# CHANDROJI RAO v. COMMISSIONER OF INCOME-TAX, M.P. NAGPUR

- **Citation:** [1971] 1 S.C.R. 422
- **Court:** Supreme Court of India
- **Decided:** 1970-04-28
- **Bench:** C. Shah, K. S. Hegde, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/chandroji-rao-v-commissioner-of-income-tax-m-p-nagpur-5065
- **Pages:** 4

## Headnote

. Indian Income-tax Act, 1922-Capital and Rei·enue
Compensation
payable under s. 8 of Madhya Bharat Abolition of Jagir A<·t, 19'51Payabte 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
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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

## Text

422
.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, 19'51Payabte 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
A
·B
c
D
F
G
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.
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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 references 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 erstwhile 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!'!
H
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
Jagirland has been resumed under Sec .. ~. such compensation 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 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
'°per~ted as a foll discharge of the liability of the Government
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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 provision 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 subs. (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.