MAJOR MUHAMMAD AHSANUDDIN HUSSAIN VS COMMISSIONER OF INCOME-TAX
1999 P T D 3632
[230 I T R 439]
[Andhra Pradesh High Court (India)]
Before Syed Shah Mohammed Quadri and B. Sudershan Reddy, JJ
Major MUHAMMAD AHSANUDDIN HUSSAIN
Versus
COMMISSIONER OF INCOME-TAX
Referred Case No.237 of 1990, decided on 09/07/1996.
Income-tax--
----Income---Accrual of income---Interest---Compulsory acquisition of land in June, 1958---Enhanced compensation and interest on such enhanced compensation awarded in 1969---Interest accrued from year to year from date -of delivery of possession of land till date of order---Entire interest not assessable, in assessment year 1970-71---Indian Income Tax Act, 1961.
Where land is acquired compulsorily and subsequently enhanced compensation is awarded with interest, such interest cannot be taken to have accrued on the date of the order of the Court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order.
The assessee had 2/5ths share in some lands which were acquired by the Government and possession of which was taken on June 3, 1958. Dissatisfied with the compensation awarded, the assessee sought a reference to the Civil Court. The Chief Judge, City Civil Court, Hyderabad, on reference, enhanced the compensation on September 6, - 1969. He also awarded interest at the rate of 6 per cent. per annum. The assessed claimed that the amount of interest was not taxable, and in the alternative he urged that it was taxable in the year in which it had accrued. That plea was not accepted by the Income-tax Officer who assessed to tax the interest, received on the compensation amount, in the year in which it was awarded by the Civil Court. Accordingly, the interest that accrued from June 3, 1958 to September 6, 1969, was assessed to tax in the assessment year 1970-71. This was upheld by the Tribunal. On a reference:
Held, that the entire sum of Rs.2,49,883, being the interest receivable for the period of June 3, 1958 to March 31, 1970 on account .of enhanced compensation was not assessable in the assessment year 1970-71.
Rama Bai v. CIT (1990) 181 ITR 400 (SC) fol.
CIT v. Sankari Manickyamma (Smt.) (1976) 105 ITR 172 (AP) ref.
Nemo for the Assessee.
S. R. Ashok for the Commissioner.
JUDGMENT
SYED SHAH MOHAMMED QUADRI, J.----In this reference under section 256(1) of the Income Tax Act, 1961, at the instance of the assessee, the following question is referred to this Court for opinion, viz:
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the entire sum of Rs.2,49,883, being the interest receivable for the period June 3, 1958, to March 31, 1970, on account of enhanced compensation is assessable for the assessment year 1970-71?"
The assessee and his sisters jointly owned 103 acres, 11 guntas of land situate in Habshiguda and Nacharam villages in which the assessee had 5ths share. The said lands were acquired by the Government possession of ditch was taken on June 3, 1958. Dissatisfied with the compensation awarded, the assessee sought a reference to the Civil Court. The Chief Judge, Civil Court; Hyderabad, on reference, enhanced the compensation on September 6, 1969; he also awarded interest at the rate of 6 percent per Y, n u m. The assessee claimed that the amount of interest was not taxable, and the alternative he urged that it should be taxable in the year in which it had accrued. That plea was not accepted by the Income-tax Officer who assessed to tax the interest, received on compensation amount, in the year in which it was awarded by the Civil Court. Accordingly, the interest that accrued from June 3, 1958 to September 6,1969, was assessed to tax in the assessment year 1970-71. The Appellate Assistant Commissioner on appeal held that as the enhancement of compensation was on September 6,1969, the interest accrued from September 7, 1969 to March 31, 1970, was assessable in the said assessment year 1970-71. On further appeal to the Income-tax appellate Tribunal, the Tribunal held that the entire amount of interest from June 3, 1958 to March 31, 1970, was assessable in the assessment year 970-7''. The Tribunal drew support for that view from CIT v. Sankari Manickyamma (Smt.) (1976) 105 ITR 172 (AP). On the above facts, at the instance of the assessed, the above question was referred to this Court for its opinion.
In Rama Bai v. CIT (1990) 181 ITR 400, the Supreme Court laid sown the following principle, viz. (page 407):
". . we are of the opinion that the appeals before us (Civil Appeal No. 810 of 1974 and Civil Appeal No. 3027 of 1988), have to be allowed and the references made under section 257 (Tax Reference Cases Nos. 3 of 1976 and 1 to 3 of 1978) have to be answered by saying that the question of accrual of interest will have to be determined in accordance with the above decision of this Court. The effect of the decision, we may clarify, is that the interest cannot be taken to have accrued on the date of the order of the Court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order."
In view of the principle laid down by the Supreme Court in the above cited case, we need not discuss the issue at length as the point is covered by that judgment. Following that judgment the question has to be answered in the negative, i.e., in favour of the assessee and against the Revenue.
The reference is accordingly answered. No costs.
M.B.A./3155/FCReference answered