Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment years 1972-73 to 1976-77 - Whether mere claim to income without an enforceable right thereto cannot be regarded as an accrued income for purpose of Act - Held, yes - Whether, therefore, mere claim for higher compensation on acquisition of land cannot be basis for determining interest accrued for taxing purpose; it is only when such a claim is adjudicated by Court and followed by undisputed enforceable decree that it can be basis for calculating interest 'accrued' within meaning of section 5(1)(b) - Held, yes - Whether, however, when such proceedings are pending, award made by Land Acquisition Officer could be basis for determining such accrued interest - Held, yes - Whether interest on compensation does not accrue from date of decree of court but it falls to be calculated and paid from date of dispossession till payment and hence it is payable in each successive year and is liable to be assessed in that year itself - Held, yes FACTS A Plot of land belonging to the assessee was acquired by the State Government. After issue of final notification on 1-9-1969, the possession of the land was taken on 11-2-1971. On 6-12-1971, the assessee was paid advance compensation of Rs. 1,48,500. On 10-7-1974, the Land Acquisition Officer passed an award determining the compensation payable to the assessee at Rs. 2,65,650 with interest at 5 per cent from 11-2-1971. The award was at the rate of Rs. 14,000 per acre as against Rs. 75,000 claimed by the assessee. The assessee being not satisfied with the award, got the matter referred to the Civil Court for enhanced compensation. The Civil Court disposed of the matter awarding compensation at Rs. 23,000 per acre. On 31-8-1974, the ITO completed the assessment for the assessment year 1972-73. He worked out the compensation receivable by the assessee at Rs. 12,56,250 at the rate of Rs. 75,00 per acre as per the claim. He deducted therefrom Rs. 1,48,500 received by the assessee and on the balance, he computed interest at 5 per cent, receivable by the assessee and brought to tax that amount as the assessee's income under section 5(1)(b), from other sources. The…

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