TaxTMI 
TaxTMI 
TaxTMI 
1940 (10) TMI 12
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....cer was ₹ 13,225; but Ramji Das Bhargava did not accept this as adequate and referred his claim to the Tribunal which has seisin of such matters, and the Tribunal on 6th April, 1931, increased the amount of compensation to the high figure of ₹ 97,640. The Tribunal also directed the Improvement Trust under the provisions of Section 28 of the Land Acquisition Act to pay interest at 6 per cent, per annum from the date of taking possession of the property to the date of payment of ₹ 97,640. The Improvement Trust appealed against this order to the High Court, but the appeal was dismissed; and thereafter the sum of ₹ 97,640 plus ₹ 49,660 as interest, was paid to the four sons of Ramjidas Bhargava, who had meanwhile died. The assessee's share of the interest money was ₹ 12,415. The Income-tax Officer was of opinion that this money was taxable, and income was accordingly taxed upon it. The assessee appealed to the Assistant Commissioner, but his appeal was dismissed. The view taken by that officer is expressed in the following words: "..........interest paid is the return on that money which was the appellant's, on the date the Improveme....
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.... the remuneration of an employee." The decision on which the taxing authorities have relied is Commissioner of Income-tax, U.P. v. Jagmohandas Rastogi AIR 1929 Oudh 125; 3 ITC, 274. In that case one of the parties to a partition suit put his decree into execution. The other party applied for stay pending at the hearing of an appeal which he had preferred in the Privy Council and a stay order was passed which was conditional upon his giving security to the extent of ₹ 95,000 and paying interest thereon into court at 6 per cent. per annum at regular intervals. The interest was so paid and was received by the party who had taken out execution. The question before the Chief Court was whether this interest was income to which the Income-tax Act applied, and the learned Judges answered it in the affirmative. At page 126, column 1 they say: "Owing to Indra Prasad taking the case to their Lordships of the Judicial Committee the enjoyment of Jagmohan Das over the property was postponed; but in lieu of this enjoyment he obtained interest at 6 per cent. on the amount calculated as security. This was clearly his income." Further on they say: "He (counsel for the....
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.... carrying on the agencies of the oil companies in the year in which they were received by the respondents. But when once it is admitted that they were sums received, not for carrying on this business, but as some sort of solatium for its compulsory cessation, the answer seems fairly plain." Further on we have this observation: "Their Lordships will only add that the reasoning of this judgment would apply equally if the appellant based his claim on head (vi) 'other sources' and the corresponding provisions of Section 12." The next authority to which we are referred is Commissioner of Income-tax, Madras v. B.J. Fletcher [1937] 5 ITR 428 ; 1937 ALJ 1403. In that case the question before their Lordships was whether a bonus which had been paid to the employee of a company on retirement from a fund which the company had constituted was liable to income-tax. Under the rules governing the constitution of the fund, allotments were made from time to time by the company to the credit of this fund and were invested and accumulated. Allotments so made were neither part of the employee's current salary, nor was it a part of his original contract of service that he ....
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....d not arise out of the business in which he was engaged nor was it in any way connected therewith." The learned Judges considered the decision of their Lordships in Shaw Wallace & Co.'s case (supra) , and they disagreed with the view which was taken by a Bench of this Court in Gaya Prasad Chhotey Lal, In re [1935] 3 ITR 177 ; 1935 ALJ 405 to the effect that "the observations of the Privy Council..........should be taken in connection with the facts of the particular case and that the Board did not intend to lay down any general principle." The Judges of the Full Bench say: "In our opinion, the intention of the Board was to enunciate a working definition of income for the guidance of the Courts in India." Learned counsel for the assessee has next drawn our attention to some English decisions, and we shall proceed to consider them- while at the same time bearing in mind the warning which was issued by the Judicial Committee in the case of Shaw Wallace and Co. The first of these cases is In re National Bank of Wales Limited [1899] 2 Ch. D. 629. In that case in the winding up of a company it was found that an ex-director of the company had improperly pa....
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....e incurred" by a firm of contractors against a railway company was referred to arbitration on the 1st March 1916. On the 14th January 1921 the arbiter awarded the firm a certain sum, mainly as damages, together with interest thereon at 5 per cent, per annum from a certain date in 1918. At page 611 the Lord President observes: "Now it is familiar that an assessment of the kind may contain as one of its constituent elements an allowance in respect that the claimant has lain for a long time out of his remedy. The propriety of such an allowance may depend on the character of the claim, and its amount may depend on many considerations of which time is only one. But an interest calculation is a natural and legitimate guide to be used by an arbiter in arriving at what he thinks would be a fair amount. In most cases in which such an allowance is a constituent of an award it does not separately appear, but is slumped along with other elements in the gross sum discerned for; but there is nothing to prevent an arbiter, if he thinks it just and reasonable, in a particular case, to make the allowance in the form of an actual interest calculation from a past date until the sum fixed ....
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....g this sum, for preventing Mr. Kay, or his executors, exercising the power of disposition over his property, the Germans have been compelled to pay compensation. The way to estimate that compensation or damages-the sensible way no doubt-.would be by calculating a sum in terms of what interest it would have earned. That has been done, but the sum that was paid has not been turned into interest so as to attach income-tax to it." In Commissioners of Inland Revenue v. Barnato [1936] 20 Tax Cas. 455, Slesser, L.J., observes that: "Where on the consideration of the realities of the case, it emerges that the money is paid as interest and not paid merely as a means of measuring damages, there it can properly be said that it satisfies the requirement of Case 3, R.1, of Schedule D that the tax shall extend to any interest of money." These and other English authorities were considered by a Full Bench of the Patna High Court in Commissioner of Income-tax, Bihar and Orissa v. Rani Prayag Kumari Debi [1939] 1940, 8 ITR 25 ; AIR 1939 Pat. 662. Manohar Lall, J.,-who delivered the judgment of the Court-classified the various decisions of the English Courts, the two main groups of....
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....to which we have referred and certain authorities to which we shall now refer, as well as from a consideration of the principles applicable to the Indian Income-tax Act, we think that we shall be able to arrive at a decision. In the Revenue Divisional Officer, Trichinopoly v. Venkatarama Ayyar [1935] 59 Mad. 433 , it was held that where Government has taken urgent possession of certain lands before the award under the Land Acquisition Act was made, interest on the amount awarded can be given to the person entitled for the period between the date of taking possession by Government and the payment of compensation money, even in a case which does not exactly fall under Sections 16 and 17 of the Land Acquisition Act, on the principle that the right to receive interest takes the place of the right to retain possession. This view was in accordance with the decision in Inglewood Pulp & Paper Co., Ltd. v. New Brunswick Electric Power Company [1928] AIR 1928 PC 287, where their Lordships of the Privy Council at page 290 say: "It is now well established that on a contract for sale and purchase of land it is the practice to require the purchaser to pay interest on his purchase money f....