AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 1671
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....er the department can initiate action afterwards when it has already made the assessment and no infirmity was pointed out at the time of assessment? iii) Whether an order passed by the court is absolute and has to be complied with in Toto? iv) Whether the Judgment Debtor can make deductions and if so, whether it would amount to contempt of court? v) Whether interest allowed on compensation amount can be equated with interest earned on Principal amount? vi) Whether the interest awarded by the MACT is not a part of compensation?" 3. The assessee is providing transport facility by plying buses from one place to other place in the State of Punjab and in neighbouring States. On account of its buses being involved in accidents, it paid compensation under the provisions of Motor Vehicle Act, 1988 (M.V.Act) with interest as awarded by the Motor Accident Claims Tribunals (MACT). Since it failed to deduct tax at source out of interest income received by the claimants as per awards, the assessee was held to be assessee in default. The plea of the assessee was that interest being part of compensation was not taxable income from which TDS could be deducted. It o....
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....he award of MACT is not income. The expression 'income' used in Entry 82 of List I of Seventh Schedule to the Constitution can be given widest meaning. Under Section 2(24), inclusive and not exhaustive definition has been given. 10. In absence of an express provision to the contrary, income can be held to refer to something earned. What is received as compensation for loss in one or the other form may not be income. 11. Considering this aspect, it was observed in Commissioner of Income Tax, Bengal Vs. Shaw Wallace and Company, AIR 1932 Privy Council 138 by Privy Council:- "The object of the Indian Act is to tax "income" a term which it does not define. It is expanded, no doubt, into income, profits and gains," but the expansion is more a matter of words than of substance, Income, their Lordships think, in this cannotes a periodical monetary return "coming in" with some sort of regularity, or expected regularity, from definite sources. The source is not necessary one which is expected to be continuously productive, but it must be one whose object is the production of a definite return, excluding anything in the nature of a mere windfall. Thus income has been likened pictor....
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....n-recurring receipts from the category of income, profits and gains is itself, in my opinion, an indication that, but for that exemption, they are to be regarded as capable of falling within the class of income, profits or gains under the charging section. If it is to be assumed that ex hypothesi a casual and nonrecurring payment could never be income, then, as I see it, the statutory exception of it would be otiose and unnecessary. Another reason is afforded by Section 4 (3)(ii) of the Income-tax Act for inducing me to think that so narrow a construction cannot be placed on the word "income". If the assessee were right in saying that the test of "obligation" has in all cases to be applied in deciding what is or is not "income", it is difficult to see why voluntary contributions to a religious or charitable institution (whether applicable solely to religious or charitable purposes or not) should be specially excepted by the Act. The conclusion, therefore, I have reached is that, in construing that word "income" in the Indian Income-tax Act, one has to ask oneself whether, having regard to all the circumstances surrounding the particular payments and receipts in question, what is re....
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....ether capital gain could be treated as income if so provided for under statutory provisions, it was observed:- "7. What, then, is the ordinary, natural and grammatical meaning of the word "income" ? According to the dictionary it means "a thing that comes in." (See Oxford Dictionary, Vol. V. p. 162; Stroud, Vol. II, pp. 14-16). In the United States of America and in Australia both of which also are English speaking countries the word "income" is understood in a wide sense so as to include a capital gain. Reference may be made to - 'Eisner v. Macomber', (1919) 252 US 189 (K); -'Merchants' Loan and Trust Co. v. Smietanka', (1920) 255 US 509 (L) and - 'United States of America v. stewat', (1940) 311 US 60 (M) and - 'Resch v. Federal Commissioner of Taxation', (1943) 66 CLR 198 (N). In each of these cases very wide meaning was ascribed to the word "income" as its natural meaning." 16. In The Commissioner of Income-Tax, Hyderabad, Deccan Vs. M/s Vazir Sultan and sons, AIR 1959 SC 814 the issue was whether compensation for loss of agency was a capital receipt. It was held that compensation for loss of agency to be capital receipt on the ground that a....
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....ny adopt this device. Having regard to the fact that the legislature was . aware of such devices, would it not be competent to the legislature to device a fiction for treating the ostensible loan as the receipt of dividend? In our opinion, it would be difficult to hold that in making the fiction, the legislature has travelled beyond the legislative field assigned to it by entry 82 in List 1." 18. In Senairam Doongarmall Vs. Commissioner of Income-Tax, Assam, AIR 1961 SC 1579, the question was whether compensation received from military authority on account of loss of earning of tea estate was income or capital receipt. It was observed that quality of payment was decisive of the character of income and compensation received was not income. During the discussion following passage from English judgment in Sutherland Vs. Commissioners of Inland Revenue (1918) 12 Tax Case 63 was referred:- "Now it is quite clear that if a source of income is destroyed by the exercise of the paramount right... and compensation is paid for it, that that is not income, although the amount of compensation is the same sum as the total of the income that has been lost." 19. In CIT v. ....
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....te that such wide meaning was put upon the word 'income' not because of any particular legislative practice either in the United States or in the Commonwealth of Australia but because such was the normal concept and connotation of the ordinary English word 'income'. Its natural meaning embraces any profit or gain which is actually received. This is in consonance with the observations of Lord Wright to which reference has already been made. The argument founded on an assumed legislative practice being thus out of the way, there can be no difficulty in applying its natural and grammatical meaning to the ordinary English word 'income'. As already observed, the word should be given its widest connotation in view of the fact that it occurs in a legislative head conferring legislative power." (emphasis supplied) 8. Since the definition of income in Section 2(24) is an inclusive one, its ambit, in our opinion, should be the same as that of the word income occurring in Entry 82 of List I of the Seventh Schedule to the Constitution (corresponding to Entry 54 of List I of the Seventh Schedule to the Government of India Act)." 20. In the context of compensation receive....
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....yam (HUF), (2009) 315 ITR 1 SC held that interest paid by the Collector under Section 34 of the said Act was part of compensation and was treated to be at par with the compensation for purposes of taxability. The relevant observations therein are:- "...Section 28 of the 1894 Act applies only in respect of the excess amount determined by the Court after reference under Section 18 of the 1894 Act. It depends upon the claim, unlike interest under Section 34 which depends on undue delay in making the award. It is true that "interest" is not compensation. It is equally true that Section 45(5) of the 1961 Act refers to compensation. But as discussed hereinabove, we have to go by the provisions of the 1894 Act which awards "interest" both as an accretion in the value of the lands acquired and interest for undue delay. Interest under Section 28 unlike interest under Section 34 is an accretion to the value, hence it is a part of enhanced compensation or consideration which is not the case with interest under Section 34 of the 1894 Act..." 25. In Central Bank of India Vs. Ravindra and others AIR 2001 SC 3095, the question was whether interest component of the principal sum co....