COMMISSIONER OF INCOME TAX Vs. B RAI

JUDGEMENT

(1.) THE following question of law has been referred to us for adjudication by the Tribunal, Amritsar Bench, under s. 256(1) of the IT Act, 1961 :

(2.) THE question of law as reproduced above emanates from the facts that the assessee, an individual, who was at the relevant time District and Sessions Judge, for the assessment year under consideration, had claimed higher pay scale than what was being allowed to him. The matter pertaining to higher pay scale was meted out by this Court in civil writ petition, wherein the claim of the assessee for higher pay scale was allowed. This Court while passing order for grant of higher pay scale also ordered payment of interest at the rate of 12 per cent per annum from the date of accrual of amount till the date of actual payment. The amount of interest thus payable worked out to Rs. 1,17,975, which was claimed by the assessee as interest not in the nature of income.

(3.) THE order of the CIT(A) on a further appeal by the assessee has since been reversed by the Tribunal vide order dt. 9th Oct., 1995. For setting aside the orders of the authorities below, the Tribunal relied upon the Division Bench judgment of this Court in CIT vs. Chiranji Lal Multani Mal Rai Bahadur (P) Ltd. (1989) 79 CTR (P&H) 133 : (1989) 179 ITR 157 (P&H) as also the decision of the Hon'ble Supreme Court in Dr. Shamlal Narula vs. CIT (1964) 53 ITR 151 (SC). The Tribunal held that the interest was awarded by the Court for loss of arrears of salary, which was property and the element of interest was determined by way of estimating the compensation to be granted for such loss of capital and as such the receipt was a capital receipt in the hands of the assessee.