COMMISSIONER OF INCOME TAX Vs. AZIMUNNISA BEGUM

JUDGEMENT

(1.) The Tribunal, Allahabad, has referred the following question of law under Section 256(1) of the IT Act, 1961 (hereinafter referred to as the Act), for opinion to this Court:

(2.) Briefly stated, the facts giving rise to the present reference are as follows : The reference relates to the asst. yr. 1975-76. One Smt. Khatoon Bibi along with several other persons was owner of M/s Noori Sugar Factory. Smt. Khatoon Bibi has gone to Karachi in 1947 and the Asstt. Custodian, Evacuee Properties, had published a declaration that all the properties of Smt. Khatoon were evacuee property. On 20th March, 1956, the Competent Officer held that a share of 6 paise in the property in dispute belonged to Smt. Azimunnisa Begum (respondent) as the legal heir of Smt. Khatoon Bibi. There was a lot of litigation between the family members. In the intervening period, the property in dispute was sold on 30th Aug., 1956, for a sum of Rs. 16,05,000. During the time the litigation was going on, the sale proceeds were kept by the Competent Officer in the Allahabad Bank. Initially the deposit was a short-term deposit for one month carrying interest @ 3 per cent per annum which was renewed from time to time. Interest was also invested in the short-term deposit. At the end of June, 1974, the amount of deposit consisting principal and interest amounted to Rs. 24,77,008.

(3.) It appears that the respondent along with other persons had challenged action of the Asstt. Custodian in declaring the property as evacuee property including the validity of the UP Administration of Evacuees Property Ordinance (1 of 1949) and the Government of India (Third Amendment) Act. Having failed in this Court, the matter was taken up before the apex Court and it was decided on 25th Oct., 1960, upholding the action of the Asstt. Custodian. The decision is reported in AIR 1961 SC 365. The respondent-assessee received the principal amount and the interest of Rs. 1,98,238 which related to the period 1956 to 31st July, 1973. The ITO treated the entire amount of interest as income of the respondent-assessee during the asst. yr. 1975-76.