Law:

Section:

Section 5 of the Income-tax Act, 1961 - Income - Accrual of - Assessment year 1976-77 - Whether, when Court awards interest on enhanced compensation for acquisition of property under Land Acquisition Act, such interest has to be taken as having accrued year after year from date of delivery of possession of land till date of order of court, and it cannot be assessed to tax in one lump sum in year in which order is passed - Held, yes FACTS The assessee was an individual deriving agricultural income as a protected tenant. The State Government acquired the lands which were in his possession as a protected tenant and an award was passed. On further litigation these was some change in quantum of compensation and interest was directed to be paid from the date of acquisition till the date of payment of compensation. The ITO made the assessment on the entire interest relying on the decision of this court in CIT v. Smt. Snkari Manickyamma[1976] 105 ITR 172 . On appeal, the Commissioner (Appeals) as well as the Tribunal confirmed the decision of the assessing authority. On reference: HELD The aforesaid decision of the High Court was reversed by the Supreme Court in Sankari Manickyamma v. CIT [1990] 181 ITR 400 (SC) holding that the interest on enhanced compensation awarded by the court on a reference under section 18 of the Land Acquisition Act or on further appeal in respect of the land acquired has to be taken to have accrued not on the date of the order of the court granting enhanced compensation but as having accrued year after year from the date of delivery of possession of the land till the date of such order, and such interest cannot be assessed to income-tax in one lump sum in the year in which the order is passed. In view of the decision of the Supreme Court, it was to be held in the instant case, that only the interest relating to the year 1975-76 was assessable as the income of the assessee for the assessment year 1976-77 and the entire interest payable to the owner of the land for the period 6-5-1961 to 31-3-1976, was not assessable in one lump sum. Note : The decision was in favour of assessee. CASE REVIEW Sankari Manickyamma v. CIT[1990] 181 ITR 400…

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