Chandroji Rao v. Commissioner of Income-tax, M.P. Nagpur

.CHANDROJI RAO v COMMISSIONER OF INCOME-TAX, M.P. NAGPUR April 28, 1970 [J, C. SHAH, K. S. HEGDE AND A. N. GROVER, JJ.] . Indian Income-tax Act, 1922-Capital and Rei·enue Compensation payable under s. 8 of Madhya Bharat Abolition of Jagir A<·t, 19'51- Payabte In 10 years In annual instalments--lnterest on compensation lf'hether taxable as revenue receipt-Marginal notes, value of, The appellant was a Jagirdar of the erstwhile Gwalior State which marged in the State of Madhya Bharat (now Madhya Pradesh). The Madhya Bharat Abolition of Jagir Act 1951 abolished Jagirs with effect from December 4, 1952. Under s. 8 <if the Act compensation was payable in accordance with the principles laid down in Schedule I of the Act. Under sub-section (2) of that section the compensation payable became due as from the date of the resumption of the Jagir. Simple interest was payable at 2+ per cent per· mnum from that date up to the date of -par· ment of the amount of compensation which was payable w1thm a period of 10 years in annual instalments. The appellant claimed before the Income-tax Officer that the amount of interest formed part of the compensation and constituted a capital receipt. The claim \\Ifs disallowed by the Incom&otax Officer as well as by the 11.ppellate Assistant Commissioner. The Tribunal, however, held that the amount of interest was a capital receipt which could not be included in the assessee's income. In reference, the Hi1h Court held against the appellant. In appeal to this Court by special l~ve. HELD : Under s. 8 of the Jagir Act the compensation amount as determined in accolrdance with the principles laid down in Schedule 1 became due tq the Jagirdar from the date of resumption. Since the entire amount was not to be paid on the date of the resumption but was to be paid by instalments extending over 10 years. a provision had to be made for the payment of interest in sub·s. (2). The amount of interest was thus given to the Jagirdar for bein11 kept out ctf the compensation amount for the aforesaid period. The .legislature being well nware of the distinction between compensation anu interest, employed clear languaee which leaves no room for doubt that under sub·s, (2) interest was payable in a well understood sense um! it could never form po1·t of the compensation. [425 E-H] The fact that the marginal heading of s. 8 was 'Duty to pay com· pensation' could not lead to a different conclllliion. The marginal head· 1ng canot control the words of a section, particularly, when the langual!" js clear and unambiguous. (425 Cl ·B Dr. Sham Lal Narula v. Commissioner of Income-tax, Pun/ah, lammu & Kashmir, Hlmachal Pradesh and Pat/a/a, 53 I.T.R. 151, applied. H CIVIL APPELLATE JURISDICTION : Civil Appeals N'os, sos to 508 of 1967. · CHANDROJI RAO v. c.r.T. (Grover, /.) 423 Appeals by _special leave from the judgment and order dated April 20, 1965 of the Madhya Pradesh High Court in Misc. Civil Case No. 89 oi. 1964. N. D. Karkhanis, P. W.Sahasrabuddhe and A.G. Ratnaparkhi, for the appellant (in au the appeals) . Gobind Das and R. N. Sachthey, for the respondent (in all the appeals) . The Ju~gment of the Court was delivered by Grover, 1. These appeals by special leave from a common judgment of the Madhya Pradesh High Coun arise out of re­ ferences made by the Income-tax Appellate Tribunal relating to the assessment years 1956-57, 1957-58, 1958-59 and 1961-62. The appellant who is the assessee was a jagirdar of the erst­ while Gwalior State. By the Madhya Bharat Abolition of Jagir Act 1951, hereinafter called the "Act'', the jagirs were abolished with effect from December 4, 1952. Under &. 8 of the Act compensation was payable to him in accordance with the princi-· pies laid down in Schedule 1. Under sub-s. (2) of that section the co'l'!pensation pa~able !Jecam~ due as from the. date of tho resum~uon of the 1ag1r. Simple interest was payable at the rato I of 2i Yo per annum from that date upto the date of payment on· · the amount of compensation which was payable within a period' of ten years in annual instalments. The assessee maintained' that the amount of interest formed part of the compensation and· constituted a capital receipt. The Income-tax Officer held against the assessee and included the interest in . his income .. The Appellate Assistant Commission.er took the same . view .. The appellate tribunal, however, held that the amount of interest was a capital receipt and could not be included in the assessee's: · income. The following question was referred to the High Coll!'! by the tribunal :- · "Whether on the facts and in the circ111I1stanoos . of the case the Interest that was received on the amount of compensation paid for resumption of the a11C1see'• jagir was a capital receipt ?" The High Court answered the question in the negative an<f against the assessee. - The relevant provisions of the Act may be noticed. Sectiori 3 ( 1 ) provided that the Govel'lllltent shall, by notification, a~lnt a date for the resumption of all jagir lands in the State. Secttpn 4-. 424 SUPREME COURT REPORTS [l 97 I] l S.C.R. gave the consequences of the resumption of jagir land. Chapter rn headed "compensation" commenced with s. 8 which reads : "( l) Duty to pay compensation.-Subject to other provisions of this Act the Government shall be liable to pay to every Jagirdar whose Jagir­ land has been resumed under Sec .. ~. such com­ pensation as ·shaH be determined in accordance with the principles laid down in Schedule I. I)) Compensation payable under this section shall be due as from the date of resumption · and shall carry simple interest at the rate of 21% per annum from that date up to the date of payment: Provided that no interest shall be payable on any amount of compensation which remains unpaid for any default of the Jagirdar, his Agent or his representative-in-interest. Under s. I 2 every jagirdar who2.~ jagir land had been resumed under s. 3 had to file in the prescribed form a statement of claim for compensation before the Jagir Commissioner within two months f1om the date of resumption. On receipt of a statement of claim the Jagir Commisoioner was to determine the amount cf compensation payable to the Jagirdar under s. 8 as also the amounts recoverable from him under s. 4(1) (e) and other matters mentioned in the section 13. Under s. 14 the amount recoverable from a Jagirdar was to be deducted from the compensation payable to him under s. 8. Section 15 provid· ed for payment of compensation money. According to sub­ ·section (I ) after the amount of compensation payable to n Jagirdar under s. 8 had been determined and th.~ amount deduct­ -eel from it under s. 14, the balance was to .be payable in maxi- . mum ten annual instalments. Under sub-s. ( 4) payment of compensation money to a Jagirdar etc. was to be a full discharge of the Government from the liability to pay compensation in lieu of resumption of the jagir lands. The argument on b.~half of the assessee was based principally on the marginal heading of s. 8 which is "Duty to pay compen­ ~ation'". It has been contended that the interest payable formed part of the compensation money. It has further been pointed 'Out'that ss. 13, 14 and 15 of the Act did not make any distinc­ tion between the payment dealt with by sub-s. (I) and sub'6. (2) -of s. 8 arid described both these paym.~nts as compensation pav­ al:!le .. to If jagirdar .. Similarly under s. 15 ( 4) it was the ll&Ynl,ent of compensation money which included interest that '°per~ted as a foll discharge of the liability of the Government Ii' G. I I CHANDROJ!•RAO V. C.I.T. (Grover, J;) 425 to pay compensation. In our opinion the High Court rightly rejected these contentions. Section 8 ( 2) clearly provide..! that compensation shall be due as from the date of resumption. Thus the amount of compensation became ascertained and payable from the date of resumption. The provision for interest was made simply because the compensation was to be paid in ten annual instalments. A clear distinction has been made between the compensation payable under snb-s. (I ) and the interest which is payable under sub-s. ( 2). The compensation has to be determined in accordance with the principles laid down in Schedule I. That Schedule indicates that the determination of compensation had nothing to do with the payment of interest. The marginal heading cannot control the interpretation of the words of the section particularly when the language of the section is clear and unambiguous. This Court has held in Dr. Sham Lal Naru/a v. Commissioner of Income-tax, Punjab, Jamm11 & Kashmir, Himachal Pradesh & Patiala(1), that the statutory interest paid under s. 34 of the Land Acquisition Act 1894 on' the amount of compensation awarded for the period from the date the Collector has taken possession of the land compulsorily acquired is interest paid for the delayed . payment of the compensation and is, therefore, a revenue receipt liable to tax· under the Income-tax Act. As has been pointed out in that decision the legislature has expressly used the word interest with its well known connotation In the relevant stattitory provi­ sion and it is therefore reasonable to give that expression the natural meaning, it bears. The same . principle would be applicable to the present case. It is apparent that under s. 8 ot the Act the- comjl)Cnsation amount as determined in accordance with the principles laid down in Schedule I became due to the jagirdar from the date of resumption. Since the entire amount was not to be 11aid on the date of the resumption but was to be paid by instalments extending over ten years a provision had to be made for the payment of interest in sub­ s. (2). The amount of interest was thus iiiven to the jagirdar for beinl! keot out of the compensation amount for the aforesaid period. Th" iegislature being well aware of the distin~tion between compensation and interest thereon employed clear language which leaves no room for doubt that under sub-s. (2) interest was payable in its well known and well understood sense and it could never form a part of the compensation money, There is no merit in these appeals which are dismissed witn costs. , One hearing fee. · G.C. Appeals dismissed. (I) 53 l.T.R. ISi.