Interest on enhanced compensation accrues year after year from the date of delivery of possession of the lands till the date of the order, as established by the Supreme Court.

SYED SHAH MOHAMMED QUADRI, J.

( 1 ) IN this reference under s. 256 (1) of the IT Act, 1961, at the instance of the assessee, the following question is referred to this Court for opinion, viz. : "whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the entire sum of Rs. 2,49,883, being the interest receivable for the period 23/06/1958 to 31/03/1970, on account of enhanced compensation is assessable for the asst. yr. 1970-71 ?"

( 2 ) THE assessee and his sisters jointly owned 103 acres 11 guntas of land situate in Habshiguda and Nacharam villages in which the assessees had 2/5ths share. The said lands were acquired by the Government, possession of which was taken on 3/06/1958. Dissatisfied with the compensation awarded, the assessee sought a reference to the civil Court. The Chief Judge, city civil Court, Hyderabad, on reference, enhanced the compensation on 6/09/1969; he also awarded interest at the rate of 6 per cent per annum. The assessee claimed that the amount of interest was not taxable, and in the alternative he urged that it should be taxable in the year in which it had accrued. That plea was not accepted by the ITO who assessed to tax the interest, received on compensation amount, in the year in which it was awarded by the civil Court. Accordingly, the interest that accrued from 3/06/1958 to 6/09/1969, was assessed to tax in the asst. yr. 1970-71. The AAC on appeal held that as the enhancement of compensation was on 6/09/1969, the interest accrued from 7/09/1969 to 31/03/1970, was assessable in the said asst. yr. 1970-71. On further appeal to the Tribunal, the Tribunal held that the entire amount of interest from 3/06/1958 to 31/03/1970, was assessable in the asst. yr. 1970-71. The Tribunal drew support for that view from CIT vs. Smt. Sankari Manickyamma (1976) 105 ITR 172 (AP) : TC 39r. 669. On the above facts, at the instance of the assessee, the above question was referred to this Court for its opinion.

( 3 ) IN Rama Bai vs. CIT (1990) 84 CTR (SC) 164 : (1990) 181 ITR 400 (SC) : TC 39r. 668, the Supreme Court laid down the following principle, viz. :". . . we are of the opinion that the appeals before us (Civil Appeal No. 810 of 1974 and Civil Appeal No. 3027 of 1988), have to be allowed and the references made under s. 257 (Tax Ref. Cases Nos. 3 of 1976 and 1 to 3 of 1978), have to be answered by saying that the question of accrual of interest will have to be determined in accordance with the above decision of this Court. The effect of the decision, we may clarify, is that the interest cannot be taken to have accrued on the date of the order of the Court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order. "

( 4 ) IN view of the principle laid down by the Supreme Court in the above cited case, we need not discuss the issue at length as the point is covered by that judgment. Following that judgment the question has to be answered in the negative, i. e. , in favour of the assessee and against the Revenue.

( 5 ) THE reference is accordingly answered No costs.

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