M. JAVED BUTTAR, J.- These appeals, by leave, are directed against Judgment dated 15.1.2003 passed by a Division Bench of Lahore High Court, whereby the appeals of the appellants/the Society/the assessee (hereinafter referred to as assessee) against the order, dated 19.3.1998 passed by the Income Tax Appellate Tribunal, were decided. The only question pressed before the learned Judges of the High Court, which has been reproduced below, was answered in the affirmative. The said question reads as under:- "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified to hold that interest received by the appellant from L.D.A. On the delayed payment had been rightly charged to tax?".
2. The relevant facts are that in the year 1975-76 certain property of the assessee was acquired under the Land Acquisition Act No. 1 of 1894, for the establishment of housing scheme known as "Model Town Extension Scheme" and the possession of the land so acquired was taken over by the Lahore Development Authority (hereinafter referred to as L.D.A.) The assessee assailed the transaction through, a Constitutional petition before Lahore High Court. On 6-21980 the parties compromised. The L.D.A. Agreed to pay a total sum of Rs. 7,32,38,280/- to the assessee out of which Rs. 32,38,280/- was to be paid immediately on completion and execution of the agreement and the remaining amount of Rs. 7,00,00,000/- was payable in instalments as follows:- The balance amount (Rs. 7,00,00,000) shall be payable to the second party in five half yearly equal instalments alongwith simple interest at the bank rate prevailing on the date of execution of this agreement including interest on aforesaid retained amount. First instalment shall be payable by 31st August, 1980' (emphasis supplied).
3. In the assessm ent year 1980-81, the Assessing Officer, while assessing the income of the assessee, included the additional sum of Rs. 7,97,54,370/-and made it subject to Tax, as a difference between the cost and sale price of the aforesaid land. The assertion of the society that the deal was not in the nature of an adventure in trade, therefore, the surplus was not liable to tax, was not accepted by the Assessing Officer. The assessee's appeals were dismissed by the Commissioner of Income Tax. The second appeals. However, were accepted by the Appellate Tribunal vide its order dated 05.05.1986. It was found that the transaction between the assessee and the L.D.A. Was not in the ordinary course of business of the assessee and that the revenue had ,failed to establish that it was an adventure in the nature of trade, therefore, the surplus accrued to the assessee was a capital receipt not liable to Tax.
4. Subsequently, the case was re-opened for the assessment years 1980-81 to 1983-84, on the ground that during this period, the assessee was in the receipt of interest of Rs. 27,08,904/-, 42,79,837/-, 37,82,120/- and 11,75,461/- in terms of the aforesaid clause of the agreement. The claim of the, assessee that the interest was settled as compensation for delayed payment of the sale price, therefore, it formed part of the price of the land, was not accepted by the revenue. The assessee failed before the first appellate authority, the Tribunal, and also before the High Court. The concluding paragraph of the impugned judgment reads as follows:- 1 6. Learned Members of the Tribunal also made a correct distinction between a capital and a revenue receipt by rejecting the arguments that a receipt, capital or revenue has to maintain a consistent character both in the hands of the payer and the payee. The principle expounded by the Supreme Court of India in re: CIT West Bengal II Vs. Kama! Beharilal Singha (1971) 82 1TR 460 needs to be reproduced to clinch the issue:- "Lis now well-settled that in order to find out whether a receipt is a capital receipt or a revenue receipt one has to see what it is in the hands of the received and not its nature in the hands of the payer. In other words, the nature of the receipt is determined entirely by its character in the hands of the received and the source from which the payment is made has not bearing on the question.
Where an amount is paid which, so far as the payer is concerned, is paid wholly or partly out of capital, and the receiver receives it as income on his part, the entire receipt is taxable in the hands of the receiver".
17. For these and other reasons stated above, we will return an affirmative answer to the question.
5. We have heard learned counsel for the parties and have also seen the available record.
6. The learned counsel for the assessee has submitted that the interest received by the assessee on account of delayed payments of compensation for the acquired land, formed part of the sale price and thus remained a capital receipt not liable to Tax, that till the transfer of title, irrespective of the delivery possession, all sums received by the assessee are to be treated as compensation, forming part of the price of land (placed his reliance on Dr. Shamlal Narula Vs. Commissioner of Income Tax (1964), 10 Tax 235, a judgment delivered by Supreme Court of India on 9.4.1964) and that the nature of payment must remain the same both in the hands of the payer as well as the receiver. The contentions have been opposed.
7. We find no force in these appeals. The judgment relied upon by the learned counsel for the appellants is distinguishable and is not applicable to the facts of the present case. No provision of law or principle of accounting was quoted either before us or before the High Court that the nature of payment, capital or revenue, must remain the same both in the hands of the payer as well as the receiver. It has been correctly held by the forums below that the interest received on account of delayed payment did not form part of the sale price and could not be treated as a capital receipt.
It could not be treated as a compensation for the land acquired. In our view, whatever was received over and above the actual price of land, settled between the parties, on account of delayed payments, was not part of the sale price. It was in fact compensation for not receiving the sale price in time because the Society was deprived of the use and enjoyment of the sale price for the said period. Furthermore the payment of interest was avoidable by paying the remaining sale price in lump sum at any time after the execution of the agreement. In G.I. T, Bengal Muffassil Vs. Burdhan Kuti Wards' Estate (1960) 2 Tax (Suppel-1), relied upon by the High Court it was held that compensation paid to the assessee for delivery of possession of land to the Government, under a lease agreement, was a revenue and not a capital receipt. The other argument that till actual transfer of title all the sums received by the appellants, are to be treated as compensation and part of the price of land, has also no force. This aspect has been competently dealt with by the High Court, in the impugned judgment. The possession was taken over by the L.D.A. It was correctly held by High Court that the agreement dated 6.2.1980 reached between the L.D.A. And the assessee, registered with the Sub-Registrar Lahore on 14.2.1980, by itself, can be treated as a document effecting transfer of property. It was acted upon long ago as a transfer document because thereafter, the said land was treated and used, without any objection from the appellant side, as a property belonging to L.D.A, which distributed the same to the allotttees, conferred proprietary rights on them who thereafter made constructions on the said land and the housing scheme stood completed. The nature of receipt is determinable by its character in the hands of the receiver and the source from which the payment is received has no relevance to the question in hand. Similarly, its nature in the hands of payer has no relevance. It need not be the same both in the hands of the payer as well as the receiver. As far as the payer Is concerned, the amount in question may be paid wholly or partly out of capital, whereas the receiver may be receiving the same as an income, as, in the present case, on the sale price settled or paid. The issue was exhaustively deal with by the Supreme Court of India in Commissioner of Income Tax, West Bengal 11 Vs. Kamal Behari Lal Singh (and other cases) (Supra) (relevant Para reproduced above) and we are also of the same view. Therefore, the payrrients received by the appellants, on account of 'delayed payments of the sale price, which was settled between the parties, were not part of the sale price and were liable to tax.
In view of the above-mentioned, we find no merit in these appeals which are accordingly dismissed, leaving the parties to bear own costs.
Civil .