Judgment

GROVER, J. : These appeals by special leave from a common judgment of the Madhya Pradesh High Court arise out of reference made by the Income tax Appellate Tribunal relating to the assessment years 1956-57, 1957-58, 1958-59 and 1961-62.

2. The appellant who is the assessee was a jagirdar of the erstwhile Gwalior State. By the Madhya Bharat Abolition of Jagir Act, 1951, hereinafter called the "Act", the jagirs were abolished with effect from December 4, 1952. Under section 8 of the Act compensation was payable to him in accordance with the principles laid down in Schedule I. Under sub-s. (2) of that section the compensation payable became due as from the date of the resumption of the jagir. Simple interest was payable at the rate of 21/2 per cent per annum from that date upto the date of payment on the amount of compensation which was payable within a period of ten years in annual instalments. The assessee maintained that the amount of interest formed part of the compensation and constituted a capital receipt. The Income-tax Officer held against the assessee and included the interest in his income. The appellate Assistant Commissioner took the same view. The appellate tribunal however, held that the amount of interest was a capital receipt and could not be included in the assessee s income. The following question was referred to the High Court by the tribunal :

"Whether on the facts and in the circumstances of the case the interest that was received on the amount of compensation paid for resumption of the assessee s jagir was a capital receipt ?"

The High Court answered the question in the negative and against the assessee.

3. The relevant provisions of the Act may be noticed. Section 3 (1) provided that the Government shall, by notification, appoint a date for the resumption of all Jagir lands in the State. Section 4 gave the consequences of the resumption of Jagir land. Chapter III headed "compensation" commenced with S. 8 which reads:

"Duty to pay compensation - Subject to other provisions of this Act the Government shall be liable to pay to every Jagirdar whose Jagir-land has been resumed under Section 3, such compensation as shall be determined in accordance with the principles laid down in Schedule I.

(2) Compensation payable under this section shall be due as from the date of resumption and shall carry simple interest at the rate of 21/2 per cent per annum from that date up to the date of payment:

Provided that no interest shall be payable on any amount of compensation which remains unpaid for any default of the Jagirdar, his Agent or his representative-in-interest."

Under S. 12 every jagirdar whose jagir land had been resumed under S. 3 had to file in the prescribed form a statement of claim for compensation before the Jagir Commissioner within two months from the date of resumption. On receipt of a statement of claim the Jagir Commissioner was to determine the amount of compensation payable to the Jagirdar under S. 8 as also the amounts recoverable from him under S. 4 (1) (e) and other matters mentioned in the section 13. Under S. 14 the amount recoverable from a Jagirdar was to be deducted from the compensation payable to him under section 8. Section 15 provided for payment of compensation money. According to sub-section (1) after the amount of compensation payable to a Jagirdar under S. 8 had been determined and the amount deducted from it under S. 14 the balance was to be payable in maximum ten annual instalments. Under sub-section (4) payment of compensation money to a Jagirdar etc. was to be a full discharge of the Government from the liability to pay compensation in lieu of resumption of the jagir lands.

4. The argument on behalf of the assessee was based principally on the marginal heading of Section 8 which is "duty to pay compensation." It has been contended that the interest payable formed part of the compensation money. It has further been pointed out that Section 13, 14 and 15 of the Act did not make any dis