DR. SHAMLAL NARULA versus COMMISSIONER OF INCOME-TAX, PUNJAB

Citation: [1964] 7 S.C.R. 668 · Decided: 09-04-1964 · Supreme Court of India · Bench: K. SUBBA RAO · Disposal: Dismissed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

1964 
.April 9 
668 
SUPREME COURT REPORTS 
(1964] 
DR. SHAMLAL NARULA 
v. 
COMMISSIONER OF INCOME-TAX, PUNJAB 
(K. SUBBA RAO, J.C. SHAH ANDS. M. SIKRI, JJ.J 
Income Tax-Land acquired-Award made. by Collector-
Interest on compensation awarded-If interest amounted to a 
part of compensation-Indian Income-tax Act, 1922 (11 o.f 1922), 
ss. 3, 4-Land Acquisition Act, 1894, s. 34. 
The State acquired the land of the appellant. Tne Collector 
made an award under the Land Acquisition Act as a result of 
which the appellant received Rs. 2,81,822/c, which included a 
sum of Rs. 48,660/- as interest upto the date of the award. The 
Income-tax Officer included Rs. 48,660/- (the said interest) in 
the total income of the appellant on the ground that the said 
amount was not a capital receipt. The matter went upto the 
Income-tax Appellate Tribunal. The Tribunal excluded the 
said interest from the total income of the assessee (appellant) 
on the ground that it was a capital receipt. On a reference the 
High Court held that the said interest was not a capital but a 
revenue receipt and as such liable to tax under the Indian In-
come-tax Act. The High Court granted a certificate to the ap-
pellant to file an appeal to the Supreme Court. Hence the ap-
peal. 
Held: (i) The scheme of the Land Acquis'tion Act and 
the express provisions thereof establish that the statutory in-
terest payable under s. 34 is not compensation paid to the owner 
for depriving him of his right to possession of the land acquir-
·ed, but that given to him for the deprivation of the use of the 
money representing the compensation for the land acquired. 
In other words the statutory interest paid under s. 34 of the 
Act is interest paid for the delayed payment of the compensa-
tion amount and, therefore, is a revenue receipt liable to tax 
under the Income-tax Act. 
Behari Lal Bhargava v. Commissioner of Income-tax .. C.P . 
.and U.P., (1941), 9 I,T.R. and P. V. Kurien v. Commissioner of 
Income-tax, Kerala, (1962), 46 I.T.R. 288, overruled. 
Westminister Bank Vtd. v. Riches, (1947), 28 T.C. 159. Com-
missioner of Income-tax, Madras 
v. CT. BM. N. Narayanan 
Chettiar, (1943), 11 I.T.R. 470 and Commissioner of Income-tax 
Bihar and Orissa v. Maharajadhiraj 
Sir !(ameshwar 
Singh~ 
(1953), 23 I.TR. 212, approved. 
· 
Inglewood Pulp and Paper Co. Ltd. v. New Brunswaick 
Electric Power Commission, A.LR. 1928 P.C. 287 and Revenue 
Divisiqnal Officer, Trichinopoly v. Venkatarama Ayyar, A.LR. 
1936 Mad. 199, distinguished. 
Shaw 
Wallace's 
case, A.LR. 1932 P.C. 138, 
Schulze v. 
Bensted, (1915), 7 T.C. 30, and Commissioner of Inland Revenue 
v. Barnato, (1934--36), 20 T.C. 455, referred to. 
(ii) The interest under s. 34 of the Land Acquisition Act 
shall be paid on the amount awarded from the time the Collec-
tor take possession until the amount is paid or deposited. It 
'7 S.C.R. 
SUPREl\IE COURT REPORTS 
669 
makes no difference in the legal position between a case where 
1964 
possession has been taken before and that where possession Dr Shamlal Nanda 
has been taken after the award, for in either case the title vests · 
T. 
in the Government only after possession has been taken. 
Oommi88ioner of 
In no sense of the term can it (interest) be described as lncome-Taz, Punjah 
<iamages or compensation for the owner's right to retain pos-
session, for as he has no right to retain possession after posses-
sion was taken under s. 16 or s. 17 of the Act. 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 503 
of 1963. Appeal from the judgment and order dated January 
JI, 1962, of the Punjab High Court in I.T.R. No. 28 of 1960. 
B. N. Kripal and A. N. Kripal, for the appellant. 
Gopal Singh and R. N. Sachthey, for the respondent. 
April 9, 1964. The judgment of the Court was delivered • 
SuBBA RAO, J .-This appeal by certificate granted by the 
Su!Jba Rao, J. 
High Court of Punjab raises the question whether interest 
paid under s. 34 of the Land Acquisition Act, 1894, herein-
after called the Act, is of the nature of a capital receipt or of 
a revenue receipt. 
The relevant facts are not in dispute and they may be 
briefly stated. The appellant, Dr. Shamlal Narula, is the 
Manager of a Hindu uncH.vided family, which owned·, inter 
alia, 40 bighas and 11 biswas of land in the town of PatiaJa. 
The Patiala State Government initiated land acquisition pro-
ceedings for acquiring the said land under Regulation then 
prevailing in the Patiala State. It is common case that the 

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