Income Tax Officer v. And Other Connected Appeals Beingitas

*** IIN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH Income-tax Appeal No.495 of 2009Date of decision: 30.3.2011 Drawing and Disbursing Officer ...Appellant Income Tax Officer Versus ...Respondent and other connected appeals beingITAs No. 496, 497, 498, 499, 500 of 2009and 130 of 2010. CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Anmol Rattan Singh, Addl. A.G.Punjab. for the appellant. Ms. Yogesh Putney, Senior Standing Counsel for the respondent. **** Adarsh Kumar Goel, J 1.This order will dispose of ITAs No.495, 496, 497,498, 499, 500 of 2009 and 130 of 2010 as it is stated by thelearned counsel for the parties that all the appeals involve commonquestion of law. 2.ITA No.495 of 2009 has been preferred by the *** assessee under Section 260A of the Income Tax Act, 1961(hereinafter referred to as “the Act”) against order dated31.10.2008 passed by the Income Tax Appellate Tribunal,Chandgiarh Bench (SMC-B), Chandigarh in ITANo.386/Chandi/2008, for the assessment year 2000-01, claimingfollowing substantial questions of law:- “i)Whether interest allowed by the Ld. MACT in accidentcase on the amount of award can be termed as 'Income frominterest' or the same is a part of compensation for the delaycaused in legal proceedings?case on the amount of award can be termed as 'Income frominterest' or the same is a part of compensation for the delaycaused in legal proceedings? ii)Whether the department can initiate action afterwardswhen it has already made the assessment and no infirmitywas pointed out at the time of assessment?when it has already made the assessment and no infirmitywas pointed out at the time of assessment? iii)Whether an order passed by the court is absolute andhas to be complied with in Toto?has to be complied with in Toto? iv)Whether the Judgment Debtor can make deductionsand if so, whether it would amount to contempt of court? v)Whether interest allowed on compensation amountcan be equated with interest earned on Principal amount?can be equated with interest earned on Principal amount? vi)Whether the interest awarded by the MACT is not apart of compensation?”part of compensation?” 3.The assessee is providing transport facility by plyingbuses from one place to other place in the State of Punjab and inneighbouring States. On account of its buses being involved inaccidents, it paid compensation under the provisions of MotorVehicle Act, 1988 (M.V.Act) with interest as awarded by the MotorAccident Claims Tribunals (MACT). Since it failed to deduct tax atsource out of interest income received by the claimants as perawards, the assessee was held to be assessee in default. The plea ofthe assessee was that interest being part of compensation was not taxable income from which TDS could be deducted. It onlydeposited with the Tribunal compensation as awarded which hadthe component of statutory interest to satisfy the award. Theassessee could not make any deduction from the said amount. Thisplea was not accepted by the Assessing Officer. The said view wasupheld by the CIT(A) as well as the Tribunal. The Tribunalobserved:- “Section 194A is a machinery section and has to beinterpreted in a manner by which the object of the Actis effectuated rather than frustrated. It is not the casethat the Tribunal/MACT/Court has directed not todeduct the TDS rather it was the duty of the personresponsible to deduct TDS and furnish the informationbefore the Hon'ble Court. In the impugned order, theLd. first Appellate authority vide Para 10 (Pg10) hasalready reproduced the decision from the Hon'bleMadras High Court in the case of New India AssuranceLtd. V Mani 270 ITR 394 (Madras).” 4.We have heard learned counsel for the parties. “Section 194A is a machinery section and has to beinterpreted in a manner by which the object of the Actis effectuated rather than frustrated. It is not the casethat the Tribunal/MACT/Court has directed not todeduct the TDS rather it was the duty of the personresponsible to deduct TDS and furnish the informationbefore the Hon'ble Court. In the impugned order, theLd. first Appellate authority vide Para 10 (Pg10) hasalready reproduced the decision from the Hon'bleMadras High Court in the case of New India AssuranceLtd. V Mani 270 ITR 394 (Madras).” 4.We have heard learned counsel for the parties. 5.Learned counsel for the assessee submitted thatcompensation determined by the MACT was a capital receipt andwas not income. Interest under the statutory provisions becomespart of the principal amount of compensation and partakes the samecharacter as compensation itself. It is only after the amount isdisbursed that any income by way of interest thereon may be liableto be taxed as income under the applicable head of income underthe Act. 6.Learned counsel for the revenue does not dispute thenature of receipt of compensation as being capital receipt. He, however, submits that interest component of the award of theMACT has to be treated separately and treated as income. Insupport of this submission reliance is placed on Section 194A(3)(ix)excluding applicability of requirement of deduction at source oninterest income from the compensation awarded by the MACT uptoRs.50,000/- in a financial year. He also relies on Section 171 of theM.V.Act to submit that interest was not part of compensation butseparate from it. 7.We have considered the rival submissions. 8.The question for consideration is whether interestcomponent in MACT award has to be treated as taxable income oras part of compensation which being in the nature of capital receiptis not taxable. In our view, interest component is a part ofcompensation and is not taxable. 9. Admittedly, compensation under the award of MACTis not income. The expression ‘income’ used in Entry 82 of List Iof Seventh Schedule to the Constitution can be given widestmeaning. Under Section 2(24), inclusive and not exhaustivedefinition has been given. 10. In absence of an express provision to the contrary,income can be held to refer to something earned. What is receivedas compensation for loss in one or the other form may not beincome. 11. Considering this aspect, it was observed inCommissioner of Income Tax, Bengal Vs. Shaw Wallace andCompany, AIR 1932 Privy Council 138 by Privy Council:- “The object of the Indian Act is to tax “income” a termwhich it does not define. It is expanded, no doubt, into income, profits and gains,” but the expansion is more amatter of words than of substance, Income, theirLordships think, in this cannotes a periodical monetaryreturn “coming in” with some sort of regularity, orexpected regularity, from definite sources. The sourceis not necessary one which is expected to becontinuously productive, but it must be one whoseobject is the production of a definite return, excludinganything in the nature of a mere windfall. Thus incomehas been likened pictorially to the fruit of a tree, or thecrop of a field. It is essential the produce of something,which is often loosely spoken of as “capital”. Butcapital, though possibly the source in the case ofincome from securities, is in most cases hardly morethan an element in the process of production.” 12.In Rani Amrit Kunwar Vs. Commissioner of Income Tax, C.P.& U.P. (1946) XIV ITR 561, the Allahabad High Courtobserved:- 12.In Rani Amrit Kunwar Vs. Commissioner of Income Tax, C.P.& U.P. (1946) XIV ITR 561, the Allahabad High Courtobserved:- “Under Indian law, therefore, we come back in myopinion, to the relatively simple test whether in theordinary parlance of language what the assesseereceives is “income” or not. I should not dream ofsuggesting that every payment made by one person toanother is necessarily the recipient's income since itmay, as Viscount Dunedin has said, be merely a casualpayment or, as Sir George Lowndes has suggested, amere windfall. Such sweeping proposition would beabsurd. Many things have to be considered. In the caseof a payment by a parent to a child or by a husband to awife or by one relation to another obvious questionsarise whether in the particular circumstances of eachcase the payments are made in such a way as toconstitute what is paid the money of the recipient at allor whether the payments themselves are not merely a series of casual payments or windfalls. But there seemsto me to be another class of cases altogether in which inparticular circumstances payments may be made by oneperson to another which can only be explained on theground that the giver intends to give, and the recipientexpects to receive, with regularity or expectedregularity and from a source the nature of which is toproduce such a payment, an “income” which is in theincome-tax sense his own. I can find nothing in theIndian Income-tax Act to warrant any generalconclusion that it is only in a case in which, if thepayment is discontinued, the recipient will have animmediate right of action against the payer, that it willbe income in his hands in the Indian income-tax sense.That is to put too limited a construction on the word“income.” If the payments are such as to come withinthe category of payments which are casual and non-recurring, then it is to be observed that the Act itselfhas taken them out of the category of “income”. Thevery fact that the framers of the Indian Income-tax Actfound it necessary by a special clause to exempt casualand non-recurring receipts from the category ofincome, profits and gains is itself, in my opinion, anindication that, but for that exemption, they are to beregarded as capable of falling within the class ofincome, profits or gains under the charging section. Ifit is to be assumed that ex hypothesi a casual and non-recurring payment could never be income, then, as I seeit, the statutory exception of it would be otiose andunnecessary. Another reason is afforded by Section 4(3)(ii) of the Income-tax Act for inducing me to thinkthat so narrow a construction cannot be placed on theword “income”. If the assessee were right in sayingthat the test of “obligation” has in all cases to beapplied in deciding what is or is not “income”, it isdifficult to see why voluntary contributions to a *** religious or charitable institution (whether applicablesolely to religious or charitable purposes or not) shouldbe specially excepted by the Act. The conclusion,therefore, I have reached is that, in construing thatword “income” in the Indian Income-tax Act, one hasto ask oneself whether, having regard to all thecircumstances surrounding the particular payments andreceipts in question, what is received is of the characterof income according to the ordinary meaning of thatword in the English language or whether it is merely acasual receipt or mere windfall.” 13. InRaghuvanshi Mills Ltd., Bombay Vs. Commissioner of Income-Tax, Bombay City, (1952) XXII ITR484 while considering the nature of receipt of insurance claim forthe business loss, the Hon'ble Supreme Court observed:- *** religious or charitable institution (whether applicablesolely to religious or charitable purposes or not) shouldbe specially excepted by the Act. The conclusion,therefore, I have reached is that, in construing thatword “income” in the Indian Income-tax Act, one hasto ask oneself whether, having regard to all thecircumstances surrounding the particular payments andreceipts in question, what is received is of the characterof income according to the ordinary meaning of thatword in the English language or whether it is merely acasual receipt or mere windfall.” 13. InRaghuvanshi Mills Ltd., Bombay Vs. Commissioner of Income-Tax, Bombay City, (1952) XXII ITR484 while considering the nature of receipt of insurance claim forthe business loss, the Hon'ble Supreme Court observed:- “It is true the Judicial Committee attempted a narrowerdefinition in Commissioner of Income-tax v. ShawWallace & Co., by limiting income to “a periodicalmonetary return 'coming in' with some sort ofregularity, or expected regularity, from definitesources” but, in our opinion, those remarks must beread with reference to the particular facts of that case.The non-recurring aspect of this kind of receipt wasconsidered by the Privy Council in The King v. B.C.Fir and Cedar Lumber Co. and we do not think theirLordships had in mind a case of this nature when theydecided Shaw Wallace & Company's case.” 14.In Raja Bahadur Kamakshya Narain Singh ofRamgarh Vs. Commissioner of Income-Tax, Bihar and Orissa,AIR 1943 Privy Council 153, it was observed:- “Income is not necessarily the recurrent return from a definite source, though it is generally of that character. Income againmay consist of a series of separate receipts, as it generallydoes in the case of professional earnings. The multiplicity offorms which “income” may assume is beyond enumeration.Generally, however, the mere fact that the income flows fromsome capital assets, of which the simplest illustration is thepurchase of an annuity for a lump sum, does not prevent itfrom being income, though in some analogous cases the trueview may be that the payments, though spread over a period,are not income, but instalments payable at specified futuredates of a purchase price. Such a case is illustrated by (1903)A.C.299. But, in their Lordships' judgment, the royalties hereare clearly income and not capital. They are periodicalpayments for the continuous enjoyment of the various benefitsunder the leases. The actual acquisition of the property in aparticular ton of coal at the moment when the lessees have cutand taken away the coal is only the final stage.” 15.InNavinchandraMafatlal,Bombay Vs.Commissioner of Income Tax, Bombay City, AIR 1955 S.C.58,while considering the question whether capital gain could betreated as income if so provided for under statutory provisions, itwas observed:- “7. What, then, is the ordinary, natural and grammaticalmeaning of the word "income" ? According to thedictionary it means "a thing that comes in." (SeeOxford Dictionary, Vol. V. p. 162; Stroud, Vol. II, pp.14-16). In the United States of America and inAustralia both of which also are English speakingcountries the word "income" is understood in a widesense so as to include a capital gain. Reference may bemade to - 'Eisner v. Macomber', (1919) 252 US 189(K); -'Merchants' Loan and Trust Co. v. Smietanka',(1920) 255 US 509 (L) and - 'United States of America v. stewat', (1940) 311 US 60 (M) and - 'Resch v.Federal Commissioner of Taxation', (1943) 66 CLR198 (N). In each of these cases very wide meaning wasascribed to the word "income" as its natural meaning.” 16.In The Commissioner of Income-Tax, Hyderabad,Deccan Vs. M/s Vazir Sultan and sons, AIR 1959 SC 814 theissue was whether compensation for loss of agency was a capitalreceipt. It was held that compensation for loss of agency to becapital receipt on the ground that agency was a capital asset in thatcase. It was observed:- v. stewat', (1940) 311 US 60 (M) and - 'Resch v.Federal Commissioner of Taxation', (1943) 66 CLR198 (N). In each of these cases very wide meaning wasascribed to the word "income" as its natural meaning.” 16.In The Commissioner of Income-Tax, Hyderabad,Deccan Vs. M/s Vazir Sultan and sons, AIR 1959 SC 814 theissue was whether compensation for loss of agency was a capitalreceipt. It was held that compensation for loss of agency to becapital receipt on the ground that agency was a capital asset in thatcase. It was observed:- “35......The agency agreements in fact formed acapital asset of the assessee's business worked orexploited by the assessee by entering into contracts forthe sale of the "charminar" cigarettes manufactured bythe Company to the various customer and dealers in therespective territories. This asset really formed part ofthe fixed capital of the assessee's business. It did notconstitute the business of the assessee but was themeans by which the assessee entered into the businesstransactions by way of distributing those cigaretteswithin the respective territories. It really formed theprofit-making apparatus of the assessee's business ofdistribution of the cigarettes manufactured by theCompany. If it was thus neither circulating capital norstock-in-trade of the business carried on by the assesseeit could certainly not be anything but a capital asset ofits business and any payment made by the Company asand by way of compensation for terminating orcancelling the same would only be a capital receipt inthe hands of the assessee.” In Navnit LalC. Javeri Vs. K.K.Sen AIR 1965 SC 1375, it was observed:- “16. The question which now arises is, if the impugnedsection treats the loan received by a shareholder as adividend paid to him by the company, has thelegislature in enacting the section exceeded the limitsof the legislative field prescribed by the present Entry82 in List I? As we have already noticed, the word"income" in the context must receive a wideinterpretation; how wide it should be it is unnecessaryto consider, because such an enquiry would behypothetical. The question must be decided on the factsof each case. There must no doubt be some rationalconnection between the item taxed and the concept ofincome liberally construed. If the legislature realisesthat the private controlled companies generally adoptthe device of making advances or giving loans to theirshareholders with the object of evading the payment oftax, it can step in to meet this mischief, and in thatconnection, it has created a , fiction by which theamount ostensibly and nominally advanced to ashareholder, as a loan is treated in reality for taxpurposes as the payment of dividend to him. We havealready explainer how a small number of shareholderscontrolling a private company adopt this device.Having regard to the fact that the legislature was .aware of such devices, would it not be competent to thelegislature to device a fiction for treating the ostensibleloan as the receipt of dividend? In our opinion, it wouldbe difficult to hold that in making the fiction, thelegislature has travelled beyond the legislative fieldassigned to it by entry 82 in List 1.” 18.In Senairam Doongarmall Vs. Commissioner ofIncome-Tax, Assam, AIR 1961 SC 1579, the question waswhether compensation received from military authority on account of loss of earning of tea estate was income or capital receipt. It wasobserved that quality of payment was decisive of the character ofincome and compensation received was not income. During thediscussion following passage from English judgment in SutherlandVs. Commissioners of Inland Revenue (1918) 12 Tax Case 63was referred:- “Now it is quite clear that if a source of income isdestroyed by the exercise of the paramount right... andcompensation is paid for it, that that is not income,although the amount of compensation is the same sumas the total of the income that has been lost.” 18.In Senairam Doongarmall Vs. Commissioner ofIncome-Tax, Assam, AIR 1961 SC 1579, the question waswhether compensation received from military authority on account of loss of earning of tea estate was income or capital receipt. It wasobserved that quality of payment was decisive of the character ofincome and compensation received was not income. During thediscussion following passage from English judgment in SutherlandVs. Commissioners of Inland Revenue (1918) 12 Tax Case 63was referred:- “Now it is quite clear that if a source of income isdestroyed by the exercise of the paramount right... andcompensation is paid for it, that that is not income,although the amount of compensation is the same sumas the total of the income that has been lost.” 19. In CIT v. G.R. Karthikeyan, 1993 Supp 3 SCC 222, itwas observed:- “7. It is not easy to define income. The definition in theAct is an inclusive one. As said by Lord Wright inKamakshya Narayan Singh v. CIT, (1943) 11 ITR 513(PC) “income ... is a word difficult and perhapsimpossible to define in any precise general formula. Itis a word of the broadest connotation”. In Gopal SaranNarain Singh v. CIT (1935) 3 ITR 237 (PC) the PrivyCouncil pointed out that “anything that can properly bedescribed as income is taxable under the Act unlessexpressly exempted”. This Court had to deal with theambit of the expression ‘income’ in NavinchandraMafatlal v. CIT, (1954) 26 ITR 758. The Indian IncomeTax and Excess Profits Tax (Amendment) Act, 1947had inserted Section 12(B) in the Indian Income TaxAct, 1922. Section 12(B) imposed a tax on capitalgains. The validity of the said amendment wasquestioned on the ground that tax on capital gains is nota tax on ‘income’ within the meaning of Entry 54 ofList 1, nor is it a tax on the capital value of the assets ofindividuals and companies within the meaning of Entry *** 55 of List 1 of the Seventh Schedule to the Governmentof India Act, 1935. The Bombay High Court repelledthe attack. The matter was brought to this Court. Afterrejecting the argument on behalf of the assessee that theword ‘income’ has acquired, by legislative practice, arestricted meaning — and after affirming that theentries in the Seventh Schedule should receive the mostliberal construction — the Court observed thus: “What, then, is the ordinary, natural and grammati-cal meaning of the word ‘income’? According to thedictionary it means ‘a thing that comes in’. (See OxfordDictionary, Vol. V, p. 162; Stroud, Vol. II, pp. 14-16).In the United States of America and in Australia bothof which also are English speaking countries the word‘income’ is understood in a wide sense so as to includea capital gain. Reference may be made to Eisner v. Ma-comber, 252 US 189; Merchants’ Loan and Trust Co.v. Smietunka, 255 US 209 and United States v. Stewart,311 US 60 and Resch v. Federal Commissioner ofTaxation, 66 CLR 198 (1943). In each of these casesvery wide meaning was ascribed to the word ‘income’as its natural meaning. The relevant observations oflearned Judges deciding those cases which have beenquoted in the judgment of Tendolkar, J. quite clearly in-dicate that such wide meaning was put upon the word‘income’ not because of any particular legislative prac-tice either in the United States or in the Commonwealthof Australia but because such was the normal conceptand connotation of the ordinary English word ‘income’.Its natural meaning embraces any profit or gain whichis actually received. This is in consonance with the ob-servations of Lord Wright to which reference has al-ready been made. *** The argument founded on an assumed legislative practicebeing thus out of the way, there can be no difficulty in apply-ing its natural and grammatical meaning to the ordinaryEnglish word ‘income’. As already observed, the wordshould be given its widest connotation in view of the fact thatit occurs in a legislative head conferring legislative power.”(emphasis supplied) *** The argument founded on an assumed legislative practicebeing thus out of the way, there can be no difficulty in apply-ing its natural and grammatical meaning to the ordinaryEnglish word ‘income’. As already observed, the wordshould be given its widest connotation in view of the fact thatit occurs in a legislative head conferring legislative power.”(emphasis supplied) 8. Since the definition of income in Section 2(24) is an inclu-sive one, its ambit, in our opinion, should be the same as thatof the word income occurring in Entry 82 of List I of the Sev-enth Schedule to the Constitution (corresponding to Entry 54of List I of the Seventh Schedule to the Government of IndiaAct).” 20.In the context of compensation received under theMotor Vehicle Act, the compensation is either on account of loss ofearning capacity on account of death or injury or on account of painand suffering. Such receipt is not by way of earning or profit.Award of compensation is on the principle of restitution to placethe claimant in the same position in which he would have been hadthe loss of life or injury not been suffered. In Gobald MotorService Ltd. and another Vs. R.M.K.Veluswami and others AIR1962 SC 1, it was observed:- “The same principle was restated with force and clarity byViscount Simon in Nance v. British Columbia ElectricRailway Co. Ltd., 195l AC 601. There, the learned Lord wasconsidering the analogous provisions of the British Columbialegislation, and he put the principle thus at p. 614: "The claim for damages in the present case falls undertwo separate heads. First, if the deceased had not beenkilled, but had eked out the full span of life to which inthe absence of the accident he could reasonably havelooked forward, what sums during that period would he *** probably have applied out of his income to themaintenance of his wife and family?". 21.Having regard to nature of receipt of compensation asper award under the M.V.Act, compensation is in the nature ofcapital receipt for death or injury and cannot be held to be in thenature of income. Learned counsel for the revenue also fairlyaccepts this legal position. It appears to be for this reason that thesaid receipt is not sought to be treated as income. 22.We may now consider the question whether intereston account of delay in adjudication becomes part of compensationor can be treated as a separate component of income. 23.Section 171 of the M.V.Act authorizes the Tribunal toaward interest on the claim made under the Act from the date ofmaking the claim. It reads thus: “171.Award of interest where any claim is allowed: Where any Claims Tribunal allows a claim forcompensation made under this Act, such Tribunal maydirect that in addition to the amount of compensationsimple interest shall also be paid at such rate and fromsuch date not earlier than the date of making the claimas it may specify in this behalf.” 24.In the context of compensation under the provisions ofLand Acquisition Act, 1894, the Hon'ble Supreme Court inCommissioner of Income-Tax Vs. Ghanshyam (HUF), (2009) 315ITR 1 SC held that interest paid by the Collector under Section 34of the said Act was part of compensation and was treated to be atpar with the compensation for purposes of taxability. The relevantobservations therein are:- *** “171.Award of interest where any claim is allowed: Where any Claims Tribunal allows a claim forcompensation made under this Act, such Tribunal maydirect that in addition to the amount of compensationsimple interest shall also be paid at such rate and fromsuch date not earlier than the date of making the claimas it may specify in this behalf.” 24.In the context of compensation under the provisions ofLand Acquisition Act, 1894, the Hon'ble Supreme Court inCommissioner of Income-Tax Vs. Ghanshyam (HUF), (2009) 315ITR 1 SC held that interest paid by the Collector under Section 34of the said Act was part of compensation and was treated to be atpar with the compensation for purposes of taxability. The relevantobservations therein are:- *** “…Section 28 of the 1894 Act applies only in respectof the excess amount determined by the Court afterreference under Section 18 of the 1894 Act. It dependsupon the claim, unlike interest under Section 34 whichdepends on undue delay in making the award. It is truethat “interest” is not compensation. It is equally truethat Section 45(5) of the 1961 Act refers tocompensation. But as discussed hereinabove, we haveto go by the provisions of the 1894 Act which awards“interest” both as an accretion in the value of the landsacquired and interest for undue delay. Interest underSection 28 unlike interest under Section 34 is anaccretion to the value, hence it is a part of enhancedcompensation or consideration which is not the casewith interest under Section 34 of the 1894 Act…” 25.In Central Bank of India Vs. Ravindra and othersAIR 2001 SC 3095, the question was whether interest component ofthe principal sum could carry further interest. It was observed:- “44. We are of the opinion that the meaning assignedto the expression 'the principal sum adjudged' shouldcontinue to be assigned to "principal sum" at such otherplaces in Section 34(1) where the expression has beenused qualified by the adjective "such", that is to say, as"such principal sum". Recognition of the method ofcapitalisation of interest so as to make it a part of theprincipal consistently with the contract between theparties or established banking practice does not offendthe sense of reason, justice and equity. As we havenoticed such a system has a long established practiceand a series of judicial precedents upholding the same.Secondly, the underlying principle as noticed in severaldecided cases is that when interest is debited to theaccount of the borrower on periodical rests, it is debited because of its having fallen due on that day. Nothingprevents the borrower from paying the amount ofinterest on the date it falls due. If the amount of interestis paid there will be no occasion for capitalising theamount of interest and converting it into principal. Ifthe interest is not paid on the date due, from that datethe creditor is deprived of such use of the money whichit would have made if the debtor had paid the amountof interest on the date due. The creditor needs to becompensated for deprivation. As held in PazhaniappaMudaliar v. Narayana Ayyar (supra), the fact situationis analogous to one as if the creditor has advancedmoney to the borrower equivalent to the amount ofinterest debited. We are, therefore, of the opinion thatthe expression "the principal sum adjudged" mayinclude the amount of interest, charged on periodicalrests, and capitalised with the principal sum actuallyadvanced, so as to become an amalgam of principal insuch cases where it is permissible or obligatory for theCourt to hold so. Where the principal sum (on the dateof suit) has been so adjudged, the same shall be treatedas "principal sum" for the purpose of "such principalsum" - the expression employed later in Section 34 ofC.P.C. The expression "principal sum" cannot be givendifferent meanings at different places in the languageof same section, i.e. Section 34 of C.P.C.” 26. The principle in Ghanshyam applies to award ofinterest from the date of claim to the date of receipt of the awardedamount under the Land Acquisition Act. 27.The apex Court in Tuticorin Alkali Chemicals andFertilizers Limited v. Commissioner of Income Tax, (1997) 227ITR 172 had noted that ordinarily, the interest received is income but it would not be of revenue nature where it is received by way ofdamages or compensation. 28.In view of the above, the interest component incompensation awarded by MACT is part of compensation and hasto be treated as capital receipt and not income till the claimantreceived the amount in pursuance of award. However, differentconsideration will prevail for interest earned by the claimant on theamount so received, after the receipt thereof. 29.Section 194A(3)(ix) refers to the provision of receiptof interest after amount has been received by the claimant inpursuance of the award. We are, thus, of the opinion that questionof law raised on behalf of the assessee has to be answered in itsfavour. The view of the Tribunal that interest allowed by theMACT in an accident case was income from interest and, thus,revenue in nature, is not sustainable. 30.Accordingly, the appeals are allowed. 31.A photocopy of this order be placed on the file of each of the connected cases (Adarsh Kumar Goel) Judge March 30, 2011Pka/gs (Ajay Kumar Mittal) Judge