COMMISSIONER OF INCOME TAX VS JAYANTILAL SARKARLAL GANDHI
1996 P T D 646
[212 I T R 154]
[Calcutta High Court (India)]
Before Suhas Chandra Sen and Bhagabati Prasad Banerjee, JJ
COMMISSIONER OF INCOME TAX
versus
JAYANTILAL SARKARLAL GANDHI
Income Tax Reference No. 163 of 1984, decided on 16/04/1990.
Income-tax---
----Income or capital---Premises requisitioned by Government---Monthly payments made as compensation---Amount increased by High Court---High Court directing payment of interest on such additional amount---Interest assessable as income.
The assessee's premises were requisitioned by the State Government. The monthly compensation rent was fixed at Rs.835 by the Land Acquisition Collector. The High Court fixed the monthly compensation at Rs.1,600 and further ordered that interest at the rate of six per cent. shall be payable on the enhanced amount of compensation from the date of possession till the date of payment. The interest amount came to Rs.21,295. The Income-tax Officer treated the amount of interest as "income from other sources" in the assessment order. The Tribunal held that the payment of interest was nothing but an ex gratia payment by way of compensation worked out through the medium of interest and deleted the interest income from the income of the assessee. On a reference:
Held, that this was not a case of acquisition of land, where any amount awarded as compensation would have to be treated as capital receipt. This was a case of requisition of property. If the principal amount that was given by way of monthly compensation was of revenue character, the interest awarded by the High Court could not be of a different character. The interest was assessable.
Mr. Mitra for the Commissioner.
JUDGMENT
SUHAS CHANDRA SEN, J. --The following question of law has been referred by the Tribunal to this Court under section 256(1) of the Income Tax Act, 1961 ("the Art"):
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the interest of Rs.21,295 awarded by the High Court in the appeal preferred by the assessee for enhanced compensation on the requisition of his house property by the Government was not interest but an ex gratia payment by way of compensation and in that view in deleting the aforesaid interest income added by the Income-tax Officer as income from other sources?"
The assessment year involved was 1980-81 for which the relevant previous year was the calendar year 1979.
The assessee was the owner of the premises No.50A, Theatre Road, Calcutta, which was requisitioned by the Government of West Bengal on March 23, 1961. The monthly compensation rent was fixed at Rs.835 by the Land Acquisition Collector. The amount of compensation was raised .to Rs.1,200 per month by the arbitrator appointed at the instance of the assessee under section 11(1)(b) of the West Bengal Premises Requisition and Control (Temporary Provision) Act, 1947.
Against this award both the assessee and the Land Acquisition Collector preferred appeals to the Calcutta High Court. The High Court fixed the monthly compensation at Rs. 1,600 and further ordered that interest at the rate of six per cent shall be payable on the enhanced amount of compensation from the date of possession till the date of payment. The interest amount came to Rs.21,295. The Income Tax Officer treated the amount of interest as "income from other sources" in the assessment order.
The Appellate Assistant Commissioner, on appeal, affirmed the order of the Income Tax Officer on this point.
On further appeal, the Tribunal held that there was no provision for payment of interest in the West Bengal Premises Requisition and Control (Temporary Provision) Act, on the amount of compensation payable on requisition of a house property. There was also no contract for payment of any interest for delayed payment. No interest was paid on the amount of the original compensation which came to more than Rs.66,000. From all these facts, the Tribunal concluded that the payment of interest was nothing but an ex gratia payment by way of compensation worked out through the medium of interest.
The Tribunal overlooked the fact that this was not a case of acquisition of land. Any amount awarded as compensation for compulsory acquisition of land will have to .be treated as capital receipt. There are cases where it was held that for delayed payment of compensation, if any sum of money is paid by way of interest, such payment may be of capital nature. But this is a case of requisition of property. -In the instant case, the assessee was to receive monthly compensation. The amount of monthly compensation fixed by the Land Acquisition Collector has been enhanced by the High Court. The High Court also directed payment of interest. If the principal amount that was given by way of monthly compensation is of revenue nature, the interest awarded by the High Court cannot be of a different character. There is no finding that the interest paid was by way of damages. Nothing has been shown to this Court to come to a contrary decision.
Under these circumstances, the question is answered in the negative and in favour of the Revenue.
There will be no order as to costs.
BHAGABATI PRASAD BANERJEE, J. --I agree
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