Interest on compensation under the Land Acquisition Act accrues from the date of dispossession, irrespective of the date of quantification or payment.

1. The counsel for the assessee having canvassed the correctness of the decision of this Court in Jairam v. Commissioner of Income Tax (1979 KLT.429): 117 ITR. 638) and George Paul Puthuran v Commissioner of Income Tax (126 ITR. 168 (Kerala) : ((1980) 17 CTR. (Kerala) 269)). the question of law arising from the decision of the Appellate Tribunal has been referred to a Full Bench by the Division Bench. before which the matter came up for hearing at the first instance. The question of law referred to this Court by the Income-tax Appellate Tribunal. Cochin Bench. under S.256(2) of the Income-tax. 1961. pursuant to the direction by this Court in the judgment dated 28th February. 1978 is OP. Nos. 4770 and 4772 of 1975. reads as follows:

"Whether. on the facts and in the circumstances of the case. as per the ratio of the Supreme Court decisions in 1964 SC. 53 ITR. 151 and 1967 SC 63 ITR. 458. the land acquisition interest of Rs. 80.253/-included by the Income-tax Officer under S.5(1)(b) of the Income-tax Act. 1961 in the total income for 1968-69 assessment. accrued di die in diem from the dates of taking possession of the lands during the years 1961 and 1962 upto 31-3-1968 inclusive and. therefore. only Rs. 12.626/- which accrued de die in diem during the concerned previous year of 366 calendar dates from 1-4-1967 to 31-3-1968 inclusive should have been included in the total income from 1968-69 assessment and the balance interest of Rs. 67.627/- should be similarly included on accrual basis under S.5 (1)(b) of the I.T. Act. 1961 in the income for the six assessments from 1962-63 to 1967-68 inclusive. as had already been done by the Income-tax Officer by his orders dated 6-6-1972 for the 1967-68 and 1969-70 assessments?"

2. The accounting years for the assessment years 1967-68 and 1968-69 are the years ended 31-3-1967 and 31-3-1968 respectively. Certain lands of the assessee were compulsorily acquired and after settlement of compensation. taken possession of somewhere in 1961 and 1962. Dissatisfied with the quantum of compensation the assessee got. the matter was referred to the civil Court which during the financial year ended 31-3-1968. relevant to assessment year 1968-69. passed decrees awarding higher compensation and also interest under S 30 of the Kerala Land Acquisition Act. 1961 (corresponding to. S.28 of the Land Acquisition Act. I of 1894 (Central Act). (hereinafter referred to as the Act). on such excess compensation and ending with the date of payment by Government of such excess compensation. The total interest on such excess compensation from the date of taking over possession to 31-3-1968 came to Rs.80.253/-. This excess compensation as well as interest on such excess compensation was actually paid by the Government to the assessee only much later. The assessment being on accrual basis. the.dates of payment are not material.

3. The case of the assessee is that such interest on such excess compensation accrues immediately after the date of dispossession and from year to year and that what the civil court did was only to quantify such interest and that it is not a case where the interest accrues only on the date on which the court decrees it. So. according to the assessee for assessment year 1967-68 the interest that accrued will be Rs. 12. 682/-and for the assessment year 1968-69 a sum of Rs. 12.6261-. The assessee offered these amounts for assessment in these two assessment years. But the Income-tax Officer took the view that interest on such excess compensation accrues for the first time only with the decree awarding excess compensation. that is. on the date of the decree and so the total interest from such excess compensation for the period commencing from the date of taking over possession to the date of the decree has to be assessed is the assessment year relevant to the date of the decree. In that view of the matter. the aggregate sum of Rs. 80.253/- was assessed for assessment year 1968-69. The assessee