2012 (3) TMI 207

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....that the interest received by the assessee from November 1, 1988 (the date of taking over possession of the assessee's land) to March 29, 1992 (the date of passing an award under the Land Acquisition Act, 1894) is liable to be treated as a capital receipt ?" 2. The assessee is an individual doing business of trading in cycles and cycle parts. He also derives income from agricultural land owned by him.   3. A part of the assessee's agricultural land was taken possession of by the Government on October 31, 1988, with his consent. While taking over possession, an agreement was entered into between the assessee and the Government that interest would not be payable to the assessee up to Octo- ber 30, 1988, or till the date of the awar....

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....ions of section 16 or 17 of the LA Act, the property vests absolutely in the Government. Any compensation received by a person for such compulsory acquisition of land amounts to compensation paid for the deprivation of the property, while the interest paid is given to him for deprivation of the use of money representing compensation for the land acquired. This is the view taken by the Supreme Court in Dr. Shamlal Narula v. CIT [1964] 53 ITR 151 (SC) wherein it was held (page 158) :   " . . . in a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered becau....