TaxTMI 
TaxTMI 
1992 (11) TMI 67
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....of Rs. 11,410.90 each payable on January 30 of each calendar year commencing from January 30, 1978. For bus No. MYA 2334 compensation of Rs. 69,687 was awarded on September 27, 1980, and out of that Rs. 20,000 was paid on March 7, 1977. The balance was payable in eight annual instalments of Rs. 6,210.88 each payable on January 30 of each calendar year commencing from January 30, 1978. The Income-tax Officer computed the profits under section 41(2), in respect of the above two buses, considering the entire compensation awarded, namely, Rs. 1,15,574 and Rs. 69,687, respectively. Aggrieved by the assessment, the assessee appealed and the Commissioner (Appeals) upheld the order of the Income-tax Officer. The assessee preferred a second appeal to the Tribunal. The Tribunal held that only instalments due on January 30, 1981, in respect of both the buses are to be taken for computing profits under section 41(2). The question involves the interpretation of section 41(2). The relevant part of the section reads thus : "Where any building, machinery, plant or furniture which is owned by the assessee and which was or has been used for the purposes of business or profession is sold, discarded....
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....to be determined and it was accordingly determined. However, payment of compensation was postponed statutorily ; it was to be paid in instalments. Can it be said that, on determination of the compensation, the same became " due " ? The word " due " is normally understood as conveying the meaning "imminent ". Money payable becomes due for payment on the date when it is to be paid.; such a date is usually called the " due date ". Unless the money payable is due, its recovery cannot be enforced ; a creditor cannot demand payment unless it is " due One of the characteristics of the English language is the latitude extended to the words in it. A word is to be understood in the setting in which it is used. There are occasions where the terms " payable " and " due " are used to convey the same meaning. It is also possible to understand the word " payable " as conveying the idea of a liability to pay in future also and when that future date is reached, it would become " due ". The Revenue contends that, on the determination of the compensation, the money became payable and due ; the postponement of the payment under the instalments would not make any difference. The assessee, on the oth....
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....ase is to counteract the effect of the transfer of assets so far as computation of income of the assessee is concerned, then bearing that purpose in mind, we should find out the intention from the language used by the Legislature and if strict literal construction leads to an absurd result, i.e., a result not intended to be subserved by the object of the legislation found in the manner indicated before, then if another construction is possible apart from the strict literal construction, then that construction should be preferred to the strict literal construction. Though equity and taxation are often strangers, attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the litera construction." Section 41(2) may be compared with its predecessor and found as one of the provisos to section 10(2)(vii) of the Indian Income-tax Act, 1922 ; it reads: "Provided further that where the amount for which any such building, machinery or plant is sold . . . . . exceeds the written down value, so much of the excess as does not exceed the difference between the original cost and the w....
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....rely irrelevant. However, under section 45(5)(b), the enhanced compensation is brought to tax in the previous year in which such amount is received by the assessee. Therefore, there is nothing unusual if the previous year is postponed to the year in which the money is actually payable to the assessee in the sense that the assessee should have a right to demand its payment during that year and thus it becomes " due " to him ; the due date for payment would identify the previous year. Learned counsel for the Revenue strongly relied on Kesoram Industries and Cotton Mills Ltd. v. CWT [1966] 59 ITR 767 (SC). It was held therein that the income-tax liability was held to be a debt due, on the last date of the accounting year and, therefore, it was deductible under section 2(m) of the Wealth-tax Act. Mr. Raghavendra Rao relied on the meaning of the term " debt ", as a sum of money which is now payable or will become payable in the future by reason of a present obligation. (Vide page 776). On the same analogy, it was contended that money payable becomes " due " when the obligation is created, though the obligation may have to be discharged in future. Mr. Prasad, on the other hand, relied o....
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.... not become payable ; the minimum compensation payable by itself would not result in making the said amount " money payable " for the acquisition ; this contention was accepted by this court. At page 167, the mode of determining the compensation is stated thus: " The basis for determination of the amount has been provided in the Schedule to section 6 of the Acquisition Act. Such compensation which is required to be paid is the sum arrived at on a certain percentage of the cost of such contract carriages as per the Table annexed to the Schedule. This amount, unless otherwise fixed by agreement, is to be determined by the arbitrator appointed for the purpose. Under section 12 of the Acquisition Act, an appeal is provided to the High Court by any person aggrieved by the said award. The amount referred to in section 6 of the Acquisition Act is thus required to be determined and quantified under in award by the arbitrator and it becomes due only after such determination. " While considering the scope of section 41, it was held that section 41 deals with a deemed income or a fictional income and the year of taxability under section 41(2) is the year of receipt or the year in which it ....
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....later. Compensation became payable only after its determination and thereafter it became due ; the court had no occasion to consider the effect of the statutory instalments granted to the State to make the payments. In CIT v. Bharat Lines Ltd. [1986] 159 ITR 541, the Bombay High Court was considering the case of a private sale and the agreement of sale under which the sale consideration was to be paid in monthly instalments. The assessee claimed a loss which arose due to the fluctuation in the exchange rate. The Appellate Tribunal held that " moneys payable " in section 41(2) connoted simple indebtedness without reference to the time of payment. The assessee also contended that the balance amount received under the agreement was payable, in instalments and the said amount could be taxed in the year of payments. However, having regard to the questions referred and the alternative contentions based on the loss sustained due to fluctuation in the exchange rate, the questions were answered in favour of the assessee without specifically dealing with the assessee's contention as to the year of receipt. But the ratio fully supports the assessee's contention in the instant case before us....