The Supreme Court held that interest payable on compensation under the Madhya Bharat Abolition of Jagir Act is a revenue receipt taxable under the Income-tax Act. Interest is distinct from compensation awarded for the period payment was delayed.
Appeals dismissed with costs and one hearing fee.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
422
A
.CHANDROJI RAO
v
COMMISSIONER OF INCOME-TAX, M.P. NAGPUR April 28, 1970
·B
[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]
c
D
F
G
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
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) .
B 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 c judgment of the Madhya Pradesh High Coun arise out of references made by the Income-tax Appellate Tribunal relating to the assessment years 1956-57, 1957-58, 1958-59 and 1961-62.
The High Court answered the question in the negative an<f against the assessee. -
H 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-.
[l 97 I] l S.C.R.
SUPREME COURT REPORTS
424
gave the consequences of the resumption of jagir land. Chapter rn headed "compensation" commenced with s. 8 which reads :
A
B
c
The argument on b.half of the assessee was based principally on the marginal heading of s. 8 which is "Duty to pay compenation'". 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 distinction between the payment dealt with by sub-s. (I) and sub'6. (2) -of s. 8 arid described both these paym.nts as compensation paval:!le .. to If jagirdar .. Similarly under s. 15 ( 4) it was the ll&Ynl,ent of compensation money which included interest that '°perted as a foll discharge of the liability of the Government
D
Ii'
G.
H
CHANDROJ!•RAO V. C.I.T. (Grover, J;)
425
I I
Appeals dismissed.
(I) 53 l.T.R. ISi.
2 issues framed by the court
Whether interest payable under s. 8(2) of the Madhya Bharat Abolition of Jagir Act, 1951, on compensation amount is a capital receipt exempt from tax or a revenue receipt taxable as income.
Whether the marginal heading 'Duty to pay compensation' controls the interpretation of the clear language in s. 8(2) distinguishing interest from compensation.
Colour shows how this judgement treated each authority
Dr. Sham Lal Narula v. Commissioner of Income-tax, Punjab, Jammu & Kashmir, Himachal Pradesh and PatialaApplied¶52
Dr. Sham Lal Narula v. Commissioner of Income-tax, Punjab, Jammu & Kashmir, Himachal Pradesh and Patiala, 53 I.T.R. 151
1 provisions across 1 enactments
Chandroji Rao
Commissioner of Income-tax, M.P. Nagpur
J. C. Shah
K. S. Hegde
A. N. Grover
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
