Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment year 1961-62 - Certain land of assessee was acquired under Land Acquisition Act and possession thereof was taken on 11-6-1956 - Another land was taken possession of on 10-10-1957 - However, due to some dispute regarding compensation, matter was decided by arbitrator and finally entire compensation for both lands and interest thereon was paid in January 1961 - Revenue authorities included in assessee's income entire interest on receipt basis during relevant assessment year - Whether though quantification of interest was interlinked with total compensation to be determined, it could not be said that right to receive interest had not accrued during each of years that intervened between dispossession and ultimate payment of compensation - Held, yes - Whether, therefore, revenue authorities were not justified in including entire interest on receipt basis during relevant assessment year - Held, yes FACTS Certain land of the assessee was acquired and possession of land was taken on 11-6-1956. The other land of the assessee came to be notified for acquisition on 12-4-1957 and on 18-10-1957, possession thereof was taken. As the assessee objected to the quantum of compensation, dispute was referred to arbitration and finally on 30-1-1961 the entire compensation was paid for both the lands including interest of Rs. 15,519 for the first acquisition and Rs. 941 for the second acquisition. The Assessing Officer held that the entire interest was liable to be assessed in the assessment year 1961-62. The assessee disputed the liability of taxation in respect of total amount of interest during the year on the basis that the said amount did not accrue during the year and as such there should be no assessment in respect of the entire amount. The ITO repelled the stand of the assessee. The assessee's appeal before the AAC as also the Tribunal failed. On reference : HELD It was admitted that the assessee did not maintain any accounts. No adverse inference could be drawn against the assessee on that score, because the law did not cast any duty on the assessee to maintain accounts in the instant case. The…

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