JUDGMENT :

1. At the instance of the Commissioner of Income Tax, Orissa, Bhubaneswar, the present reference has come to this court raising the following questions :

"1. Whether, on the facts and circumstances of the case, the Tribunal was justified in law in holding that the pre-award interest of Rs. 34,677 on arbitration award received by the assessee was not taxable under the Income Tax Act, 1961 ?

2. Whether, on the facts and circumstances of the case, and when the principal award money was admittedly treated as a revenue receipt, whether the Tribunal was justified in holding that the interest was a capital receipt and as such not taxable under the Income Tax Act, 1961 ?"

2. The facts of the case reveal that the assessee is a firm of contractors deriving income from execution of contract works. During the previous year relevant to the assessment year 1982-83, the assessee-firm executed certain regular contract works against which it received an amount of Rs. 4,04,184 after deducting cost of materials. Besides, the assessee-firm also received an arbitration award and interest thereon. The principal award money was Rs. 5,10,510 and pre-award interest on the principal was Rs. 34,677. T