Judgment:
D.R. Dhanuka, J.
1. The Income-tax Appellate Tribunal has referred the following question to us under section 256(1) of the Income-tax Act, 1961 :
'Whether, on the facts and in the circumstances of the case, the Tribunal pH was right in law in holding that the rental compensation in respect of the land of the assessee requisitioned by Government calculated at the rate of Rs. 5,995 per year commencing from August 7, 1961, to March 31, 1970, be assessed as income during the accounting years relevant to the assessment years 1962-63 to 1970-71 ?'
2. The short facts leading to the making of this reference are as under :
(a) The relevant assessment year is 1968-69.
(b) The assessee was the owner of certain land. On August 17, 1961, the said land was requisitioned by the Collector of Pune under the Bombay Land Requisition Act for rehabilitation of flood victims. Under section 8 of the said Act, the assessee became entitled to receive compensation from the authorities in lieu of rental. The right to receive the amount of compensation accrued to the assessee under section 8 of the Bombay Land Requisition Act, 1948, the moment the assessee was deprived of possession and from year to year. Rule 4 of the Bombay Land Requisition (Determination of Compensation) Rules, 1949, lays down a scheme for determination of compensation in lieu of rental amount payable to the assessee. The assessee claimed the amount of compensation from the Collector of Pune periodically and from time to time.
(c) Even prior to the fixation of the quantum of compensation by the said order dated August 7, 1970, the Collector of Pune paid a sum of Rs. 33,322 in part to the assessee in March, 1968. The said amount was the part payment of amount due and payable to the assessee towards compensation as aforesaid. The balance of the amount of compensation was paid by the collector of Pune to the assessee on August 2, 1970.
(d) The said land was ultimately acquired for public purposes under the Land Acquisition Act, 1894. Details of acquisition are irrelevant for the purpose of this reference.
(e) The only question before the authorities below was whether the said amount of Rs. 33,322 was liable to be included in the income of the assessee in a lump sum in the year of its receipt, i.e., during the assessment year 1968-69 or whether the said income was liable to be assessed during the years in which it accrued to the assessee, i.e., year to year. The Income-tax Officer included the entire amount of Rs. 33,322 in the income of the assessee on receipt basis. The Appellate Assistant Commissioner held that the said amount could not be so included in the income of the assessee on the ground that such yearly compensation accrued to the assessee every year, i.e., during the period commencing from August 17, 1961, to March 31, 1970. Relying upon the provisions of the Bombay Land Requisition Act, 1948, and the scheme of the Bombay Land Requisition pH (Determination of Compensation) Rules, the Income-tax Tribunal concluded that the said income accrued to the assessee year to year and could not be treated as income of the assessee in the year of receipt. The Income-tax Tribunal held that the rental compensation became payable to the assessee at the rate of Rs. 5,995 annually right from the previous year relevant to the assessment year 1962-63. The Income-tax Tribunal observed, inter alia, in its judgment as under : 'There is settled law that once there is an absolute and vested right to receive compensation or the interest, amount becomes legally due and receivable at that time notwithstanding the fact that the claim is actually quantified later on.'
3. The Tribunal is right in taking the above view.
4. Learned counsel for the Revenue has fairly invited our attention to the recent judgment of the Supreme Court in Rama Bai v. CIT : [1990]181ITR400(SC) . In this case, it was held by the apex court that interest on enhanced compensation for land compulsorily acquired under the Land Acquisition Act, 1894, could not be taken to have accrued on the date of the order of the court granting enhanced compensation, but the same was liable to be treated as having accrued year after year from the date of delivery of possession of the land till the date of such order. It was held in this case that such interest could not be assessed to income-tax in one lump sum in the year in which the order was made.
5. In our judgment, the Appellate Assistant Commissioner as well as the Tribunal were justified in coming to the conclusion that the said sum of Rs. 33,322 was not liable to be treated as income of assessee during the assessment year and the rental compensation in respect of the land of the assessee requisitioned by the Government calculated at the rate of Rs. 5,995 per year commencing from August 17, 1961, to March 3, 1970, was liable to be assessed as income during the accounting years relating to the assessment years commencing from the year 1962-63 onwards. There is no dispute about the facts of the case. It is not possible to accept the submission made on behalf of the Revenue that the said amount should be treated as income of the assessee during the assessment year 1968-69 when it was received by the assessee in lump sum as part payment. In CIT v. T. N. K. Govindarayalu Chetty : [1987]165ITR231(SC) , the Supreme Court held that interest on the compensation upon acquisition payable by the State accrued yearly and was taxable proportionately in each of the years between the date of acquisition and the date of payment. Following the ratio and the principles laid down in this case, we hold that the Tribunal was justified in holding that the amount of compensation for requisition of the land of the assessee was assessable year to year on accrual basis and not in a lump sum in the year of receipt.
6. We answer the question referred to us in the affirmative and in favour of the assessee.
7. There shall be no order as to costs.