ANNAMMA ALEXANDER Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS batch of twelve references are connected cases. Four of them are at the instance of an assessee to income-tax, and the other eight are at the instance of the Revenue. In the references at the instance of the assessee, the Revenue is the respondent. The same assessee is the respondent in the references made at the instance of the Revenue. The assessee at whose instance the references were made originally is no more. His legal heirs were impleaded. They have been served. But there is no appearance on their behalf at the time when the references were taken up for hearing. All the references relate to the assessment years 1967-68, 1968-69, 196970 and 1971-72.

(2.) WE heard counsel for the Revenue, Mr. P. K. R. Menon. The original assessee is one K. C. Alexander who was in possession of landed properties measuring 131.23 acres. Mr. Alexander filed a suit for eviction of the trespassers on the property. He claimed mesne profits and also damages for the waste committed by the trespassers in cutting down some trees. The trial court, as well as the High Court, awarded mesne profits. Compensation for waste with interest was also allowed. Interest was allowed on mesne profits as well. The assessing authority brought to tax the interest on mesne profits and also the interest on damages for waste. In appeals, the first appellate authority held that the interest on mesne profits is not exigible to income-tax. However, he took the view that the interest on damages for waste is taxable. The Revenue took up the matter in second appeal before the Income-tax Appellate Tribunal (in short, "the Tribunal"). The assessee filed cross-objections against the finding that interest on damages for waste is taxable. The Tribunal held that interest on mesne profits is not taxable. However, the Tribunal took the view that interest on damages for waste is taxable. But, in the view of the Tribunal, for taxing the interest on damages for waste, the Revenue should examine whether the interest was realisable or recoverable and whether it could be brought to tax only on the basis of actual realisation. The matter was remitted to the Income-tax Officer for a fresh determination. The common order passed by the Tribunal is dated November 30, 1983. It is thereafter that four questions of law--one at the instance of the assessee and the other three at the instance of the Revenue--have been referred for the decision of this court in the twelve referred cases.

(3.) ON a fair reading of the order of the Tribunal, we hold that the Tribunal was justified in holding that the interest amount referable to mesne profits cannot be brought to tax. This conclusion of the Tribunal is in accord with the Bench decision of this court in CIT v. Mrs. Annamma Alexander [1991] 191 ITR 551. In this perspective, we answer the first question, referred to this court at the instance of the Revenue, in the affirmative, against the Revenue and in favour of the assessee.