TaxTMI 
TaxTMI 
1964 (4) TMI 10
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.... the Union of Pepsu and later the Union of Pepsu merged into the State of Punjab. It is also common case that there was a Land Acquisition Act in the Union of Pepsu containing provisions similar to those obtaining in the Act. On October 6, 1953, the Act was extended to the Union of Pepsu. On September 30, 1955, the Collector of Patiala made an award under the Act as a result of which the appellant received on December 1, 1955, a sum of Rs. 2,81,822, which included a sum of Rs. 48,660 as interest up to the date of the award. For the year 1956-57, the Income-tax Officer included the said interest in the income of the Hindu undivided family of which the appellant is the manager, and assessed the same to income-tax, after overruling the appellant's contention that the said interest was a capital receipt and, therefore, not liable to tax. On June 14, 1957, the Appellate Assistant Commissioner confirmed the order of the Income-tax Officer. The appellant preferred an appeal to the Income-tax Appellate Tribunal. The said Tribunal by its order dated July 9, 1957, held that the said amount representing the interest was a capital receipt and on that finding the said amount was excluded from t....
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....tions are issued and the requisite notice is given to the persons interested in the land so acquired, the Collector, after holding the necessary enquiry, makes an award, inter alia, determining the amount of compensation payable for the land so acquired. Section 15 of the Act says that in determining the amount of compensation the Collector shall be guided by the provisions contained in sections 23 and 24. Section 23 provides for the matters to be considered in determining compensation ; section 24 describes the matters to be neglected in determining the compensation. A perusal of the provisions of section 23 shows that interest is not an item included in the compensation for any of the matters mentioned therein; nor is it mentioned as a consideration for the acquisition of the land. Under clause (2) of section 23, the legislature in express terms states that in addition to the market value of the land the court shall in every case award a sum of 15 per cent. of such market value in consideration of the compulsory nature of the acquisition. If interest on the amount of compensation determined under section 23 is considered to be a part of the compensation or given in consideration ....
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.... is as it were that from that date the Government withheld the compensation amount which the claimant would be entitled to under the provisions of the Act. Therefore, a statutory liability has been imposed upon the Collector to pay interest on the amount awarded from the time of his taking possession until the amount is paid or deposited. This amount is not, therefore, compensation for the land acquired or for depriving the claimant of his right to possession, but is that paid to the claimant for the use of his money by the State. In this view there cannot be any difference in the legal position between a case where possession has been taken before and that where possession has been taken after the award, for in either case the title vests in the Government only after the possession has been taken. The legislature expressly used the word " interest " with its well known connotation under section 34 of the Act. It is, therefore, reasonable to give that expression the natural meaning it bears. There is an illuminating exposition of the expression " interest " by the House of Lords in Westminster Bank Ltd. v. Riches. The question there was whether, where in an action for recovery of....
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....provement Trust, under the provisions of section 28 of the Land Acquisition Act, to pay interest to the assessee from the date of taking possession of the property to the date of payment, a Division Bench of the Allahabad High Court held, in Behari Lal Bhargava v. Commissioner of Income-tax, that the interest so awarded was in the nature of compensation for the loss of the assessee's right to retain possession of the property acquired and, therefore, was not income liable to tax. The reason for the said conclusion is stated thus : " It is not the 'fruit of a tree '--to borrow the simile used in Shaw Wallace's case--but was compensation or damages for loss of the right to retain possession ; and it seems to us that section 28 was designed as a convenient method of measuring such damages in terms of interest." As we have pointed out earlier, as soon as the Collector has taken possession of the land either before or after the award the title absolutely vests in the Government and thereafter the owner of the land so acquired ceases to have any title or right of possession to the land acquired. Under the award he gets compensation for both the rights. Therefore, the interest awarded....