Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment years 1960-61 to 1968-69 - Land belonging to assessee was acquired by State Government in February, 1959 - However, final amount of compensation and interest thereon was determined by High Court in September 1967 which was actually paid in December, 1967 - Whether right to interest accrued on date on which Collector took possession of land and it recurred from day to day through out years in between dispossession and actual payment - Held, yes - Whether, therefore, amount of interest was to be spread over through years in which it had accrued - Held, yes FACTS The lands belonging to the assessee were acquired in 1959 and compensation was also paid. Being dissatisfied with the amount, the assessee made a reference to the District Judge who enhanced the compensation payable to the assessee. On appeal by the State Government, the High Court by an order dated 28-9-1967, determined the compensation in addition to amount fixed by the Land Acquisition officer, along with interest thereon which was actually paid on 16-12-1967. The assessee filed returns for the years 1960-61 to 1968-69, spreading over the amount of interest in those various years. The ITO upheld the spread over and taxed the assessee on his returns. The Commissioner acting under section 263 held that the assessee's right to receive the interest came into existence only in consequence of the decision of the High Court quantifying the amount of compensation and directing the payment of interest thereon. He accordingly, set aside the assessment orders and directed the ITO to assess the entire interest income in the year 1968-69. On appeal, the Tribunal held that under the Land Acquisition Act the right to compensation and interest starts from the date on which the land was taken over by the authorities. The assessee was not a dealer in properties, and, therefore, there was no question of maintaining accounts for the amount of compensation. The right to interest started on the date on which the assessee's land was taken over, i.e., on 24-2-1959, and the date on which the amount was actually determined had no relevance to the…

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