years in which the amounts are received when in reality that interest in respect of the delay in the payment of comperisafion fora long time after the dispossession of the owner from the land.
(16) We are of opinion, after careful consideration, that these contentions of the learned counsel must prevail. We do not think we need to discuss the provisions of the Indian & Punjab Electricity Act in detail. The same position as in the land acquisition cases must prevail here also. In fact the assessed's position is somewhat stronger here as it 5s really not a case. of acquisition but of a purchase by the .Electricity Board. The Board is bound to pay the purchase price and interest [vide S. 7(2) of the Indian Electricity Act read with S. 4 of the Punjab Act and the statute itself envisages such payment after the market value of the assets is determined in accordance with the machinery provided in the Act. The assessed's right to .payment of compensation clearly arises from the effective date on which the purchase is deemed to have become effective. There can be hardly any doubt that the profits on a sale accrue at the point of sale. But the assessed is entitled to succeed even if it is treated as on par with acquisition cases. The decisions in Sassoon's as well as Gajapathy Naidu's case make it perfectly clear that income is said to have accrued when a right to receive such income arises in favor of an assessed. In the present case, as in the other cases relating to land acquisition, there can be no doubt that the moment the property is taken over there is a right in the seller or owner of the property to receive compensation. Indeed before the recent amendment of Article 31 of the Constitution no acquisition was at all possible, without awarding compensation to the owner of the property. It seems to us that this right to receive compensation cannot be described as an inchoate right : it is a definite right in-presenti, the accrual of 'the compensation & does not depend upon requirement that it has to be quantified in accordance with the procedure outlined in the statute before the assessed can become entitled to any particular sum of money by way of compensation or by way of interest thereon. The concept of accrual of income on the one hand and that of accrual of liability on the other are really of the same basic nature. If an item of liability is entitled to being debited in the books when a clear liability can be spelt oat in the terms of a statute or a contract notwithstanding that there might be some dispute or that there might besome difficulty in its quantification, it is difficult to see why a different principle should be enunciated in regard to the accrual of income.
(17) Some of he cases which we have referred to earlier .and indeed the reasoning of the learned Vice President of the Tribunal in the present case have sought to make a distinction between the compensation that is awardable in the first instance and the right to receive what has been described as -extra or additional compensation as a result of arbitration or reference or further appeals. This line of approach has been disapproved by the Supreme Court in Mrs. Khorshed Shapoor Chenai v. Assistant Controller of Estate Duty 1980 122 Itr (24). That was a case. under the Estate Duty Act. The lands belonging to a person were compulsorily acquired during his life time. But the compensation payable had not been determined by the date of his death. The question was regarding the nature of the asset that formed part of the estate and the method by which it was to be valued. Relying on the decisions in Ahmed Alladin & Sons. Hindusthan Housing' and Land Development Trust Ltd.. Tooandas Kundanmal and Jairam it was contended on behalf of the revenue before the Supreme Court that once the award made by the Land Acquisition Collector had determined the compensation payable anil this was paid to. and received by, the land owner he mere fact that he was agitating the correctness of the awards in further proceedines did not constitute any asset and was merely a precarious right. It was urged that such a right to further compensation would become property only when the claim is accepted finally by the court and till the enhanced compensation payable is determined by reason of the final adjudication of the court .no property could be said to have come into .existence. Dealing with the matter in this context the supreme Court observed : in our opinion, the High Court was right in holding that there are no two separate rights one a right to receive compensation and the other, a right to receive extra or further compensatioa. Upon acquisition of his lands under the Land Acquisition Act 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 s. 11 and by the Civil Court under s. 26 of the Land Acquisition Act. It is true that under s. 11 the Collector after holding the necessary inquiry determines the quantum of compensation by fixing the market value of the land and in doing so is guided by the provisions contained in ss. 23 and 24 of the Act the very provisions by reference to which the Civil Court fixes the valuation. it is also true that the Collector's award is, under s. 12, declared to be, except as otherwise provided, final and conclusive evidence as between him and the persons interested. Even so, it is well settled that in law the Collector's award under s. 11 is nothing more than an offer of compensation made by the Government to the claimants whose property is acquired. ... -
IFthat be the true nature of the award made by the Collector then the question whether the right to receive compensatioa survives the award must depend upon whether the claimant acquiesces therein fully or not. 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 land reference is sought by the claimant under s. 18. the right to receive compensaion must be regarded as having survived and kept alive which the claimant prosecutes in a Civil Court......'.
Though these observations were made in a slightly different context they emphasise that what is determined in the case of acquisitions by the Civil Courts is merely a continution of the same process of .quantification 'that had already been undertaken. by the Land Acquisition Officer. -In this view of the matter , is not possible to take the View that once an award is made the assessed's right to compensation comes to an end and that afresh right in respect of some extra or additional compensation comes into being when further proceedings are taken in the matter. We are, thereforee, of opinion, having regard to the various pronouncements which have been dealt with earlier, that there can be no doubt that a right accrued in the assessed to receive compensation on the date of dispossession and that the compensation amounts or the interest payable thereon must be said to have accrued 'Kith reference to that date of dispossession. The view .is not tenable, it seems to us, that the right to receive compensations fixed by the District Court Court of arbitrator arises only when the arbitrator's award or the District Court's judgment is given and that similarly the right to receive further compensation from the High Court or in the High Court would also depend upon the dates of the decision of those courts. For these reasons we answer the second question referred to us in the negative and in favor .of the assessed. In our view the Appellate Tribunal was not justified in law in holding that the entire interest of Rs. 1,55,628 Was liable to be taxed in the assessment year 1963-64.
(18) If we had agreed with the majority of the members of the Tribunal, the entire, amount of Rs. 1,55,628 would have been taxable in assessment year 1963-64. 'But our answer raises the conundrum as to the amount, if any, that can be brought to tax in the assessment year. The last part of the second question poses this issue but we find it cannot bedisposed of satisfactorily in the circumstances of this case. Normally, in cases of acquisition, mterest runs from the date of dispossession to the date of payment and will be taxed, in the view we have taken, proportionately, i.e.. ineach year the interest in respect of the previous .year will be liable to tax. But in the present case, the arbitrator has awarded interest for a period of 8 years. In the circumstaaces, can. it be said that there is any interest proportionate relatable to that year, i.e. that can be said to have accrued from 1-4-1962 to 31-3-1963. We find that we are not called upon in this reference to answer' this point as there has been no decision of the Tribunal thereon. 'the VicePresident and the Judicial Member, in the view they took, had no occasion to consider it at all; only the Accountant Member answered it and he related the interest to the financial years 1949-50 to 1956-57. Thus, on this point, there was. no effective' decision. Now that we have disagreed with the view of the majority, the matter has to be considered afresh by the Tribunal and a decision given thereon. We. thereforee, leave this part of the question unanswered.
(19) There were two more points of controversy debated in detail before the Tribunal. One of these related to the method of accounting employed by the assessed. It is, however, not necessary -for us to discuss this aspect of the matter because the question regarding the assessed's method of accounting on which the assessed specifically sought a reference has not been referred to us and is, thereforee, not properly before us. We have, thereforee, to proceed on the basis that, irrespective of the method of accounting employed by the assessed on which the three members of the Tribunal have given their respective findings, the interest income in question has to be assessed on accrual basis.
(20) The second controversy which is the subject matter of the first question before us is regarding the question whether the interest amounting to Rs. 1,55.628 arises under the Indian Electricity Act read with the Punjab Electricity Act or it emanated from the award given by the umpire. The Accountant Member took the former view while the majority has taken the' view that the interest is attributable only to the award. We are of opinion that on this point the cendusion of the learned Accountant Member is correct. As lie has pointed out, Section 4 of the Punjab Electricity Act which supplemented the Indian Electricity Act, 1910 was very clear. It read:
FORthe purposes of sub-section (,3) of Section 7 of the Act, a .purchase shall be deemed to have been effected on such date as Government may appoint within a period of six months after the specified date whether the purchase money has been paid or not: Provided that, with the consent of the parties concerned, any other date may be fixed for the purchase: Provided also that the purchase money shall be paid to the licensee within a period not exceeding six months of the specified or fixed date for the purchase as the case may be, and if for any reason the purchase money is not paid within such period the licensee shall be entitled to interest at 1 per cent above the Reserve Bank of India rate from the expiry of such period.'
This sub-section clearly provided that if the purchase money is not paid within the period of six months abovementioned the Government was liable to pay interest to the licensee at I per cent above the rate of the Reserve Bank of India. Such interest is payable from the expiry of the period of six months from the specified date on which the purchase took effect till the actual date of payment of the purchase money. The Punjab Electricity Act was repealed by Act 15 of 1960. But Section 3 of the Repealing Act provided that such repeal 'shall not affect the validity, invalidity, effect or consequences of anything already done or suffered, or any right, title, obligation or liability already acquired or incurred, or any remedy or proceeding in respect thereof, or any release or discharge of or from any debt, penalty obligation, liability claim or demand, or any indemnity already granted, or the proof of any past act or thing'. It is, thereforee, clear that though the Punjab Electricity Act was repealed the right that had accrued to the assesses company to claim interest as well as the liability of the Punjab State Elecricity Board to pay interest to the assessed in terms of Section 4 survived.
(21) It is, however, urged that the arbitrator did not award interest in accordance with the formula mentioned in Section 4. On the other hand he awarded interest at a rate determined by him and for a period also determined by him. It is. thereforee, contended that the interest which -the 'assessed received was in erms of the arbitrator's award and, thereforee, the right. to receive such interest has emanated from that award. The learned Accountant Member has given a finding that the rate of 41/2 per cent awarded by the arbitrator is really in; terms of Section 4 of the Punjab Electricity Act. On behalf of the revenue it is contended that this. finding is based on no material. But it appears to us that this aspect of the matter is totally E irrelevant. What went before the arbitrator for adjudication was the right- of the assessed to compensation in terms of the statute. The assessed Was entitled to the purchase price as well as interest under the statute. The assessed made a claim in this behalf before the arbitrator. In what manner the purchase price and the interest should be determined had to be adjudicated upon by the arbitrator. The arbitrator-applied his mind to the issue and he has also specifically recorded that he has taken the note of the provision under the Punjab Electricity Act as well as the repealing Act. We, thereforee, think that. whether the interest awarded by the arbitrator can be co-related to the exact amount of interest which the assessed was entitled to receive under the Act or not, it would not becorrect to say that the award of interest is entirely de hors the Act. No doubt 'an arbitrator does not and need not give reasons in support of his award. But in the present case lie has' done so. He ' has taken note of .the fact that the* assessed was entitled to interest under the statute. There can be no doubt about this right at least till 1960 when the Repealing Act was passed though what the arbitrator thought about the subsequent period is not known. Perhaps turn this reason also, but in any event for the reason mentioned by him he thought that the period of eligibility for interest should be curtailed. It cannot be inferred from the award that the arbitrator was of opinion that the assesses was not entitled to any interest under the statute but nevertheless proceeded to grant him some interest on his own initiative. We, thereforee, think that it would not be correct to describe the entitlement of' interest as emanating' from the award and not from the Statute. We, thereforee, answer the first question in the negative.
(22) The reference is disposed of us indicated above. We, however, make no order as to costs.