Commissioner of Income Tax, Andhra Pradesh, Hyderabad Vs. M. Sarojini Devi - Court Judgment

Excerpt:
direct taxation - imposition of tax - compensation awarded by government to assessee for acquiring his land enhanced - assessee demanded interest for same - interest provided by high court - matter reached supreme court and pending with same - during pendency of that matter assessment made by tax authorities - tax imposed by authorities on interest demanded by assessee - imposition of tax questioned - tax authorities entitled to impose tax on interest granted by high court - however same will be refunded if matter later on disposed against assessee. - all india services act, 1951.sections 8 & 11 & a.p. buildings (lease, rent and eviction) control rules, 1961, rule 5: [v.v.s. rao, g. yethirajulu & g. bhavani prasad, jj] refusal by landlord to receive rent - deposit of rent in court - held, a tenant has the option to take recourse to section 8 in case of refusal or evasion by landlord to receive rent and if landlord were to not name a bank or refuse even the money order of rent, the tenant can deposit the rent in accordance with sub-rules (1) to (3) of rule 5. the notice to person entitled to rent and proper maintenance of accounts of such deposits under sub-rules (4) and (5) of rule 5 are solely dependent on compliance with sub-rule (3) by the tenant. the payment or deposit of rent under section 11 read with sub-rule (6) of rule 5 arises only in respect of a tenant who did not take recourse to section 8 or section 9 before an application for eviction has been made against him in respect of any rent in arrears by date of that application, whereas in respect of rent that becomes subsequently due since date of application for eviction, the tenant is bound to pay or deposit regularly until termination of proceedings in order to enable him to contest the application. any violation of section 11(1) to (3) and sub-rule (6) of rule 5 makes the tenant liable for the adverse consequences under sub-section (4) of section 11. thus, the provisions of section 11 and sub-rule (6) of rule 5 are intended only to ensure the payment and deposit of rent including arrears during pendency and till termination of proceedings for eviction. the forfeiture of right of tenant to contest in case of default is to protect the rights and interests of landlord pending such an application for eviction, but not to confer any right on tenant to plead that all defaults committed by him prior to application for eviction can never be considered wilful, if he were to deposit all arrears of rent due within fifteen days under rule 5(6) read with sub-section (1) of section 11. the object and effect of section 11 and sub-rules (1) to (5) to rule 5, the former being for protection of landlord during pendency of eviction proceedings and the later being for protection of tenant to avoid any liability for eviction on ground of wilful default. consequently, while taking recourse to section 8 by tenant is optional, once that option is exercised, compliance with sub-rules (1) to (5) of rule 5 becomes mandatory in the sense that any non-compliance with prescribed procedure will positively indicate the wilful nature of default committed in paying or tendering rent as prescribed. while deposit of rent in terms of provisions of act and the rules amounts to valid tender of rent to landlord, the failure to comply with rule 5 (3) requiring delivery of a copy of the challan for deposit of rent in office of controller or appellate authority, as the case may be, so as to enable controller or appellate authority to cause maintenance of proper accounts under sub-rule (5) and give notice of deposit to person amounts to wilful default in making valid payment or lawful tender of the rent by the tenant to the landlord. thus, where a tenant obtains an order to deposit rent, same shall be deposited at least by the last day of the month following that for which rent is payable and rent challan shall be delivered in the office of controller within a reasonable time so that rent controller can take necessary action for service of notice of deposit under sub-rule (4) of rule 5 of the rules within seven days of such delivery. in the absence of compliance in so depositing rent and delivering challan in the office of controller, tenant shall be deemed to have committed wilful default.orderbilal nazki, j. 1. lands belonging to the assessee have been acquired by the government in the year 1966 and compensation was awarded by the land acquisition officer. on reference, compensation at higher rate was awarded. the assessee was held to be entitled to an interest of rs.43,642/- for the period 18-5-1966 to 9-12-1975. the state government went in appeal against the enhancement made in the appeal. the appeal before the supreme court was pending. the income tax officer held that the entire amount of interest on enhanced compensation should be brought to tax for the assessment year 1976-77. the orderwas challenged by way of appeal. the appellant assistant commissioner held that as the matter had not become final and an appeal was before the supreme court, the amount of interest received by the assessee could not be taxed. he relied on a judgment of this court in cit v. smt sankari manickyamma : [1976]105itr172(ap) . on further appeal before the tribunal, the same view was upheld relying upon the same judgment. thereafter at the instance of the revenue, the following question has been framed and referred to this court:'whether on the facts and in the circumstances of the case, the interest on compensation the assessment year for which the interest should be brought to tax is the one in which it was awarded or the year in which issue of quantum of compensation becomes final?'2. we have given the facts of the case somewhat in detail only because we have found that the question is not happily framed. the question, which needed to be answered, is 'whether the assessing officer has to wait till the final disposal by the final court in an acquisition matter before the interest accrued is taxed?' therefore, we are refraining the question in the above mentioned phraseology and we find that the question is already answered by the supreme court in rama bai v. cit : [1990]181itr400(sc) . the fact that the compensation was enhanced by the high court in an appeal and the interest accruing to it was received by the assessee makes him liable to pay the tax. however, it will be spread over the period for which it accrued to him, in accordance with the supreme court judgment. in any case, if the judgment enhancing the compensation in favour of the assessee is reversed by the supreme court, then the assessee, even after payment of the tax on the accrued interest, would not be remediless. he can always seek the refund of the tax so paid, by makingappropriate application for rectification of the assessment. the tribunal relied on judgment in smt. sankari manickyamma (supra) that obviously stands reversed in view of the judgment of the supreme court judgment in rama bai (supra).3. for all these reasons, we answer the question in favour off the revenue as indicated above and against the assessee.

Judgment:
ORDER

Bilal Nazki, J.

1. Lands belonging to the assessee have been acquired by the Government in the year 1966 and compensation was awarded by the Land Acquisition Officer. On reference, compensation at higher rate was awarded. The assessee was held to be entitled to an interest of Rs.43,642/- for the period 18-5-1966 to 9-12-1975. The State Government went in appeal against the enhancement made in the appeal. The appeal before the Supreme Court was pending. The Income Tax Officer held that the entire amount of interest on enhanced compensation should be brought to tax for the assessment year 1976-77. The orderwas challenged by way of appeal. The Appellant Assistant Commissioner held that as the matter had not become final and an appeal was before the Supreme Court, the amount of interest received by the assessee could not be taxed. He relied on a judgment of this Court in CIT v. Smt Sankari Manickyamma : [1976]105ITR172(AP) . On further appeal before the Tribunal, the same view was upheld relying upon the same judgment. Thereafter at the instance of the Revenue, the following question has been framed and referred to this Court:

'Whether on the facts and in the circumstances of the case, the interest on compensation the assessment year for which the interest should be brought to tax is the one in which it was awarded or the year in which issue of quantum of compensation becomes final?'

2. We have given the facts of the case somewhat in detail only because we have found that the question is not happily framed. The question, which needed to be answered, is 'Whether the assessing officer has to wait till the final disposal by the final Court in an acquisition matter before the interest accrued is taxed?' Therefore, we are refraining the question in the above mentioned phraseology and we find that the question is already answered by the Supreme Court in Rama Bai v. CIT : [1990]181ITR400(SC) . The fact that the compensation was enhanced by the High Court in an appeal and the interest accruing to it was received by the assessee makes him liable to pay the tax. However, it will be spread over the period for which it accrued to him, in accordance with the Supreme Court judgment. In any case, if the judgment enhancing the compensation in favour of the assessee is reversed by the Supreme Court, then the assessee, even after payment of the tax on the accrued interest, would not be remediless. He can always seek the refund of the tax so paid, by makingappropriate application for rectification of the assessment. The Tribunal relied on judgment in Smt. Sankari Manickyamma (supra) that obviously stands reversed in view of the judgment of the Supreme Court judgment in Rama Bai (supra).

3. For all these reasons, we answer the question in favour off the Revenue as indicated above and against the assessee.