COMMISSIONER OF INCOME TAX Vs. K.L. POSWAL

JUDGEMENT

(1.) THE Revenue has approached this Court invoking the provisions of s. 256(2) of the IT Act, 1961 (for brevity 'the Act') Bench, Chandigarh in ITA No. 934/Chd/1984 in respect of asst. yr. 1981 -82. It has further been claimed that the Tribunal had committed grave error by refusing to refer the question raised by it by dismissing the application filed would arise for determination of this Court : "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the interest on enhanced compensation accrues on year -to -year basis and as such interest for each period has to be calculated and taxed for the relevant assessment year and not in one year in which the judgment of the Hon'ble High Court enhancing compensation and allowing interest is given ? 2. WHETHER on the facts and in the circumstances of the case, the sum of Rs. 3,19,017 being the entire amount of asst. yr. 1981 -82 -

(2.) Brief facts of the case are that the agricultural land of the assessee was acquired by the Government of Haryana in the year 1972 and compensation in lieu thereof was awarded by the collector. The assessee went in appeal before the District Judge and compensation awarded by the collector was enhanced. Feeling still not satisfied, the assessee filed an appeal for enhancement of compensation before this Court and compensation was further enhanced by this Court. The enhanced compensation of Rs. 5,80,031, interest of Rs. 3,19,017 and Court fee charges of Rs. 7,292 was paid to the accrual basis spread over in different years and for the relevant asst. yr. 1981 -82 the assessee declared interest on enhanced compensation at Rs. 34,800 but included only 50 per cent thereof in the total income on the ground that the rest of the amount should be taken as spent in view of the High Court decision. The ITO was not satisfied with the explanation that half of the amount should only be included in the income as according to him the assessee had not spent a single pie on this account. It was further observed by the ITO that the wealth -tax computation and the cash flow statement did not suggest that the assessee spent anything for this purpose. Therefore, he included in the total income the interest of Rs. 34,800 on protective basis. The ITO further observed that entire amount of interest was includible in the asst. yr. 1982 -83 as compensation was received in the relevant asst. yr. 1982 -83. Feeling aggrieved the assessee lies. However, while disposing of the appeal, the AAC required the assessee to file a copy of the judgement of the High Court enhancing compensation. It was held by the AAC that the entire interest awarded by the High Court amounting to adjustment of addition of Rs. 34,800 made by the ITO the income assessed by the ITO was enhanced by Rs. 2,84,217. interest accrues on year to year basis and only its quantification is postponed to the date of judgment by the higher Courts and, as such interest for each period has to be calculated and taxed for the relevant assessment year and not in one year in which the judgment of the High Court is given. Following its earlier order in the case of Smt. Rajinder Kaur, the Tribunal deleted the addition of Rs. 2,84,217 made by the AAC. The order of the Tribunal was not accepted by the declined to refer the question of law to this Court. Hence the present petition.

(3.) WE have heard learned counsel at some length and find that the question raised is squarely covered by the judgment of Hon'ble the Supreme Court in the case of Smt. Rama Bai vs. CIT (1990) 84 CTR (SC) 164 : (1990) 181 ITR 400 (SC) holding that the interest on the enhanced compensation for land compulsorily acquired under the Land Acquisition Act, 1894 (for brevity Rs.1894 Act') which has been awarded by the Courts either on reference under s. 18 of the 1894 Act or on further appeal taken to the High Court has accrued not on the date of the order of the Court granting enhanced compensation but as having accrued year after year from the date of delivery of possession of the land till the date of such order. It has further been held that such interest cannot be assessed to income -tax in lump sum in the year in which the order is made. The view taken by Hon'ble the Supreme Court in Smt. Rama Bai's case (supra) has been followed and applied in the case of Bikram Singh & Ors. vs. LAC (1997) 139 CTR (SC) 475 : (1997) 224 ITR 551 (SC). Therefore the first question stands answered by the judgment of Hon'ble the Supreme Court in Smt. Rama Bai's case (supra) against the Revenue. Once the view expressed by the Tribunal is found to be in conformity with law laid down by the apex Court we do not find that any referable question of law arises in the present petition. The second question is also ancillary to the first question.