LexCHANDROJI RAO versus COMMISSIONER OF INCOME-TAX, M.P. NAGPUR
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422 .CHANDROJI RAO v COMMISSIONER OF INCOME-TAX, M.P. NAGPUR April 28, 1970 [J, C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] . Indian Income-tax Act, 1922-Capital and Rei·enue Compensation payable under s. 8 of Madhya Bharat Abolition of Jagir A<·t, 19'51- Payabte In 10 years In annual instalments--lnterest on compensation lf'hether taxable as revenue receipt-Marginal notes, value of, The appellant was a Jagirdar of the erstwhile Gwalior State which marged in the State of Madhya Bharat (now Madhya Pradesh). The Madhya Bharat Abolition of Jagir Act 1951 abolished Jagirs with effect from December 4, 1952. Under s. 8 <if the Act compensation was payable in accordance with the principles laid down in Schedule I of the Act. Under sub-section (2) of that section the compensation payable became due as from the date of the resumption of the Jagir. Simple interest was payable at 2+ per cent per· mnum from that date up to the date of -par· ment of the amount of compensation which was payable w1thm a period of 10 years in annual instalments. The appellant claimed before the Income-tax Officer that the amount of interest formed part of the compensation and constituted a capital receipt. The claim \\Ifs disallowed by the Incom&otax Officer as well as by the 11.ppellate Assistant Commissioner. The Tribunal, however, held that the amount of interest was a capital receipt which could not be included in the assessee's income. In reference, the Hi1h Court held against the appellant. In appeal to this Court by special l~ve. HELD : Under s. 8 of the Jagir Act the compensation amount as determined in accolrdance with the principles laid down in Schedule 1 became due tq the Jagirdar from the date of resumption. Since the entire amount was not to be paid on the date of the resumption but was to be paid by instalments extending over 10 years. a provision had to be made for the payment of interest in sub·s. (2). The amount of interest was thus given to the Jagirdar for bein11 kept out ctf the compensation amount for the aforesaid period. The .legislature being well nware of the distinction between compensation anu interest, employed clear languaee which leaves no room for doubt that under sub·s, (2) interest was payable in a well understood sense um! it could never form po1·t of the compensation. [425 E-H] The fact that the marginal heading of s. 8 was 'Duty to pay com· pensation' could not lead to a different conclllliion. The marginal head· 1ng canot control the words of a section, particularly, when the langual!" js clear and unambiguous. (425 Cl A ·B c D F G Dr. Sham Lal Narula v. Commissioner of Income-tax, Pun/ah, lammu & Kashmir, Hlmachal Pradesh and Pat/a/a, 53 I.T.R. 151, applied. H CIVIL APPELLATE JURISDICTION : Civil Appeals N'os, sos to 508 of 1967. · B c D CHANDROJI RAO v. c.r.T. (Grover, /.) 423 Appeals by _special leave from the judgment and order dated April 20, 1965 of the Madhya Pradesh High Court in Misc. Civil Case No. 89 oi. 1964. N. D. Karkhanis, P. W.Sahasrabuddhe and A.G. Ratnaparkhi, for the appellant (in au the appeals) . Gobind Das and R. N. Sachthey, for the respondent (in all the appeals) . The Ju~gment of the Court was delivered by Grover, 1. These appeals by special leave from a common judgment of the Madhya Pradesh High Coun arise out of re- ferences made by the Income-tax Appellate Tribunal relating to the assessment years 1956-57, 1957-58, 1958-59 and 1961-62. The appellant who is the assessee was a jagirdar of the erst- while Gwalior State. By the Madhya Bharat Abolition of Jagir Act 1951, hereinafter called the "Act'', the jagirs were abolished with effect from December 4, 1952. Under &. 8 of the Act compensation was payable to him in accordance with the princi- · pies laid down in Schedule 1. Under sub-s. (2) of that section the co'l'!pensation pa~able !Jecam~ due as from the. date of tho resum~uon of the 1ag1r. Simple interest was payable at the rato I of 2i Yo per annum from that date upto the date of payment on· · the amount of compensation which was payable within a period' of ten years in annual instalments. The assessee maintained' that the amount of interest formed part of the compensation and· constituted a capital receipt. The Income-tax Officer held against the assessee and included the interest in . his income .. The Appellate Assistant Commission.er took the same . view .. The appellate tr
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