Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment year 1986-87 - In respect of acquisition of certain land in year 1962, assessee received enhanced compensation and interest in relevant year - However, matter regarding quantum of compensation had not attained finality and was still fluid - Whether revenue was not entitled to tax amount of interest received by assessee till such time proceedings in reference to compensation attained finality - Held, yes FACTS The agricultural land belonging to the assessee was acquired by the State Electricity Board in 1962. During the relevant assessment year, the assessee received enhanced compensation and interest. The Assessing Officer held that the entire amount of interest received by the assessee was assessable in the relevant assessment year as the amount was actually received during that year. On appeal, the assessee primarily contended that the amount of interest was not at all taxable during the relevant year. In the alternative, the assessee submitted that in any case, the entire amount of interest was not assessable during the year in question as the interest had accrued year after year and the interest relatable to the assessment year in question could at best be assessed during that year. The Commissioner (Appeals) did not accept the primary contention, but while accepting the alternative plea, directed the Assessing Officer to bring under assessment only that amount of interest which accrued to the assessee during the assessment year in question. On further appeal, the Tribunal relying upon decision of the Supreme Court in CIT v. Hindustan Housing & Land Development Trust Ltd. [1986] 161 ITR 524, held that as the matter regarding compensation had not attained finality but was still fluid, no amount of interest could be held to be taxable. On reference : HELD The Andhra Pradesh High Court, in CIT v. Smt. M. Sarojini Devi [2001] 250 ITR 759, had taken the view that the Assessing Officer need not to wait till the matter regarding assessment of compensation attains finality. Against this, in a number of s, different High Courts have taken the view in favour of the assessee. Further, under…

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