COMMISSIONER OF INCOME TAX vs JAYANTILAL PERKARLAL GANDHI.

SUHAS CHANDRA SEN, J. :

The following question of law has been referred by the Tribunal to this Court under s. 256(1) of the IT Act, 1961 :

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the interest of Rs. 21,295 awarded by the High Court in the appeal preferred by the assessee for enhanced compensation on the acquisition of his house property by the Government was not interest but an ex gratia payment by way of compensation and in that view in deleting the aforesaid interest come added by the ITO as income from other sources ?"

The assessment year involved was 1980-81 for which the relevant previous year was the calendar year 1979.

The assessee was the ower of premises No. 50A, Theatre Road, Calcutta which was requisitioned by the Govt., of West Bengal on 23rd March, 1961. The monthly compensation rent was fixed at Rs. 835 by the Land Acquisition Collector. The amount of compensation was raised to Rs. 1200 per month by the arbitrator appointed at the instance of the assessee under s. 11(1)(b) of the West Bengal Premises Requisition and Control (Temporary Provision) Act, 1947.

Against this award both the assessee and the Land Acquisition Collector preferred appeals to the Calcutta High Court. The High Court fixed the monthly compensation at Rs. 1,600 and further ordered that interest at the rate of 6% shall be payable on the enhanced amount of compensation from the date of possession till the date of payment. The interest amount came to Rs. 21,295. The ITO treated the amount of interest as "income from other sources" in the assessment order.

The AAC, on appeal, affirmed the order of the ITO on this point.

On further appeal, the Tribunal held that there was no provision for payment of interest in the West Bengal Premises Requisition and Control (Temporary Provision) Act, 1947, on the amount of compensation payable on requisition of a house property. There was also no contract for payment of any interest for delayed payment. No interest was paid on the amount of the original compensation which came to more than Rs. 66,000. From all these facts the Tribunal concluded that the payment of interest was nothing but an ex gratia payment by way of compensation worked out through the medium interest.

The Tribunal overlooked the fact that this was not a case of acquisition of land. Any amount awarded as compensation form compulsory acquisition of land will have to be treated as capital receipt. There are cases where it was held that for delayed payment of compensation, if any sum of money as paid by way of interest, such payment may be of capital nature. But this is a case of requisition of property. In the instant case, the assessee was to receive monthly compensation. The amount of monthly compensation fixed by the Land Acquisition Collector has been enhanced by the High Court. The High Court also directed payment of interest. If the principal amount that was given by way of monthly compensation is of revenue nature, the interest awarded by the High Court cannot be of a different character. There is no finding that the interest was paid by way of damages. Nothing has been shown to this Court to come to a contrary decision.

Under these circumstances, the question is answered in the negative and in favour of the Revenue.

There will be no order as to costs.

BHAGABATI PRASAD BANERJEE, J. :

I agree.