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High Court Of Calcutta
SABYASACHI MUKHERJI, SUDHINDRA MOHAN GUHA
NAWN ESTATES PVT.LTD. - Appellant
Versus
COMMISSIONER OF INCOME-TAX - Respondent
Income-Taxreference 134 Of 1977
Decided On : 01/21/1981
The assessee, a private limited company, received a sum of Rs. 91,062 during the relevant assessment year from the First Land Acquisition Collector, Calcutta, being the compensation for the occupation of its land at Chowringhee Road. The assessee had purchased the land after the requisition. The assessee followed the mercantile system of accounting. The ITO noticed that the assessee-company had received the compensation money and included it in the income of the assessee. The AAC upheld the addition. The Tribunal found that the compensation received from the First Land Acquisition Collector, Calcutta, represented a payment of the balance of 20 percent of the decretal amount in terms of the award of the arbitrators in respect of occupation of the vacant land at No. 46a, Chowringhee Road, Calcutta, which was requisitioned by the Central Govt. under the Defence of India Rules in 1944. The Tribunal further found that the compensation was related to the period from 27th of May, 1947, to 4th of January, 1954. It was submitted before the Tribunal on behalf of the assessee that the amount of compensation was not liable to tax being a receipt of a casual nature and not a recurring income. The Tribunal rejected the assessee's contentions. On a reference: 1. Whether, on the facts and in the circumstances of the case, the sum of Rs. 91,052 received by the assessee during the relevant previous year as compensation under an award was income of the said year and assessable to income-tax in the relevant assessment year 1962-63, under the head 'other sources' ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the sum of Rs. 15,094 as profits and gains derived from business assessable to tax in the assessment year 1962-63 ? HELD, dismissing the reference: (i) A requisition is different from an acquisition. While in acquisition there is a passing away of a title and the deprivation by the act of acquisition, in requisition, there is a temporary moratorium of the user of the asset and the title remains with the person from whom the property is requisitioned. (ii) The nature of the payment of compensation depends upon the nature of the asset which is requisitioned or acquired. In the instant case, the land was held as a trading asset by the assessee, because the assessee being a dealer in lands and buildings was dealing in properties and selling and buying lands. (iii) The fact that it was paid compensation as a result of an award does not, in our opinion, militate against this being treated as a revenue receipt. (iv) The compensation received by the assessee was for the injury that was done by a temporary restriction on the possession and enjoyment by the owner of the land in question, which was a trading asset in the hands of the assessee, being the utility in land and buildings. If that is the position, then (a payment for) the injury done to the trading assets in the case of the utility and not a compensation for the deprivation of a right or source of asset, would be a revenue receipt.
Fact of the Case:
The assessee, a private limited company, received a sum of Rs. 91,062 during the relevant assessment year from the First Land Acquisition Collector, Calcutta, being the compensation for the occupation of its land at Chowringhee Road. The assessee had purchased the land after the requisition. The assessee followed the mercantile system of accounting. The ITO noticed that the assessee-company had received the compensation money and included it in the income of the assessee. The AAC upheld the addition. The Tribunal found that the compensation received from the First Land Acquisition Collector, Calcutta, represented a payment of the balance of 20 percent of the decretal amount in terms of the award of the arbitrators in respect of occupation of the vacant land at No. 46a, Chowringhee Road, Calcutta, which was requisitioned by the Central Govt. under the Defence of India Rules in 1944. The Tribunal further found that the compensation was related to the period from 27th of May, 1947, to 4th of January, 1954. It was submitted before the Tribunal on behalf of the assessee that the amount of compensation was not liable to tax being a receipt of a casual nature and not a recurring income. The Tribunal rejected the assessee's contentions.
Finding of the Court:
The compensation received by the assessee was for the injury that was done by a temporary restriction on the possession and enjoyment by the owner of the land in question, which was a trading asset in the hands of the assessee, being the utility in land and buildings. If that is the position, then (a payment for) the injury done to the trading assets in the case of the utility and not a compensation for the deprivation of a right or source of asset, would be a revenue receipt.
Issues: 1. Whether, on the facts and in the circumstances of the case, the sum of Rs. 91,052 received by the assessee during the relevant previous year as compensation under an award was income of the said year and assessable to income-tax in the relevant assessment year 1962-63, under the head 'other sources' ? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the sum of Rs. 15,094 as profits and gains derived from business assessable to tax in the assessment year 1962-63 ?
Ratio Decidendi: A requisition is different from an acquisition. While in acquisition there is a passing away of a title and the deprivation by the act of acquisition, in requisition, there is a temporary moratorium of the user of the asset and the title remains with the person from whom the property is requisitioned. The nature of the payment of compensation depends upon the nature of the asset which is requisitioned or acquired. In the instant case, the land was held as a trading asset by the assessee, because the assessee being a dealer in lands and buildings was dealing in properties and selling and buying lands. The fact that it was paid compensation as a result of an award does not, in our opinion, militate against this being treated as a revenue receipt. The compensation received by the assessee was for the injury that was done by a temporary restriction on the possession and enjoyment by the owner of the land in question, which was a trading asset in the hands of the assessee, being the utility in land and buildings. If that is the position, then (a payment for) the injury done to the trading assets in the case of the utility and not a compensation for the deprivation of a right or source of asset, would be a revenue receipt.
Final Decision: Question No. (1), under Section 256 (1) refer- (sic)answered in the affirmative and in favour of the Revenue. Question No. (1), under Section 256 (2) reference, is answered in the negative and in favour of the Revenue and question No. (2), under Section 256 (2) reference, is answered in the affirmative and in favour of the Revenue.
( 1 ) THE assessee is a private limited company and the relevant assessment year with which we are concerned is the assessment year 1962-63 for which the previous year ended on 31st of March, 1962. It maintained accounts on the mercantile system. About this there has been certain arguments and we shall deal with this argument later on, because the ITO's order appearing at page 30 of the paper book describes the method of accounting as mercantile. The Appellate Tribunal had held, in respect of the compensation money with which we are concerned in this reference, that the assessee was treating the said types of income as receipts from other sources and was following the cash system. Apart from income from house property and business, the assessee had also income from interest and dividend under the head "other sources".
( 2 ) IN the course of the relevant assessment proceedings the ITO noticed that the assessee-company had received a sum of Rs. 91,062 during the previous year from the First Land Acquisition Collector, Calcutta, being the compensation for the occupation of its land at Chowringhee Road. He found that the compensation was related to the period from 27th of May, 1947, to 4th of January, 1954. It was submitted before him, on behalf of the assessee, that the amount of compensation was not liable to tax being a receipt of a casual nature and not a recurring income. This was rejected by the ITO on the ground that the compensation was received by the assessee for the user of its land. Further, it was observed that though the amount was relatable to the period anterior to the relevant accounting year, the same was liable for inclusion in the total income of the instant year having been received during the relevant previous year. The sum of Rs. 91,062 was accordingly included in the income of the assessee. Dealing with this aspect the ITO observed, inter alia, as follows:"the assessee is an investment company deriving income mostly from house property. During the year under review the assessee-company received a sum of Rs. 91,162 from the First Land Acquisition Collector, Calcutta, being the compensation for the occupation of its land at Chowringhee Road. The compensation was for the relevant accounting year. It is submitted on behalf of the assessee-company that the said compensation is not liable to tax as it is a receipt of a casual and non-recurring nature. I am unable to agree with the submissions of the assessee. The receipt is definitely liable to tax as it is the compensation received by the assessee for the user of its land. "
( 3 ) IT is not necessary for us to deal with the other aspect of Rs. 15,094, as the question relating to this was not pressed before us.
( 4 ) BEING aggrieved by the order of the ITO, the assessee went up in appeal before the AAC. The AAC upheld both the additions, viz. , the addition of Rs. 91,062, with which we are concerned, as well as the addition of Rs. 15,094, with which we are not concerned, because of the stand taken by the learned advocate for the assessee before us. The AAC found that the compensation received from the First Land Acquisition Collector, Calcutta, represented a payment of the balance of 20 per cent. of the decretal amount in terms of the award of the arbitrators in respect of occupation of the vacant land at No. 46a, Chowringhee Road, Calcutta, which was requisitioned by the Central Govt. under the Defence of India Rules in 1944. There was also a building adjoining to the land but this was separately numbered. The building was numbered as 46b, Chowringhee Road, Calcutta. The land was also separately numbered and the municipal records show the number as 46a, Chowringhee Road. We are concerned with the compensation relating to the requisition of premises No. 46a, Chowringhee Road, Calcutta. It may be noted for the purpose of narration of the history that the immovable properties including the portions of the land were sold partly on 31st Dec
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