GEORGE PAUL PUTHURAN Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) PURSUANT to the order passed by this court in O.P. No. 5651 of 1975 under Section 256(2) of the I.T. Act, 1961, the Income-tax Appellate Tribunal, Cochin Bench, has stated a case referring the following questions for decision by this court:

(2.) DURING the year 1961, a total extent of 1 acre 83 cents belonging to the assessee was acquired under the Kerala Land Acquisition Act (hereinafter called "the Act") for the Cochin Shipyard Project. Possession of a portion of the property was taken on June 9, 1961, and the rest of the property was also taken possession of on November 9, 1961. The Land Acquisition Officer awarded compensation to the assessee at the rate of Rs. 570 per cent. Not being satisfied with the said award made by the Land Acquisition Officer, the assessee got the matter referred to the Subordinate Judge's Court, Ernakulam, under Section 20 of the Act. The learned subordinate judge by his decree and judgment dated 28th October, 1968, enhanced the compensation awarded to the assessee by the Land Acquisition Officer by a further sum of Rs. 2,59,750. The court also decreed to the assessee interest at 6% on the additional compensation for the period commencing from the date of dispossession and lasting till the date of payment. The enhanced compensation was paid by the State on November 9, 1969, and such payment included a sum of Rs. 1,25,183 by way of interest.

(3.) IN M. Jairam v. CIT [1979] 117 ITR 638, a Division Bench of, this court consisting of Gopalan Nambiyar, Chief Justice, and one of us (Balagangadharan Nair J.) had occasion to consider the very same questions of law in almost identical circumstances. After a detailed discussion of all the relevant aspects and after adverting to the prior rulings of some of the other High Courts on the subject, the Division Bench held that the income earned by an assessed by way of interest awarded by a court under Section 28 of the Central Land Acquisition Act (Section 30 of the Kerala Act) on the excess compensation decreed by it cannot be regarded as having "accrued" or be "deemed to have accrued" on the date of dispossession or on the date of the notification published under Section 4 of the Land Acquisition Act, because at those stages it could not invariably be predicated that the assessee would file an application for reference in the court for excess compensation, or that the court would enhance the compensation, and even if it does so, that it would award interest on the excess compensation. Pointing out that Section 30 of the Kerala Land Acquisition Act (Section 28 of the Central Act) left it to the court to decide, in its discretion, whether or not to award to the claimant interest on the amount of excess compensation decreed by it, the Division Bench held that the right to interest on the excess compensation cannot, therefore, be said to arise, and income by way of such interest cannot be said to accrue until the court actually decrees interest to the claimant while allowing the excess compensation. The Division Bench, accordingly, held that the interest awarded by the court on the amount of additional compensation decreed to the claimant became the income of the assessee only on the date of the decree passed by the court and not prior to it. We are in respectful agreement with the view so expressed by the Division Bench.