COMMISSIONER OF INCOME TAX Vs. H S SHIVARUDRAPPA

JUDGEMENT

(1.) THE following question has been referred for our consideration under section 256(1) of the Income-tax Act, 1961 :

(2.) THE assessment year is 1981-82, for which the previous year ended on March 31, 1981. THE assessee owned two buses which were bearing Nos. MYA 2334 and MYA 6169. THEse were acquired by the Government of Karnataka in the year 1976, under the provisions of the Karnataka Contract Carriages (Acquisition) Act, 1976. For bus No. MYA 6169, compensation of Rs. 1,15,574 was awarded. Out of that, Rs. 20,000 was paid on March 12, 1976, and the balance was payable in eight annual installments of Rs. 11,410.90 each payable on January 30 of each calendar year commencing from January 30 of each calendar year commencing from January 30, 1978. For bus No. MYA 2334 compensation of Rs. 69,687 was awarded on September 27, 1980, and but of that Rs. 20,000 was paid on March 7, 1977. THE balance was payable in eight annual installments of Rs. 6,210.88 each payable on January 30 of each calendar year commencing from January 30, 1978. THE Income-tax Officer computed the profits under section 41(2), in respect of the above two buses, considering the entire compensation awarded, namely, Rs. 1,15,574 and Rs. 69,687, respectively. Aggrieved by the assessment, the assessee appealed and the Commissioner (Appeals) upheld the order of the Income-tax Officer. THE assessee preferred a second appeal to the Tribunal. THE Tribunal held that only installments due on January 30, 1981, in respect of both the buses are to be taken for computing profits under section 41(2).

(3.) MONEY payable for the asset is either the compensation determined in the case of compulsory acquisition or the price for the sale of the asset in the case of an ordinary sale. It can be said that a certain sum is payable for the asset on its sale; but the said money payable for the asset need not always become due immediately on the sale (or acquisition as the case may be). In the case of compulsory acquisition, compensation has to be determined and only then it becomes payable, subject to any statutory terms governing the acquisition. In the instant case, compensation had to be determined and it was accordingly determined. However, payment of compensation was postponed statutorily; it was to be paid in installments. Can it be said that, on determination of the compensation, the same became "due" ?