High Court Of Madras
Tiruchirapalli Co-Operative Marketing Society Ltd. vs. CIT
Asst. Year 1980-81
R. Jayasimha Babu & N.V. Balasubramanian, JJ.
Tax Case No. 1018 of 1988
2nd April, 1998
P.P.S. Janarthana Raja for Subbaraya Aiyar, for the Applicant : C.V. Rajan, for the Respondent
R. Jayasimha Babu, J. :
The question referred to us at the instance of the assessee arising out of its assessment of the income for the asst. yr. 1980-81 is as to whether on the facts and in the circumstances of the case the Tribunal was right in holding that the sum of Rs. 1,73,343 constituted income from other sources in the hands of the assessee? A rice mill of the assessee was taken over by the Government on 7th Dec., 1972, but payment therefor was made only in the year 1978. That payment so made was towards the value of what had been taken possession of by the Government and was in a sum of Rs. 3,22,014. Further, a sum of Rs. 1,73,383 was paid as interest for the period between the date of possession was delivered and the date of the Government order, which was on 5th Aug., 1978. The Tribunal has held that the amount of interest paid to the assessee was in the nature of revenue receipt and was taxable accordingly.
Learned counsel for the assessee contended that interest having been paid for the period of delay in paying the price, must be regarded as part of the capital receipt as that interest was directly related to capital receipt and therefore, to be regarded as incidental to the same.
The delay in making the payment for the assets that was taken over resulted in interest being paid on the unpaid price. Interest so paid cannot be regarded as a sum which is capital in nature as the reason for the payment of interest was only on the fact that unpaid price had been retained by the transferee and interest paid was on the sum so retained. Had the unpaid price been paid over to the assessee in the year in which possession was taken, and had the assessee invested the same in a bank, or elsewhere and earned interest thereon such interest would undoubtedly be revenue receipt. The fact that the money remained with the transferee and was not invested in a bank or elsewhere does not make any difference to the character of the interest paid being a receipt of revenue character.
The Supreme Court in the case of Dr. Shamlal Narula vs. CIT, etc. (1964) 53 ITR 151 (SC) : TC 38R.951, has held that the statutory interest paid under s. 34 of the Land Acquisition Act, 1894, on the amount of compensation awarded for the period from the date the collector had taken possession of land compulsorily acquired, is interest paid for the delayed payment of the compensation and is, therefore, a revenue receipt liable to tax under the IT Act. That principle is equally applicable to the case of the assessee herein. Interest paid on the delayed payment of compensation or unpaid price is a revenue receipt and is taxable accordingly.
The question referred to us is, therefore, answered in the affirmative in favour of the Revenue and against the assessee. Parties to bear their respective costs.
[Citation : 247 ITR 830]