TaxTMI 
TaxTMI 
1982 (8) TMI 46
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.... the file of the learned District judge, Warangal, for recovery of possession of the said land, which was ultimately decreed on January 22, 1963. The Azam Jahi Mills Ltd. filed an appeal in this court , being A.S. No. 167 of 1963. In this appeal, a compromise was entered into between the parties which was recorded by this court on July 8, 1968, in CMP No. 9839/68. According to this compromise, the Azam Jahi Mills agreed to pay a total sum of Rs. 1,45,000 to the legal representatives of the plaintiff (plaintiff died pending the proceedings) comprised of the following items : &nbs....
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....; Total 1,45,000 -------- For the assessment year 1969-70, the assessing authority held that the sum of Rs. 40,000 covered by items (c) and (d) in the above table is not taxable as revenue receipt. It did not also hold that the amoun....
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.... are not final orders but are merely orders of remand directing further enquiry. This preliminary objection was overruled by the Tribunal. On merits, the Tribunal held that the sum of Rs. 40,000 was not a revenue receipt. It was of the opinion that since it was an interest paid otherwise than under the provisions of the statute, it was not taxable as a revenue receipt. But so far as the other direction of the Addl. Commissioner, viz., that the ITO should look into the character of the receipt of the entire amount of Rs. 1,45,000 to find out whether it was a capital receipt attracting capital gains tax, was concerned, the Tribunal confirmed the orders of the Addl. commissioner. In other words, the appeal was allowed in part. In so far as the....
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....s merely consequential. Mr. M. Suryanarayana Murthy, the learned standing counsel for the Department, contended that the distinction made by the Tribunal, viz., whether the interest was received under a statutory provision or otherwise than under a statutory provision was unsustainable in law. He submitted further that when the assessee himself chose to call the sum of Rs. 40,000 as interest, there was no reason not to treat it as interest ; and once it is called interest, it must follow that the sum of Rs. 80,000 mentioned under cl. (a) in the memorandum of compromise as the basic cost, should be treated as the price at which the land was sold on the date the encroachment had taken place or at any rate on the date of the suit. In other ....
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....t observed inter alia thus (p. 156): " interest, whether it is statutory or contractual, represents the profit the creditor might have made if he had the use of the money or the loss he suffered because he had not that use. It is something in addition to the capital amount though it arises out of it. " Similarly in T. N. K. Govindaraju Chetty v. CIT[1967] 66 ITR 465 (SC), at p. 471, the Supreme Court observed that the principle which is applicable in the case of interest payable under statutory provisions will equally apply even if the interest was payable under the terms of an agreement and the court or the arbitrator gives effect to the terms of the agreement, and awards interest which has been agreed to be paid. But the more imp....
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.... sum represents interest and if so on what amount ? For this purpose, Mr. Suryanarayana Murthy evolved an ingenious argument to the effect that the sale must be deemed to have taken place on the date the encroachment was made by the defendant. This theory is sought to be culled out from the use of the word " interest " in items (c) and (d) of the memorandum of compromise. We are, however, of the opinion that the inference so sought to be drawn is too farfetched. The assessee-plaintiff claimed to be the owner of the land and obtained decree. In appeal, the parties entered into a compromise and in lieu of sum of Rs. 1,45,000, the plaintiff gave up all his rights and claims in the said land and also a piece of adjoining land in favour of the d....