KAILASH NARAIN GUPTA VS COMMISSIONER OF INCOME-TAX
1999 P T D 428
[225 I T R 921]
[Rajasthan High Court (India)]
Before V.K. Singhal and M.A.A. Khan, JJ
KAILASH NARAIN GUPTA
versus
COMMISSIONER OF INCOME-TAX
D.B.I.T. Reference No. 36 of 1983, decided on 06/05/1996.
Income-tax---
----Income---Interest---Interest awarded under Motor Vehicles Act is a revenue receipt---Indian Motor Vehicles Act, 1939, S.110-CC.
Section 110-CC of the Motor Vehicles Act, 1939, provides that the Claims Tribunal may direct that in addition to the amount of compensation, simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as it may specify in this behalf. The recognition of the right to claim interest is a statutory recognition. Hence, the interest awarded under section 110-CC of the Motor Vehicles Act, 1939, is a revenue receipt exigible to tax.
CIT v. Periyar and Pareekanni Rubbers Ltd. (1973) 87 ITR 666 (Ker.); Govinda Choudhury & Sons v. CIT (1977) 109 ITR 497 (Orissa); Govindaraju Chetty (T.N.K.) v. CIT (1967) 66 ITR 465 (SC) and Shamlal Narula (Dr.) v. CIT (1964) 53 ITR 151 (SC) ref.
Nemo for the Assessee
K.S. Gupta for G.S. Bapna for the Commissioner.
JUDGMENT
V.K. SINGHAL, J. ---The Income-tax Appellate Tribunal, vide its order dated October 23, 1982, in respect of the assessment year 1978-79 has referred the following question of law arising out of its order dated September 12, 1980, under section 256(1) of the Income Tax Act, 1961:
"Whether, under the facts and circumstances of the case, the Appellate Tribunal was justified in holding that the interest amounting to Rs.5,757 awarded under section 110-CC of the Motor Vehicles Act, 1939, was a revenue receipt and thus exigible to tax?"
The facts as stated in the statement of case are that the assessee met with an accident when a jeep hit him on February 4, 1972, as a result of which he received severe injuries including fracture of bone, sand was admitted in the hospital for medical treatment. The assessee is a practising lawyer and filed the claim for compensation under section 110-A of the Motor Vehicles Act, 1939, before the Claims Tribunal and the said Tribunal, vide its order, dated August 22, 1977, awarded a compensation of Rs.15,000 on account of physical disability and mental agony caused to him due to the accident. A further sum of Rs.2,600 was awarded for medical reimbursement. The claim of the assessee with regard to compensation on account of loss of income from profession was not accepted by the Tribunal. The Tribunal directed that the assessee will be entitled to interest at the rate of six per cent on the compensation amount awarded on August 3, 1977, to the date of realisation thereof. The interest amount was determined to the extent of Rs.5,757 which was included by the Income-tax Officer in the income of the assessee. It was contended before the Income-tax the interest amount was a part of compensation and did not constitute as taxable income under the Act.
The decision in the case of CIT v. Periyar and Pareekanni Rubbers Ltd. (1973) 87 ITR 666 (Ker.), was relied in which it was ordered that if the land has been acquired compulsorily by the Government on the basis of an agreement between the assessee and the Government and the award in the case was made subsequently, there is deprivation of property and interest paid by the Government was merely compensation for deprivation of property. The Income-tax Officer came to the conclusion that in accordance with the provisions of section 110-CC of the Motor Vehicles Act, 1939, the interest paid under the Motor Vehicle Act, 1939, stands on a different footing from that under the Land Acquisition Act, 1894 as it was mandatory there while the award of interest under the Act of 1939 is discretionary.
In the appeal preferred before the Appellate Assistant Commissioner, the said decision was rejected following the decisions in the case of Govinda Choudhury and Sons. v. CIT (1977) 109 ITR 497 (Orissa) and T.N.K. Govinda-Raju Chetty v. CIT (1967) 66 ITR 465 (SC). This was a case under the Land Acquisition Act and the apex Court observed that the right of the assessee to receive interest arose by virtue of the provisions of sections 28 and 34 of the Land Acquisition Act, 1894, and the arbitrator and High Court merely gave effect to that right in awarding interest on the amount of compensation. The interest received by the appellant was, therefore, taxable. The principle in Dr. Shamlal Narula's case (1964) 53 ITR 151 (SC) was followed wherein it was observed that the interest, whether it is statutory or contractual, represents the profit the creditor might have made if he had the use of the money or the loss he suffered because he had not that use. It is something in addition to the capital amount, though it arises out of it. Under section 34 of the Act when the Legislature designedly used the word "interest" in contradistinction to the amount awarded, we do not see any reason why the expression should not be given the natural meaning it bears.
The scheme of the Act and the express provisions thereof establish that the statutory interest payable under section 34 is riot compensation paid to the owner for depriving him of his right to possession of the land acquired, but that given to him for the deprivation of the use of the money representing the compensation for the land acquired. It was observed that the right to interest arises by virtue of section 34 of the Act and the arbitrator and the High Court merely gave effect to that right in awarding interest on the amount of compensation, therefore, the interest received by the assessee was taxable.
The Income-tax Appellate Tribunal found that under the provisions of section 110 of the Motor Vehicle Act though interest is discretionary which the Claims Tribunal may award, but it was awarded under the statute itself and if the interest is awarded under a statute or under the contract the same is exigible to income-tax.
The provisions of section 110-CC of the Motor Vehicle Act, 1939, are as under:
"110-CC Award of interest where any claim is allowed.--- Where any Court or Claims Tribunal allows a claim for compensation made under this Act such Court or Tribunal may direct that in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as it may specify in this behalf."
In the language of section 110-CC of the Act of 1939 though it is mentioned that the Claims Tribunal may direct that in addition to the amount of compensation simple interest shall also be paid at such rate and from such date not earlier than the date of making the claim as it may specify in this behalf. But the fact remains that the statutory recognition of the right to claim the interest by the affected person or the right to ward interest is a statutory recognition. In the absence of such a provisions, the interest could not have been granted. The interest is to be paid from a date not earlier than the date of submission of the application for claim to the date of actual payment.
So far as the compensation is concerned, it stands on a different footing. Though the interest in certain circumstances may have the same character as the principal sure is having, but it is not the truth in all circumstances'. The interest here which is awarded was because of the provisions of section 110-CC of the Act of 1939. Had there been no such provision the question of award of any interest would not have arisen and, therefore, it can be said that the award of interest is under a statute. The discretion is limited to the extent mentioned in the said section and even for not granting the interest reasons have to be given. In these circumstances, we are of the view that the Income-tax Appellate Tribunal was justified in holding that the interest amounting to Rs.5,757 awarded under section 110 CC of the Motor Vehicle Act, 1939, was a revenue receipt and thus exigible to tax.
The reference is answered in favour of the Revenue and against the assessee. A copy of this order be sent to the Income-tax Appellate Tribunal for information and necessary action.
M.B.A./1784/FCOrder accordingly.