The main legal point established in the judgment is the distinction between interest and damages for wrongful detention of money, based on precedents and legal principles.

Alfred Henry Lionel Leach, C.J.

1. This is a reference by the Income Tax Appellate Tribunal, Calcutta Bench, under Section 66(1) of the Income Tax Act, and has been made at the instance of the Commissioner of Income Tax, Madras. The assessees father, who died in 1921, was a partner in a money-lending firm carried on in the Federated Malay States. Notwithstanding the death of the assessees father, the business of the firm was carried on until 1928 when a Panchayat met to decide what was payable to the assessee and his brother on account of their fathers share, and the amount was fixed at $155,900. The assessee and his brother were minors, and so was Meyyappa. Ten years later, another Panchayat was formed for the purpose of deciding what interest should be paid on the $155,900 and the panchayatdars fixed the amount at $27,000. A sum of $182,900 representing principal and interest was paid to the assessee and his brother by way of a hundi on the 2nd April, 1938, the hundi being cashed on the 9th March, 1938. The assessees.share of the interest came to Rs. 21,153. The Income Tax Officer included this sum as income of the assessee for the year 1939-40 and the assessee objected. He contended that the Rs. 21,153 represented damages paid to him for the wrongful detention of the principal sum to which he was entitled under the award of the Panchayat. This contention was accepted by the Income Tax Appellate Tribunal, but as the decision involved a question of law, it has referred to this Court for decision the following question:

Whether, having regard to the circumstances of the case, the conclusion of the Bench, namely,, that the amount of Rs. 21,153 received by the appellant was in the nature of damages for wrongful detention of the money in the hands of the partner of the appellants father and therefore, not assessable, is correct in law?

2. In accepting the assessees contention that this sum represented damages for the wrongful detention of the principal, the Tribunal relied on two, cases, Commissioner of Income Tax, Bihar and Orissa v. Rani Prayagkumari Debi I.L.R.(1939) Pat. 186 and Beharilal Bhargava v. Commissioner of Income Tax I.L.R. (1941) All. 54. In our judgment these cases are not in point, and in any event the correctness of the decision in the second case is open to doubt. The first case had reference to a sum which had been awarded to the assessee in a civil suit as damages for the wrongful detention of her movable property. The Patna High Court held that as the amount was decreed as damages, it was not a sours of income within the contemplation of the Act. The second case was decided by the Allahabad High Court. There an amount awarded as compensation in land acquisition proceedings carried interest, and the question was whether the interest-represented assessable income. The Allahabad High Court held that it did not, but with great respect we find ourselves unable to follow the reasoning. Certainly we are not prepared to accept the judgment as a guide to the decision in the present case.

3. There are two cases which we consider have beating here, namely, Schulze V.S.W. Bensted (1915) 7 T.C. 30 and Commissioners of Inland Revenue v. Bernato (1936) 20 T.C. 455. In Schulze v. S.W. Bensted (1915) 7 T.C. 30 the appellant, who Was the trustee of an estate, sued the representatives of a deceased trustee for damages to the estate caused by Ms negligence, and a decree was passed directing the defendants to pay a sum of money with interest thereon at the rate of 3 1/2 per cent, per annum from the date on which the sum should have belonged to the estate. The Surveyor of Taxes claimed that the interest represented income, but this claim was resisted. The Court of Session held that the Surveyor of Taxes was right. In Commissioners of Inland Revenue v. Bernato (1936) 20 T.C. 455 the decision in Schulze v. S.W. Bensted (1915) 7 T. C. 30 was approved by the Court of Appeal in England. In that case, the respondent inherited certa