Law:

Section:

Section 41(2) [omitted with effect from 1-4-1988] of the Income-tax Act, 1961 - Balancing charge - Assessment year 1981-82 - Assessee owned two buses which were acquired by Government of Karnataka in year 1976 - Compensation of Rs. 1,15,574 and Rs. 69,687 was awarded on 27-9-1980 - Initial amounts of Rs. 20,000 each were paid on 12-3-1976 and 7-3-1977 and balance was payable in eight equal instalments of Rs. 11,410 and Rs. 6,210, respectively commencing from 30-1-1978- Whether for assessment years 1981-82 only instalments due as on 30-1-1981 alone should be taken into consideration for computing profits under section 41(2) - Held, yes- Whether ITO not justified in computing profits under section 41(2) in respect of above two buses, considering entire compensation awarded, namely, Rs. 1,15,574 and Rs. 69,687, respectively - Held, no Words and phrases - Word 'due' occurring in section 41(2) of the Income-tax Act, 1961 Interpretation of statutes - Rule of reasonable construction FACTS The assessee, an individual, was owner of two buses bearing Nos. MYA 2334 and MYA 6169. These were acquired by the Government of Karnataka in the year 1976 under the provision of Karnataka Contract Carriages (Acquisition) Act, 1976. For bus No. MYA 6169, compensation of Rs. 1,15,574 was awarded. Out of "that, Rs. 20,000 was paid on 12-3-1976 and the balance was payable in eight annual instalments of Rs. 11,410.90 each payable on the 30th of January of each calendar year commencing from 30-1-1978. For bus No. MYA 2334 compensation of Rs. 69,687 was awarded on 27-9-1980 and out of that Rs. 20,000 was paid on 7-3-1977. The balance was payable in eight equal instalments of Rs. 6,210 each payable on 30th of January of each calendar year commencing from 30-1-1978. The ITO computed the profits for the assessment year 1981-82 under section 41(2), in respect of the above two buses, considering the entire compensation awarded namely Rs. 1,15,574 and Rs. 69,687 respectively. Aggrieved by the assessment, the assessee appealed and the Commissioner (Appeals) upheld the order of the ITO. The assessee preferred a second appeal to the Tribunal. The Tribunal held that only instalments due on…

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