K.S. KRISHNA RAO VS COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH
1991 P T D 286
[Supreme Court of India]
Present: S. Ranganathan, N.D. Ojha and I.S. Verma, JJ
K.S. KRISHNA RAO
versus
COMMISSIONER OF INCOME-TAX, ANDHRA PRADESH
Ck Appeal No. 4789 of 1989, decided on 08/11/1989.
(a) Income-tax...
----Income or capital---Compulsory acquisition of land---Interest on compensation awarded is of the nature of income and not capital Land Acquisition Act (I of 1894), S.28.
(b) Income-tax---
----Income---Accrual---Land acquisition---Interest on enhanced compensation ordered by Court accrues from year to year on time basis from date of delivery of possession and cannot be taxed in one lump sum on the date on which Court orders enhanced compensation---Land Acquisition Act, 1894, Ss. 18 & 28.
The interest paid on compensation awarded for compulsory acquisition of land under section 28 of the Land Acquisition Act, 1894, is of the nature of income and not capita",
Dr. Shamlal Narula v. CIT (1964) 53 ITR 151(SC) fol.
Where compensation awarded under the Land Acquisition Act is enhanced by the order of the Court on a reference under section 18 of that Act or on further appeals, interest on enhanced compensation cannot be taxed all in a lump sum as having accrued on the date on which the Court passes the order for enhanced compensation: the interest has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the Court on a time basis.
Rama Bai v. CIT (1990) 181 ITR 400 (SC) fol.
Civil Appeal No. 4789 of 1989
Appeal by special leave from the order of the Appellate Tribunal, dated July 12, 1975, in ITA No. 899 (Hyd.) of 1971-72, after treating the special leave filed by the petitioner to appeal against the order dated October 6, 1982, of the Andhra Pradesh High Court in Income-tax Case No. 40 of 1981 dismissing the petitioner's application under section 256(2) of the Income-tax Act, 1961, for an order directing the Income-tax Appellate Tribunal to state a case and refer the following three questions of law arising out of the order of the Tribunal dated July 12, 1976, as a petition against she appellate order of the Tribunal:
"(i) Whether, in the facts and circumstances of the case, was the Appellate Tribunal justified in stating that the interest paid under section 28 of the Land Acquisition Act was not additional compensation representing capital receipt estimated and measured in terms of interest as decided by the Madras High Court in K.G. Krishna Murthy v. Revenue Divisional Officer reported in (1970) 2 MU 692, but revenue receipt?
(ii) Whether, in the facts and circumstances of the case, is the Appellate Tribunal justified in not accepting the contention of the assessee that interest is in the nature of agricultural income since the lands are agricultural lands?
(iii) Whether, in the facts and circumstances of the case, was the Appellate Tribunal right in law in holding that the entire interest amount of Rs.73,295 was assessable in the assessment year 1971-72 and not that only proportionate interest referable to the assessment year 1971-72 was assessable in that year?"
J. Ramamurthi, Senior Advocate with B. Parthasarathi, Advocate with him for Appellant.
Dr. V. Gauri Shankar, Senior Advocate with B.B. Ahuja and Miss A. Subhashini, Advocates with him for Respondent.
ORDER
S. RANGANATHAN, J: --This is a petition under Article 136 from an order of the High Court declining to call upon the Income-tax Appellate Tribunal to state a case and refer certain questions of law for its decision. The questions of law on which reference was sought stand concluded by our order of even date in Tax Referred Case No. 3 of 1976 (Rama Bai v. CIT (1990) 181 ITR 400). In view of this, we think that it will be a futile exercise to deal with the appeal as placed before us. We treat it instead as a special leave petition under Article 136 from the order of the Tribunal deciding the question raised against the assessee, condoning the delay. Counsel for the Union of India takes notice of the petition. In the circumstances mentioned above, we grant leave and proceed to dispose of the appeal itself.
There were three questions decided by the Tribunal which are set out m the preliminary portion of the High Court's order. The first question is concluded by the decision of this Court in Narula's case (1964) 53 ITR 151 against the assessee. The second question is not pressed by counsel for the appellant. That leaves only the third question for consideration. This question is regarding the point of accrual of interest on compensation awarded under the Land Acquisition Act, where such compensation is enhanced by the order of a District Court/High Court on a reference under section 18 or further appeals. By our judgment in Tax Referred Case No. 3 of 1976 (Rama Bai v. CIT (1990) 181 ITR 400), we have held that such interest cannot be taxed all in a lump sum on the date on which the Court passes an order for enhanced compensation but that it has to be spread over on an annual basis right from the date of delivery of possession till the date of the order of the Court on a time basis.
We, therefore, set aside the order of the Tribunal and allow this appeal. The assessment will be modified in the light of our decision. In the circumstances, we make no order as to costs.
M.B.A./884/TAppeal allowed.