High Court Of Bombay : Nagpur Bench
Mrs. Usha Wamanrao Charde vs. CIT
Section 256(2)
Asst. Year 1981-82, 1982-83
J.P. Devadhar & B.P. Dharmadhikari, JJ.
IT Appln. Nos. 25 & 54 of 1995
18th April, 2007
Counsel Appeared :
W.G. Charde, for the Applicant : A.S. Jaiswal, for the Respondent
JUDGMENT
J.P. Devadhar, J. :
In these two applications filed under s. 256(2) of the IT Act, 1961 the applicant assessee seeks an order directing the Tribunal to forward the following questions of law for the opinion of this Court :
“(1) Whether on the facts and circumstances of the case, the Tribunal erred in holding that the possession taken on 1st April, 1979 was as per s.16 of the Land Acquisition Act and the lands also vested in Government from 1st April, 1979 and the amount of compensation became due on that very date ?
(2) Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the amount received by the assessee by way of interest from 1st April, 1979, on the enhanced amount of compensation till the awards of LAO was not a capital receipt ?
(3) Whether on the facts and circumstances of the case, Tribunal erred in not holding that the amount of interest was compensation for deprivation of right of cultivation and was the agricultural income and in any case could not be taxed at all as capital receipt or otherwise ?”
The assessment years involved herein are asst. yr. 1981-82 and 1982-83. In these cases, possession of agricultural land belonging to the assessee was taken over by the State Government for irrigation project by negotiations, even before initiating proceedings under the Land Acquisition Act. After taking over the possession of the agricultural lands, the land acquisition proceedings were initiated and on completion of the proceedings, three awards were passed on 31st July, 1981, 31st Aug., 1981 and 19th May, 1982, determining the compensation under the Land Acquisition Act. Being aggrieved by the aforesaid order, the assessee filed reference under s. 18 of the Land Acquisition Act seeking enhancement of the compensation. By order dt. 30th Nov., 1985 the Civil Court enhanced the compensation and directed that the enhanced compensation be paid with interest with effect from taking possession of the agricultural land i.e. on 1st April, 1979. The assessee contended that since the possession of the lands was taken over even before initiating proceedings under the Land Acquisition Act, the enhanced compensation payable from 1st April, 1979 till the date of the award would be agricultural income, and therefore, interest payable thereon would be capital receipt and not taxable. The assessee relied upon the decision of Kerala High Court in the case of CIT vs. Periyar & Pareekanni Rubbers Ltd. (1973) 87 ITR 666 (Ker).
The AO held that interest received from 1st April, 1979 was revenue receipt and therefore taxable. On appeal filed by the assessee before the CIT(A), the CIT(A) held that interest from 1st April, 1979 till the date of award is capital receipt and the capital receipts have to be assessed as capital gains in accordance with the law. Being aggrieved by the aforesaid order, the Revenue filed appeal before Tribunal and the assessee filed cross-objection. The Tribunal held that the interest received was revenue receipt and rejected the cross-objection filed by the assessee. On a reference application filed by the assessee the Tribunal relied upon the judgment of the Hon’ble apex Court in the case of Dr. Shamlal Narula vs. CIT (1964) 53 ITR 151 (SC) and rejected the application filed by the assessee, hence the present application is filed by the assessee. The question in these cases is where the possession of the immovable property is taken by the State Government even before initiating the proceedings under the Land Acquisition Act, and thereafter enhanced compensation is paid with interest, whether, the amount of interest received from the date of possession upto date of the award would be a capital receipt or revenue receipt ?
The decision of the Kerala High Court in the case of Periyar & Parekanni (supra), which has distinguished by decision of the apex Court in the case of Dr. Shamlal Narula (supra), has not been considered by the Tribunal. In this view of the matter, the reference applications filed by the assessee are allowed and the Tribunal is directed to forward statement of case for both the years raising the aforesaid questions of law for the opinion of this Court. Rule is made absolute in the aforesaid terms, with no order as to cost.
[Citation : 294 ITR 510]
