Andhra Pradesh H.C : Whether, on the facts and in the circumstances of the case, the interest on compensation for the assessment year for which the interest should be brought to tax is the one in which it was awarded or the year in which issue of quantum of compensation become final ?

Counsel Appeared

J.V. Prasad, for the Applicant : Ms. S. Rani, for the Respondent

JUDGMENT

BILAL NAZKI, J. :

Lands belonging to the assessee have been acquired by the Government in the year 1966 and compensation was awarded by the LAO. On reference, compensation at higher rate was awarded. The assessee was held to be entitled to an interest of Rs. 43,642 for the period 18th May, 1966 to 9th Dec., 1975. The State Government went in appeal against the enhancement made in the appeal. The appeal before the Supreme Court was pending. The ITO held that the entire amount of interest on enhanced compensation should be brought to tax for the asst. yr. 1976-77. The order was challenged by way of appeal. The AAC held that as the matter has not become final and an appeal was before the Supreme Court, the amount of interest received by the assessee could not be taxed. He relied on a judgment of this Court in CIT vs. Smt. Sankari Manickyamma (1976) 105 ITR 172 (AP) : TC 39R.669. On further appeal before the Tribunal, the same view was upheld relying upon the same judgment. Thereafter at the instance of the revenue, the following question has been framed and referred to this Court : “Whether, on the facts and in the circumstances of the case, the interest on compensation for the assessment year for which the interest should be brought to tax is the one in which it was awarded or the year in which issue of quantum of compensation become final ?”

We have given the facts of the case somewhat in detail only because we have found that the question is not happily framed. The question, which needed to be answered, is ‘whether the AO has to wait till the final disposal by the final Court in an acquisition matter before the interest accrued is taxed ?” Therefore, we are reframing the question in the above-mentioned phraseology and we find that the question is already answered by the Supreme Court in Rama Bai vs. CIT (1990) 84 CTR (SC) 164 : (1990) 181 ITR 400 (SC) : TC 39R.668. The fact that the compensation was enhanced by the High Court in an appeal and the interest accruing to it was received by the assessee makes him liable to pay the tax. However, it will be spread over the period for which it accrued to him, in accordance with the Supreme Court judgment. In any case, if the judgment enhancing the compensation in favour of the assessee is reversed by the Supreme Court, then the assessee, even after payment of the tax on the accrued interest, would not be remediless. He can always seek the refund of the tax so paid, by making appropriate application for rectification of the assessment. The Tribunal relied on judgment in Smt. Sankari Manickyamma’s case (supra) that obviously stands reversed in view of the judgment of the Supreme Court judgment in Rama Bai’s case (supra).

For all these reasons, we answer the question in favour of the Revenue as indicated above and against theassessee.

[Citation : 250 ITR 759]