COMMISSIONER OF INCOME TAX Vs. SACHINDRAMOHAN NANDY

JUDGEMENT

(1.) In this reference under Section 256(1) the following question for the assessment year 1966-67 has been referred to this court:

(2.) The Land Acquisition Collector acquired the "Rani Bagan" property measuring 6'959 acres belonging to the assessee. The date of acquisition was 29th August, 1963, and the date of the award was 29th March, 1966. For the period of 2 years and 7 months a sum of Rs. 35,190 was allowed as interest by the Land Acquisition Collector. It was common ground that in the subsequent year the District Judge further allowed a sum of Rs. 1,05,643 as interest. The ITO treated the entire interest receipt of Rs. 35,190 as income of the year in question which the AAC upheld in appeal. The appeal was taken up to the Tribunal and it was contended that interest had accrued in each of the years from the date of acquisition till the date of payment. Hence it was submitted that only the portion of interest relatable to the years should be included in this year but not the entire interest. The Tribunal after hearing the contentions of both the parties referred to the decision of the Mysore High Court in the case of CIT v. Sampangiramaiah [1968] 69 ITR 159 and also referred to some other decisions and came to the conclusion that only the portion of interest relatable to the year should be included as the income of the assessee in that year and directed the ITO to modify the assessment accordingly. Upon this the question as indicated above has been referred to this court. Learned advocate for the Revenue drew our attention to the column of the assessment order indicating the method of accounting under the head "Method" which indicated neither the cash nor mercantile. Therefore, it was contended on behalf of the Revenue that it was presumed that the assessee followed the cash system of accounting in respect of the interest received by it and, therefore, the entire interest received by the assessee in the year in question should be assessed in this year. We find that similar was the position in the case before the Mysore High Court in CIT v. V. Sampangiramaiah [1968] 69 ITR 159, where the Mysore High Court at pp. 164 and 165, inter alia, observed as follows:

(3.) The conclusion arrived at by the Mysore High Court is in consonance with the decision arrived at by this court in the case of CIT v. Santi Devi. It has also been noted by the Tribunal, as we have indicated before, that the view of the Mysore High Court on this aspect has also been followed by the Madras High Court in the case of T.N.K. Govindarajulu Chetty v. CIT. We are of the opinion, that this conclusion would be a proper and equitable conclusion to be arrived at.