Collister, J - (1.)This is a reference under Section 66(2), Income-tax Act, (11 of 1922). The assessee is Behari Lal Bhargava, proprietor of the Central Book Depot at Allahabad. For the assessment year 1937-38 the Income-tax Officer assessed him to tax upon an income of Rs. 11,607. The account of profit and loss was as follows:
(2.)It will be observed that one of the items of profit is a sum of Rs. 12,708 under the head of "interest," and it is with this sum of money that the reference now before us is concerned. It appears that two houses belonging to the assessee's father, Ramji Das Bhargava, were acquired by the improvement trust under the Land Acquisition Act in 1927, and possession was taken on 11 November 1927. The amount awarded by the Land Acquisition Officer was Rs. 13,225; but Ramji Das Bhargava did not accept this as adequate and referred his claim to the tribunal which has seisin of such matters, and the tribunal on 6 April 1931, increased the amount of compensation to the high figure of Rs. 97,640. The tribunal also directed the improvement trust under the provisions of Section 28, Land Acquisition Act, to pay interest at 6 per cent, per annum from the date of taking possession of the property to the date of payment of Rs. 97,640. The improvement trust appealed against this order to the High Court, but the appeal was dismissed; and thereafter the sum of Rs. 97,640, plus Rs. 49,660 as interest, was paid to the four sons of Ramji Das Bhargava, who had meanwhile died. The assessee's share of the interest money was Rs. 12,415. The Income-tax Officer was of opinion that this money was taxable, and income was accordingly taxed upon it. The assessee appealed to the Assistant Commissioner, but his appeal was dismissed. The view taken by that officer is expressed in the following words: ...interest paid is the return on that money which was the appellant s, on the date the improvement trust took possession of the property. The return on money being nothing but income is clearly liable to tax.
(3.)The Assistant Commissioner not only dismissed the appeal, but he enhanced the amount of income under the head of "business" and accordingly the assessee appealed to the Commissioner under Section 32 of the Act, but that appeal also was dismissed so far as the interest awarded under the Land Acquisition Act was concerned. In his order the Commissioner says: If the appellant has been left in the possession of his property till the question between the improvement trust and his father was decided by the tribunal, he would certainly have earned income in the shape of rent and it was to compensate him for this loss of income that the interest was awarded by the tribunal. The appellant's capital stood at the amount awarded by the tribunal and the amount of interest was certainly a thing quite apart from it and clearly represented the appellant's income on that capital for the period during which the appellant was kept out of its possession.