VITTAL REDDY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) The twin questions that arise at the instance of the assessee in this reference are :

(2.) The relevant facts in brief are : the assessees lands were acquired by a notification issued under section 4 of the Land Acquisition Act on 3/05/1967. The Land Acquisition Collector made an award under section 11 of the Land Acquisition Act and took possession of the lands on 26/12/1970, which falls within the previous year relevant to the assessment year 1971-72. However, not satisfied with the compensation awarded, the assessees went to the City Civil Court, Hyderabad, which enhanced the compensation on 12/07/1971, which fell within the previous year relevant to the assessment year 1972-73. It also awarded interest amounting to Rs. 23,317 under section 28 of the Land Acquisition Act.

(3.) The case of the assessees is that the enhanced compensation awarded by the city civil court related back to the date of the acquisition of the property and that from the date of acquisition, the right to the interest on the enhanced compensation accrued from year to year. The Income-tax Officer, however, did not accept the contention of the assessees that the interest on the enhanced compensation awarded by the civil court accrued from year to from the date of the acquisition and that what was assessable to tax in the assessment year 1972-73 was only the interest relatable to the relevant previous year but not the entire interest awarded by the civil court in the relevant previous year. According to the Income-tax Officer, however, the right of the owners of the land to interest on the enhanced compensation had accrued to the assessees only on the date when the civil court delivered its judgment awarding enhanced compensation and also the interest thereon and that since that right accrued to the assessees only in the previous year relevant to the assessment year 1972-73, the whole of the interest was in consequence liable to be taxed in the assessment year 1972-73. On appeal, it was confirmed by the Appellate Assistant Commissioner and on further appeal to the Tribunal, it was held, while dismissing the appeals, as under :