Mohd. AhsanuddIn HussaIn Vs. Commissioner of Income Tax - Court Judgment

Excerpt:
direct taxation - interest - sections 28 and 257 of income tax act, 1961 - petitioners owned a piece of land - it was acquired by government - petitioner not satisfied with compensation granted sought reference of civil court - civil court enhanced compensation and awarded interest - assessee claimed that interest was not taxable and it should be taxable in year in which it accrued - held, interest not accrued on date of order of court but have accrued year after year from date of delivery of possession of land till date of order. head note: income tax income--accrual--interest on enhanced compensation. ratio: in rama bai v. cit (1990) 181 itr 400 (sc) the supreme court laid the principle that the interest cannot be taken to have accrued on the date of the order of the court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order. held: in rama bai v. cit (1990) 181 itr 400 (sc) the supreme court laid the principle, that the interest cannot be taken to have accrued on the date of the order of the court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order therefore the tribunal was not justified in holding that the entire sum of rs. 2,49,883, being the interest receivable for the period 3-6-1958 to 31-3-1970 on account of enhanced compensation is assessable for the assessment year 1970-71. application: also to current assessment years. a. y.: 1970-71 dt. ord.: 9-7-1996 income tax act 1961 s.5 - maximssections 2(xv) & 3(1) & (3): [v.v.s. rao, n.v. ramana & p.s. narayana, jj] ghee as a live stock product held, [per v.v.s. rao & n.v. ramana, jj - majority] since ages, milk is preserved by souring with aid of lactic cultures. the first of such resultant products developed is curd or yogurt (dahi) obtained by fermenting milk. dahi when subjected to churning yields butter (makkhan) and buttermilk as by product. the shelf life of dahi is two days whereas that of butter is a week. by simmering unsalted butter in a pot until all water is boiled, ghee is obtained which has shelf life of more than a year in controlled conditions. ghee at least as of now is most synthesized, ghee is a natural product derived ultimately from milk. so to say, milk is converted to dahi, then butter. scientifically or common sense point of view, even though ghee is not directly obtained from milk (which is certainly a product of cow/buffalo), it is certainly a product of a product of livestock i.e., cow or buffalo. it would be rather illogical or irrational to say that ghee is not a milk/dairy product or to say that it is not a product of livestock. section 2(x) and 2(iv) of the act used the plural products of livestock. the legislative intention is very clear that not only a product of livestock like milk (when notified by government), butter etc., are products of livestock but even derivative items (derived from a product of livestock) are intended to be product of livestock for the purpose of the act. thus the term ghee is to be interpreted on the basis of expression products of livestock as defined in section 2(xv) of the act. whatever products are declared as such by the government by notification, they become products of livestock for purpose of the act. consequently it was held that ghee is the product of livestock and by reason of power conferred under section 3(1) read with section 3(3) of the act on them it is competent for the government to declare ghee as product of livestock for the purpose of regulating its purchase and sale, in any notified market area. [per p.s. narayana, j,(dissenting)]if livestock or agricultural produce and the categories thereof had been specified in the statute itself by appending in the schedule or otherwise, that would stand on a different footing from the present provisions of the act which contemplate the issuance of notifications in accordance with the procedure ordained by the provisions specified supra. in view of the clear definition of the livestock and products of livestock, the ghee being derivative of butter or cream, if the language employed in definition to be taken as they stand, the only conclusion would be is that the ghee would not fall within ambit of the definitions aforesaid. sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] declaration of notified area held, it is only under section 3 that government are required to publish draft notification inviting objections and section 3(3) mandates to consider objections and suggestions before issuing declaration order. it is very conspicuous that section 4 does not contemplate any draft notification inviting objections and suggestions before either constituting market committee, establishing notified market area or declaring notified market area for the purpose of levy of market fees. thus, except ordaining government to issue preliminary/draft notification inviting objections at the time of issuing declaration order under section 3(3) of the act nowhere much less under section 4 contemplates issuing a notification inviting objections. when the legislature has chosen to exclude principles of natural justice, the court cannot introduce rule of audi alteram partem and render statutory provisions unworkable. in such a case, maxim, expressum facit cessare tacitum (when there is express mention of certain things, then anything not mentioned is excluded) would apply. section 7: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] levy of market fee element of quid pro quo - held, levying fees and tax are two forms of exercise of sttaes taxing power. there is no quid pro quo between tax payer and public authority as tax is a part of common burden. it is also well settled that fee is charge for special service or a benefit given to a class of individual fee payers and fee collected need not have correlation with actual service in exactitude but if it is shown that substantial portion of the fee is expended or the purpose for which it is levied, it would be justified. expressum facit cessare tacitum sections 4 & 3: [v.v.s. rao, n.v. ramana & p.s. narayana, jj] meaning when there is express mention of certain things, then anything not mentioned is excluded. syed shah mohammed quadri, j. 1. in this reference under s. 256(1) of the it act, 1961, at the instance of the assessee, the following question is referred to this court for opinion, viz. : 'whether, on the facts and in the circumstances of the case, the tribunal was justified in holding that the entire sum of rs. 2,49,883, being the interest receivable for the period 23rd june, 1958 to 31st march, 1970, on account of enhanced compensation is assessable for the asst. yr. 1970-71 ?' 2. the assessee and his sisters jointly owned 103 acres 11 guntas of land situate in habshiguda and nacharam villages in which the assessees had 2/5ths share. the said lands were acquired by the government, possession of which was taken on 3rd june, 1958. dissatisfied with the compensation awarded, the assessee sought a reference to the civil court. the chief judge, city civil court, hyderabad, on reference, enhanced the compensation on 6th september, 1969; he also awarded interest at the rate of 6 per cent per annum. the assessee claimed that the amount of interest was not taxable, and in the alternative he urged that it should be taxable in the year in which it had accrued. that plea was not accepted by the ito who assessed to tax the interest, received on compensation amount, in the year in which it was awarded by the civil court. accordingly, the interest that accrued from 3rd june, 1958 to 6th september, 1969, was assessed to tax in the asst. yr. 1970-71. the aac on appeal held that as the enhancement of compensation was on 6th september, 1969, the interest accrued from 7th september, 1969 to 31st march, 1970, was assessable in the said asst. yr. 1970-71. on further appeal to the tribunal, the tribunal held that the entire amount of interest from 3rd june, 1958 to 31st march, 1970, was assessable in the asst. yr. 1970-71. the tribunal drew support for that view from cit vs . smt. sankari manickyamma : [1976]105itr172(ap) . on the above facts, at the instance of the assessee, the above question was referred to this court for its opinion. 3. in rama bai vs . cit : [1990]181itr400(sc) , the supreme court laid down the following principle, viz. : '... we are of the opinion that the appeals before us (civil appeal no. 810 of 1974 and civil appeal no. 3027 of 1988), have to be allowed and the references made under s. 257 (tax ref. cases nos. 3 of 1976 and 1 to 3 of 1978), have to be answered by saying that the question of accrual of interest will have to be determined in accordance with the above decision of this court. the effect of the decision, we may clarify, is that the interest cannot be taken to have accrued on the date of the order of the court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the lands till the date of such order.' 4. in view of the principle laid down by the supreme court in the above cited case, we need not discuss the issue at length as the point is covered by that judgment. following that judgment the question has to be answered in the negative, i.e., in favour of the assessee and against the revenue. 5. the reference is accordingly answered. no costs.