Madras High Court
Tiruchirapalli Co-Operative ... vs Commissioner Of Income-Tax on 2 April, 1998
Equivalent citations: [2001]247ITR830(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT
R. Jayasimha Babu, j.
1. The question referred to us at the instance of the assessee arising out of assessment of its income for the assessment year 1980-81 is as to whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the sum of Rs. 1,73,343 constituted income from other sources in the hands of the assessee ?
2. A rice mill of the assessee was taken over by the Government on December 7, 1972, but the payment therefor was made only in the year 1978. That payment so made was towards the value of what had been taken possession of by the Government and was in the sum of Rs. 3,22,014. Further, a sum of Rs. 1,73,383 was paid as interest for the period between the date possession was delivered and the date of the Government order, which was on August 5, 1978. The Tribunal has held that the amount of interest paid to the assessee was in the nature of a revenue receipt and was taxable accordingly.
3. Learned counsel for the assessee contended that interest having been paid for the period of delay in paying the price, must be regarded as part of the capital receipt as that interest was directly related to a capital receipt and, therefore, to be regarded as incidental to the same.
4. The delay in making the payment for the assets that were taken over resulted in interest being paid on the unpaid price. Interest so paid cannot be regarded as a sum which is also to be regarded as receipt which is capital in nature, as the reason for the payment of interest was only the fact that unpaid price had been retained by the transferee and interest paid was on the sum so retained. Had the unpaid price been paid over to the assessee in the year in which possession was taken, and had the assessee invested the same in a bank, or elsewhere and earned interest thereon such interest would undoubtedly be a revenue receipt. The fact that the money remained with the transferee and was not invested in a bank or elsewhere does not make any difference to the character of the interest paid being a receipt of revenue character.
5. The Supreme Court in the case of Shamlal Narula v. CIT , has held that the statutory interest paid under Section 34 of the Land Acquisition Act, 1894, on the amount of compensation awarded for the period from the date the collector had taken possession of land compulsorily acquired is interest paid for the delayed payment of the compensation and is, therefore, a revenue receipt liable to tax under the Income-tax Act. That principle is equally applicable to the case of the asses-see herein. Interest paid on the delayed payment of compensation or unpaid price is a revenue receipt and is taxable accordingly.
6. The question referred to us is therefore answered in the affirmative, in favour of the Revenue and against the assessee. Parties to bear their respective costs.