Income Tax Appellate Tribunal - Pune
Assistant Commissioner Of Income-Tax vs Smt. S.M. Natu on 28 January, 1997
Equivalent citations: [1997]62ITD55(PUNE)
ORDER
Shri Chander Singh, Accountant Member
1. This appeal by the revenue for the assessment year 1987-88 has been directed against the order of the CIT(A).
2. The assessee was owning a piece of land admeasuring 2601 sq.mt. bearing survey No. 1917, 1918 and part of 1919. This piece of land was reserved by the Government for municipal garden. The assessee was served with a purchase notice dated 19-1-1974 under section 49 of the M.R.T.P. Act, 1966. The Government confirmed the notice and directed the Pune Municipal Corporation to acquire the said land. In pursuance to the direction, the Special Land Acquisition Officer issued notice which was published on 14-2-1976. After the due process of law, the Special Land Acquisition Officer, by his Award dated 23-9-1986 acquired the land and determined the compensation as under :
Compensation Rs. 8,98,796
Interest Rs. 6,92,073
Solatium Rs. 2,69,224
3. The assessee, after receipt of the compensation, consideration the entire amount, including solatium and interest, as compensatory price and claimed the entire amount as exempt as the total receipt was invested by the assessee in Unit Trust of India. The Assessing Officer accepted the claim of the assessee with respect of compensation and solatium. However, as regards the interest, the Assessing Officer was of the view that the Special Land Acquisition Officer in his order dated 23-9-1986 determined the cost of the land at Rs. 310 per sq.mt. and also awarded interest at 12% on the land from 14-2-1976. The said interest, in the opinion of the Assessing Officer, was awarded on the capital of the assessee and hence, did not form part of the compensation. The interest of Rs. 6,92,073, therefore, was held to be assessable by the Assessing Officer as income from other sources. He accordingly included the said amount as the income of the assessee for the year under consideration. The assessee, however, succeeded before the CIT(A) who held that the interest of Rs. 6,92,073 was part of the compensation and in fact was determined as such by the Special Land Acquisition Officer. The CIT(A) examined the provisions of section 23(1A) of the Land Acquisition Act, 1894 and was of the view that the compensation, interest and the solatium was part of the land price and hence was not liable to be assessed as income from other sources. He, therefore, deleted the addition.
4. Aggrieved, the revenue has come up in appeal before us. The learned departmental representative, Shri Sanjay Prasad, assailed the order of the CIT(A) on the ground that the facts of the case have not been properly appreciated by him. The learned departmental representative has taken us through the award dated 23-9-1986 along with the order dated 15-10-1986. He pointed out that on page 6 of the said award, the Special Land Acquisition Officer had fixed the land value at Rs. 310 per sq.mt. In addition to the value of the land, the Special Land Acquisition Officer has also specifically awarded interest at 12% on the land value from 14-2-1976 onwards. The said Officer had also awarded 30% solatium on the land value. Thus, including the interest and the solatium, the total amount payable to the assessee was determined at Rs. 20,06,307. From the said award, it is clear that the interest has been separately granted by the Special Land Acquisition Officer. Thus, the said interest did not form part of cost of the land and was in fact not the compensation received.
5. The learned departmental representative has also taken us through the Statement of Objects and Reasons of the Amending Act, 1984. In particular, he has drawn our attention to Item X of the said Statement of Objects and Reasons, which provides :
"As a large number of cases for the acquisition of land are pending before various authorities for a very long time payment of the market value of the land obtaining on the date of the preliminary notification under section 4 of the Act in respect of such land is likely to be unrealistic and inequitous, it is proposed to provide for payment of simple interest at 10 per centum per annum on the amount of compensation for the period commencing from the date of issue of the notification under section 4 of the Act to the date of tender of payment or deposit of compensation awarded by the Collector in respect of all pending proceedings on the 30th April 1982, the date when the earlier bill for the amendment of the Act was introduced in the House of the People."
He, thus, pointed out that the Statement of Objects and Reasons clearly provide the grant of interest on the acquisition of the land. In the case of the assessee, the interest was granted as per the said Statement of Objects and Reasons and, therefore, did not from part of the compensation.
6. The learned departmental representative has also drawn our attention to the decision of the Supreme Court in the case of Dr. Shamlal Narula v. CIT [1964] 53 ITR 151. In the said decision, he pointed out, it was held that under the scheme of the Land Acquisition Act, 1894, land acquired compulsorily vests absolutely in the Government after the Collector has taken possession of the land, whether before or after making his award determining the compensation. A statutory liability has been imposed upon the Collector to pay interest on the compensation awarded from the time of his taking possession until it is paid or deposited. This amount of interest is not compensation for the land acquired or for depriving the claimant of his right to possession but is paid to the claimant for the use of his money by the State. 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 has taken possession of land compulsorily acquired is interest paid for the delayed payment of the compensation and, therefore, is a revenue receipt liable to tax under the Income-tax Act. The learned departmental representative, therefore, contended that the case of the department is fully supported by the decision of the Supreme Court and, therefore, the CIT(A) was in error in holding that the interest received was part of the compensation and as the assessee has invested the entire amount in the Unit Trust of India was not liable to pay any tax under the head capital gains. The interest income was income from other sources, as it was not connected with and did not form part of the compensation awarded by the Special Land Acquisition Officer. In view of the special facts, interest was revenue receipt and was liable to be assessed as income from other sources. The CIT(A) was, therefore, in error in holding that the interest formed part of the compensation for the land price as a result of which interest was not liable to be assessed as income from other sources. The learned departmental representative, therefore, pleaded that the order of the CIT(A) is not in accordance with law and should, therefore, be reversed.
7. The learned counsel, Shri S.N. Inamdar, on the other hand, supported the decision of the CIT(A). He has taken us through the amended provisions of section 23(1A) and pointed out that the word 'interest' has not been mentioned in the said section. It is true that the word 'interest' has not been mentioned in the said section. It is true that the word 'interest' was mentioned in the Statement of Objects and Reasons of the amending provisions, but while enacting the provisions, the word 'interest' was perhaps consciously omitted by the Legislature. If there is no provision to award interest under section 23(1A), the price of land acquired fixed under the said section should be considered as the compensation and no part of the said compensation should be taken as involving any element of interest. He further argued that the possession of the land was taken on 15-10-1986 and the award was passed on 23-9-1986. Thus, according to section 16 of the Land Acquisition Act, the ownership of the land vested absolutely in favour of the Government only on 15-10-1986. He further argued that if it is held that the amount of Rs. 6,92,073 was in the nature of the interest on the amount of compensation, it would mean that the assessee was simultaneously holding the ownership of land and was also entitled to received compensation in respect of the acquired land. This conclusion, in his view, would lead to fallacy and hence, it is incorrect to say that the amount of Rs. 6,92,073 was not connected with the compensation. Since the assessee was the owner of the land till 15-10-1986, the Government cannot be said to have become debtor for the payment of compensation unless the land is vested in the said Government. In such a situation, it would be ironical to say that the owner has received interest on the principal amount of which he was not the owner or creditor during the period for which the so-called interest is calculated.
8. The learned counsel has also drawn our attention to the decision of the Bombay High Court in the case of Union of India v. Smt. Maria Olivia Carvalho, placed at pages 12 to 14 of the paper book. He pointed out that the amended provisions of section 23(1A) were examined by the Bombay High Court and on the similar facts the decision was rendered in favour of the assessee. In fact, the said decision of the Bombay High Court fully supports the case of the assessee and, therefore, the learned counsel supported the decision of the CIT(A).
9. We have heard the rival submissions. With a view to appreciate the controversy, we consider it essential to extract the provisions of section 23 of the Land Acquisition Act, 1894 :
"23 (1) In determining the amount of compensation to be awarded for land acquired under this Act, the Court shall take into consideration...
first, the market value of the land at the date of the publication of the notification under section 4, sub-section (1);
secondly, the damage sustained by the persons interested, by reason of the taking of any standing crops or trees which may be on the land at the time of the Collector's taking possession thereof;
thirdly, the damage (if any) sustained by the persons interested, at the time of the Collector's taking possession of the land, by reason of severing such land from his other land;
fourthly, the damage (if any) sustained by the person interested, at the time of the Collector's taking possession of the land, by reason of the acquisition injuriously affecting his other property, movable or immovable, in any other manner, or his earning;
fifthly, if, in consequence of the acquisition of the land by the Collector the person interested is compelled to change his residence or place of business, the reasonable expenses (if any) incidental to such change; and sixthly, the damage (if any) bona fide resulting from diminution of the profits of the land between the time of the publication of the declaration under section 6 and the time of the Collector's taking possession of the land.
(1A) In addition to the market value of the land, as above provided, the Court shall in every case award an amount calculated at the rate of twelve per centum per annum on such market value for the period commencing on and from the date of the publication of the notification under section 4, sub-section (1), in respect of such land to the date of the award of the Collector or the date of taking possession of the land, whichever is earlier;
Explanation : In computing the period referred to in this sub-section any period or periods during which the proceedings for the acquisition of the land were held up on account of any stay or injunction by the order of any Court shall be excluded.
(2) In addition to the market value of the land as above provided the Court shall in every case award a sum of thirty per centum on such market value, in consideration of the compulsory nature of the acquisition."
In determining the amount of compensation, certain factors are to be taken into account. In addition to the market value of the land, it is also provided that the Court shall in every case award an amount calculated at the rate of 12 per centum per annum on such market value. It is pertinent to note that in sub-section (1A), the Legislature has used the word 'amount' and not the word 'interest '. If an interest is received on the acquisition of land, that interest has to be awarded under the provisions of section 34 of the Act and not under sub-section (1A) of section 23 of the Land Acquisition Act, 1894. The plain reading of section 23, as a whole, goes to show that the said section provides only with the determination of the compensation on the compulsory acquisition of the land. While determining the market value of the land, the Court have to take certain factors into account mentioned in the said section. In addition, the Court also shall award an amount at the rate of 12 per centum per annum and under sub-section (2) of the said section a solatium of 30% will also be allowed. Thus, the market price of the land, amount of 12% and the amount of solatium at 30% would be the determination of the compensation on the acquisition of land. As far as interest is concerned, a person can become entitled to interest only when he is entitled to the principal amount. As per section 16 of the Land Acquisition Act, the ownership of the property under acquisition passes only on taking possession under that section. In the case of the assessee the possession was taken on 15-10-1986 and, therefore, the assessee continued to be the owner of the said land till that date. When the assessee was the owner of the land, the Government could not become a debtor for payment of compensation till the land was not vested in the Government. In other words, it would be ironical to say that the owner has received interest on the principle amount of which he was in fact not the owner or creditor during the period for which the interest has been calculated.
10. Regarding the Supreme Court judgment in the case of Dr. Shamlal Narula (supra) relied upon by the learned departmental representative, we find that the said decision was rendered when sub-section (1A) of section 23 was not on statute book. In the said decision the Hon'ble Apex Court has examined the scope of section 23 of the Land Acquisition Act, 1894. On page 154 of the decision, the Hon'ble Supreme Court had observed that :
"To appreciate the scope of the section, it is necessary to notice briefly the scope of an award and the manner in which possession is taken under the Act. After the statutory notifications are issued and the requisite notice is given to the persons interested in the land so acquired, the Collector, after holding the necessary enquiry, makes an award, inter alia, determining the amount of compensation payable for the land so acquired. Section 15 of the Act says that in determining the amount of compensation the Collector shall be guided by the provisions contained in sections 23 and 24. Section 23 provides for the matters to be considered in determining compensation; section 24 describes the matters to be neglected in determining the compensation. A perusal of the provisions of section 23 shows that interest is not an item included in the compensation for any of the matters mentioned therein; not is it mentioned as a consideration for the acquisition of the land. Under clause (2) of section 23 of the Legislature in express terms states that in addition to the market value of the land the court shall in every case award a sum of 15 per cent of such market value in consideration of the compulsory nature of the acquisition. If interest on the amount of compensation determined under section 23 is considered to be a part of the compensation or given in consideration of the compulsory nature of the acquisition, the Legislature would have provided for it in section 23 itself. But instead, payment of interest is provided for separately under section 34 in Part V of the Act under the heading 'payment'. It is so done, because interest pertains to the domain of payment after the compensation has been ascertained. It is a consideration paid either for the use of the money or for forbearance from demanding it after it has fallen due. Therefore, the Act itself makes a clear distinction between the compensation payable for the land acquired and the interest payable on the compensation awarded."
As already mentioned above, the said decision of the Supreme Court pertains to the period when the provisions of sub-section (1A) of section 23 of the Land Acquisition Act, 1894 were not on the statute book. Perhaps, the provisions of section (1A) have been enacted so as to carry out the wish expressed by the Supreme Court in the said decision.
The provisions of sub-section (1A) have been brought on the statute book with effect from 1984. As per the said sub-section, the amount calculated at the rate of 12 per centum per annum has to be awarded on the compulsory acquisition of the land. We may also mention that the compensation on compulsory acquisition of the land has to be determined under section 23 of the Act. Therefore, whether it is a market price or the amount at the rate of 12% or solatium, the total sum determined under the said section has, therefore, to be taken as the compensation only. There is a separate provision for the charge of interest and that provision contains in section 34 of the Act. Any interest awarded under section 34 of the Land Acquisition Act can perhaps be taken as a revenue receipt liable to be assessed as income from other sources, but an amount awarded under sub-section (1A) of section 23 has to be considered as part and parcel of the land price and cannot be taken as interest so as to bring it to tax as income from other sources.
11. We have also carefully considered the Statement of Objects and Reasons of the amending Act and in particular para (x) of the said Statement of Objects and Reasons. In para (x), reference is made regarding the quantification of the award. As already mentioned above, para (x) states that due to long pendency of acquisition matters, the market value obtaining on the date of notification is likely to be unrealistic and inequitous. The said para (x) states that to remedy this injustice, it was proposed to provide for payment of simple interest at 10% per annum on the amount of compensation for the period commencing from the date of issue of notification and the date of payment of awarded compensation. To our mind, it appears that it is this portion which has ultimately terminated into introduction of sub-section (1A) in section 23 of Land Acquisition Act. In the absence of the Bill, it is therefore not clear as to what was the wording proposed in the Bill. However, from the text of the sub-section, as ultimately introduced, it appears that the Legislature has appreciated that in order to compensate for increase in market value what is required to be paid is differential compensation for removing hardship caused by fixing market value on the prior date of notification. Therefore, the word 'amount' appears to have been used deliberately to indicate the payment of compensation and not the word 'interest' as mentioned in the Objects. Probably, the Legislature was aware that it would be against common-sense to provide for interest for a period during which the concerned person was not the owner of the market value as per sub-section (1) which can be taken as principal for computation of interest.
12. In our view, the provisions of sub-section (1A) of section 23 are very clear and there is no ambiguity, in the said provisions. It is well-settled that in a taxing Act one has to look merely at what is clearly stated. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. There is nothing to be read in, nothing to be implied. One can only look fairly at the language used. In other words, no words need be read into or subtracted from the language used by the Legislature. In other words, an assessee is not to be taxed unless the charging provisions clearly imposes the obligation. Equally important is the rule of construction that if the words of a statute are precise and unambiguous, they must be accepted as declaring the express intentions of the Legislature. The provisions of section 23 and sub-section (1A) of the said section are clear in our view and there is no provisions of awarding any interest liable to be taxed as income from other sources.
13. We have also carefully gone through the Award. On page 7 of the said Award, the compensation of Rs. 20,06,307 has been mentioned. It does not say anything regarding the element of interest. In our view, therefore, the entire amount is awarded by way of compensation only for acquisition of the land. It is, therefore, not necessary to go into the working of compensation contained on page 6 of the said Award. It may also be mentioned that in the Award, in para 9, the details of valuation has been mentioned. There may be several factors which an authority may consider in arriving at the valuation of the land acquired. These facts are only considered to ensure that due weightage is given to different facts and circumstances in arriving at a fair amount of compensation. All such portions giving the basis for including each component of valuation is for justifying the rationale of the aggregate amount of compensation. All such components ultimately merge into one figure which is finally called as compensation for the value of the land acquired. The compensation, therefore, determined under section 23 of the Land Acquisition Act, 1894 would always include :
(i) market value of the land,
(ii) the amount at the rate of 12% per annum, and
(iii) solatium.
All these three components would, in our view, may be compensation without including any element of interest. In our view, therefore, the amount payable at 12% per annum under section 23(1A) cannot be equated with the interest payable under section 28 on the additional compensation or section 34 on delayed payment of the awarded amount after taking possession of the land. Section 28 of the Land Acquisition Act, 1894 relates to interest to be granted by the court on additional compensation granted by such court over and above the amount of compensation awarded by the Collector. Section 34 relates to the delayed payment of compensation. In the assessee's case, the Award was passed on 23-9-1985 and the possession was handed over on 15-10-1986. It can thus be seen that the amount of Rs. 6,92,073 is not the interest granted under section 34 in respect of delayed payment of compensation. This amount is neither received under section 28 nor under section 34 of the Land Acquisition Act. Thus, this is not the amount of interest received on the amount of compensation but it forms part of the amount of compensation as such.
14. The issue was also examined by the Bombay High Court in the case of Smt. Maria Olivia Carvalho. The jurisdictional High Court in para 9 of the order have laid down :
"We already said that sub-section (1A) of the amended section 23 of the Principal Act provides that the Court shall in very case award an amount calculated at the rate of twelve per centum per annum on such market value for the period commencing on and from the date of publication of the notification under section 4(1) in respect of such land to the date of Award of the Collector or the date of taking possession of the land, whichever is earlier. The learned District Judge has calculated the market value of the acquired land belonging to the respondents at the rate of Rs. 5 per sq. mt. Therefore, by virtue of the aforesaid sub-section (1A), the respondents are entitled to a further compensation calculated at the rate of twelve per centum per annum on the aforesaid compensation awarded by the learned District Judge from the date of the publication of the Notification under section 4(1) to the date on which possession of the land was taken or to the date of the award of the Collector, whichever is earlier. We were told and this fact is not disputed that the acquired land had been earlier requisitioned by the Government and, since that time, was in possession of the Military authorities. The learned Government counsel submitted that in view of this circumstance and since a compensation had been paid to the respondents on account of the requisition, no further compensation as provided in sub-section (1A) is to be awarded to the respondents. We are unable to accept this submission of the learned counsel. In fact, the possession which is spoken of in sub-section (1A) is the possession that follows the acquisition of the land. It is obvious that in view of the particular factual situation, fresh possession of the land was not taken by the Government and, therefore, we have to consider the date on which the Collector made his Award for the purposes of granting to the respondents the additional compensation they are entitled to under sub-section (1A) of section 23 of the Act. Thus, we hold that the respondents should be paid an additional compensation calculated at the rate of twelve per centum per annum on the compensation awarded by the learned District Judge from the date of the notification under section 4(1) to the date on which the Collector made his award..."
The jurisdiction High Court in the above decision has considered the amount of twelve per centum per annum as additional compensation. There is no mention of the word 'interest' by the jurisdictional High Court. Thus, in out view, the compensation on acquisition of the land determined under section 23, be it land price or amount at 12% or solatium, would constitute the compensation for acquisition and would not involve any element of interest therein. The CIT(A) was, therefore, justified in deleting the amount of Rs. 6,92,073. We accordingly uphold his order.
15. In the result, the is dismissed.