Law:

Section:

Section 5 of he Income-tax Act, 1961 - Income - Accrual of - Assessment year 1962-63 - A piece of land owned by assessee was acquired under provision of Land Acquisition Act - Total amount received by assessee consisted of compensation amount and interest thereon from date of delivery of possession till date of payment - Whether such interest became income in year in which it became recoverable and attribution of whole of that interest to year of receipt was manifestly impossible - Held, yes - Whether, therefore, Tribunal was right in holding that only proportionate interest referable to year of receipt was assessable in that year - Held, yes FACTS By a notification under section 4 of the Land Acquisition Act, a piece of land owned by the assessee was proposed to be acquired, and subsequently possession was taken. The Land Acquisition Officer made an award by which he determined the compensation payable to the assessee. the sum was paid to the assessee ho wever, there was a reference to the District Judge under section 18 of the Land Acquisition Act, and, in that reference, the District Judge enhanced the compensation amount. On further appeal, High Court further enhanced the compensation amount. There was again an appeal to the Supreme Court by both the parties, and those appeals were dismissed by the Supreme Court. Thus a certain sum became payable to the assessee under the decree eventually made by the Supreme Court. That sum consisted of the compensation amount and the interest, payable from the date on which delivery of possession was taken till the date of payment. In the return, which he produced in respect of the assessment year 1962-63, the assessee disclosed the receipt of the sum but claimed that the whole of that amount was exempt from tax on the ground that it was a capital accretion. The ITO upheld the contention that no tax was payable in respect of the compensation amounting but negatived the plea that the interest which was received by the assessee was a capital receipt. So, the sum representing the interest paid to the assessee by the Land Acquisition Officer, was taxed as a revenue receipt. The appeal preferred by the assessee to the AAC was…

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