LexBIKRAM SINGH AND ORS. versus THE LAND ACQUISITION COLLECTOR AND ORS.
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A BIKRAM SINGH AND ORS. v. THE LAND ACQUISITION COLLECTOR AND ORS. SEPTEMBER 12, 1996 B [K. RAMASWAMY, FAIZAN UDDIN AND G.B. PATTANAIK, JJ.] Income Tax Act, 1961 : Sections 4,5, 194-A-lnterest received as income on the delayed pay- C ment of compensation detennined under S.28 or 31 of Land Acquisition Act-Held : It is revenue receipt exigible to tax under S.4-S.194A not applicable as it relates to deduction of tax at source. D E F G Land Acquisition Act, 1894 : Sections 28,31-Jnterest received as income on the delayed payment of compensation-ls a revenue receipt exigible to tax under S.4 of the Income Tax Act, 1961. Dr. Sham/al Nanlla v. Commissioner of Income tax, Jamnm, 53 ITR 151; TMK Gvoindaraju Chetty v. Commissioner of Income-tax, Madras, 66 ITR 465; Rama Rai & Ors. v. CIT Andhra Pradesh, 181 ITR 400 and K.S. Krishna Rao v. CIT, A.P., 181 ITR 408, relied on. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12497- 12500 of 1996. From the Judgment and Order dated 13.12.91 of the Punjab & Haryana High Court in C.W.P. Nos. 10558, 10556, 11495 and 10557of1991. K. G. Bhagat, S.S. Dahiya, Kamal Baid and G.G. Singh for the Appellants. R.R. Misra, Ms. Lakshmi Iyengar and Anil Srivastava for the Respondents. The following Order of the Court was delivered : H Leave granted. 214 - BIKRAM SINGH v. lAND ACQN. COLLECTOR 215 We have heard learned counsel on both sides. A This appeal by special leave arises from the judgment of the High court of Punjab & Haryana made in CWP Nos. 1558/91 and batch on December 13, 1991. The admitted facts are that the appellants had received notice on July 31, 1991 for payment of income-tax on the delayed interest B amount recovered under the Land Acquisition Act, 1894 (for short, the "LA Act"). calling that notice in question, they filed writ petitions. The High Court relying upon decisions of this Court dismissed the petitions with a finding as under : "This now leads us to the consideration of the question whether interest paid on the amount of compensation for compulsory acquisition of land is "income" and, therefore, taxable under. the Act. Matters which have to be considered for awarding compen- sation for compufaory acquisition of land are enumerated in section c 23 of the Land Acquisition Act. While sub- section (2) of that D section provides for payment of certain solatium for acquisition of compulsory nature, interest is not included as an item of compen- sation. Instead, interest is payable by force of section 34 of the Act, if compensation is not paid or depositeq on or before taking possession of the land. By force of section 28 also, the court, on a reference if it enhances the co~pen~ation offered by the Collector E is entitled to award interest on the amount of such enhanced compensation. Section 28 a:lso provides that the court, on a refer- ence, shall award interest on the amount of enhanced compensa- tion. It will thus appear from the text of section 34 of the Land Acquisition Act that interest is not payable as compensation but F is paid if the compensation is not paid before taking possession of the land. Interest is thus payable because of the deprivation of the possession of that land before compensation for compulsory ac- quisition of that land is paid. This position is now well- settled. In Dr. Sham/al Nam/a v. CIT, (1964) 53 ITR 151 SC ; AIR (1964) SC 1878, the observation is that interest has to be paid on the amount G awarded from the time the Collector takes possession until the amount is paid or deposited. Interest is not an item of compensa- tion nor is it consideration for acquisition of land. Payment of interest has been provided for separately under section 34 of the Land Acquisition Act. This is so because interest is paid after the H A B c D E F G H 216 SUPREME COURT REPORTS (1996) SUPP. 6 S.C.R. compensation has been determined. It is something in addition to the capital amount though it arises out of it. It has expressly been held that interest under section 34 of Land Acquisition Act is not compensation paid to the owner for depriving him of his right to possession of the land acquired, but is given to him for the deprivation of the use of the money representing the compensation for the land acquired. This interest under section 34 of the Land Acquisition Act is thus paid for the delayed payment of the compensation amount and, therefore, a revenue receipt liable to tax und
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