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Commissioner of Income-tax Vs. Periyar and Pareekanni Rubbers Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 94 of 1969
Judge
Reported in[1973]87ITR666(Ker)
ActsLand Acquisition Act, 1894 - Sections 16 and 17
AppellantCommissioner of Income-tax
RespondentPeriyar and Pareekanni Rubbers Ltd.
Appellant Advocate P.A. Francis and; P.K. Ravindranatha Menon, Advs.
Respondent Advocate Joy Joseph, Adv.
Cases ReferredDr. Shamlal Narula v. Commissioner of Income
Excerpt:
- .....the deletion of the proportionate interest from november 29, 1961, till august 31, 1962, from the income of the assessee.'3. counsel on behalf of the revenue has challenged this deduction allowed by the tribunal. he submitted that there is no distinction between interest that is payable under section 28 or 34 of the land acquisition act, 1894, and interest that had been paid in this case. he went to the extent of submitting that even if this is not so, it must be taken that the possession assumed by the government was also under the provisions of the act and the interest payable under sections 28 and 34 of the land acquisition act, 1894, are awardable in relation to possession taken outside the act.4. a distinction has been drawn in relation to possession assumed under the provisions of.....
Judgment:

Govindan Nair, J.

1. This is a reference under Section 256(1) of the Income-tax Act, 1961, by the Income-tax Appellate Tribunal, Cochin Bench, at the instance of the revenue and the question referred is :

' Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the amount received by the assessee by way of interest till the date of the award is capital receipt ?'

2. The question arose with reference to the assessment of the Periyar & Pareekanni Rubbers Ltd. for the year 1963-64. During the year that ended on December 31, 1963, the relevant accounting period for the assessment year, the assessee had received an amount of Rs. 24,103.33. This amount was paid as compensation by way of interest on the compensation amount payable to the assessee on compulsory acquisition of land that belonged to the company under the Land Acquisition Act, 1894. The possession of the land was taken by the Government not under the provisions of the Land Acquisition Act as envisaged by Section 17 or by Section 16 after the award, but on agreement between the assessee and the Government. Such possession was taken on Nqvember 29, 1961. The award in the case was passed on August 31, 1962. The amount of Rs. 24,106.33 represented the interest on the amount of compensation awarded for the period from November 29, 1961, to September 6, 1962, the date of payment. The Tribunal considered the bulk of this amount as representing compensation for deprivation of property, and, therefore, receipts in the nature of capital, and held that the receipts were not taxable. Paragraph 9 of the Tribunal's order is in these terms :

'9. The amount of Rs. 24,106'33 represents interest from November 29, 1961, till September 6, 1962. The award having been passed on August 31, 1962, interest up to that date alone will partake the character of capital receipt. The proportionate interest from September 1, 1962, to September 6, 1962, will be revenue receipt and the assessee will not be entitled to relief regarding this amount. We accordingly direct the deletion of the proportionate interest from November 29, 1961, till August 31, 1962, from the income of the assessee.'

3. Counsel on behalf of the revenue has challenged this deduction allowed by the Tribunal. He submitted that there is no distinction between interest that is payable under Section 28 or 34 of the Land Acquisition Act, 1894, and interest that had been paid in this case. He went to the extent of submitting that even if this is not so, it must be taken that the possession assumed by the Government was also under the provisions of the Act and the interest payable under Sections 28 and 34 of the Land Acquisition Act, 1894, are awardable in relation to possession taken outside the Act.

4. A distinction has been drawn in relation to possession assumed under the provisions of the Act and possession otherwise taken. In the former case, Sections 16 and 17 of the Land Acquisition Act stipulate that on possession being taken, the property will vest in the Government. In the absence of any such statutory provision, even when possession is assumed by the Government, whether under some provision of law or by agreement or even sometimes unauthorisedly, the view is that there has been deprivation of property and the interest paid by the Government is merely compensation for deprivation of such property. The fact that compensation that is payable for such deprivation is calculated on a percentage of interest on that amount does not affect the question. It is still compensation for deprivation of property. This is the distinction that has been drawn by the Supreme Court in the decision in Dr. Shamlal Narula v. Commissioner of Income-tax, [1964] 53 I.T.R. 151; [1964] 7 S.C.R. 668(S.C.) referred to by the Tribunal. That this distinction is real, cannot be disputed and in a later decision of the Supreme Court in T. N. K. Govindarajulu Chetty v. Commissioner of Income-tax, [1967] 66 I.T.R. 465; [1967] 3 S.C.R. 653 (S.C.) the earlier decision is referred to and approved. In the nature and in the circumstances of this Case, we are unable to hold that the amount paid to the assessee and allowed by the Tribunal as a deduction represented anything other than compensation for deprivation of property. The property was not vested in the Government till the award was passed on August 31, 1962. The nature of the possession changed from that date and, we think, the Tribunal refused to allow deduction of interest payable from that date till September 6, 1962, rightly. But, as regards the payment of interest for the anterior period, the view taken is in consonance with the Supreme Court decision. The principle is that stated by the Privy Council in Vallabhdas Naranji v. Development Officer, Bandra, [1929] I.L.R. 53 Bom. 589; A.I.R. 1929 P.C. 163 and in Inglewood Pulp and Paper Co. Ltd. v. New Brunswick Electric Power Commission, A.I.R. 1928 P.C. 287. The latter decision has been approved by the Supreme Court in Dr. Shamlal Narula v. Commissioner of Income-tax.

5. We answer the question referred to us in the affirmative, that is,against the department and in favour of the assessee. We make no orderas to costs.

6. A copy of this judgment under the seal of the High Court and the signature of the Registrar will be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.


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