HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
T. N. K. Govindarajulu Chetty v. Commissioner of Income-tax, Madras
Civil Appeals Nos. 1425 and 1426 of 1966
[1967] 3 SCR 653 ·
Indian Income-tax Act, 1922: income chargeability provisions · Requisitioned Land (Continuance of Powers) Act, 1947: sections 5 and 6 · Defence of India Act, 1939: section 19(1), including clauses (e) and (g) · Land Acquisition Act, 1894: sections 23(1), 28 and 34
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by J. C. Shah, J. · J. C. Shah, J. · S. M. Sikri, J. · V. Ramaswami, J.
Assessment years: 1955-56, 1956-57
01 · Facts of the case
The Madras Collector requisitioned the assessees' Lutterals Gardens property in 1944 under rule 75A of the Defence of India Rules and acquired it in 1949 under section 5 of the Requisitioned Land (Continuance of Powers) Act. The assessees rejected an offer of Rs.2,40,000 plus 6 per cent interest; the Madras High Court ultimately fixed compensation at Rs.5,00,000 and awarded 6 per cent interest from the acquisition notification. During the previous years relevant to assessment years 1955-56 and 1956-57, they received Rs.6,28,716, including Rs.1,28,716 interest. The officer taxed year-of-receipt amounts, the first appellate authority treated the interest as revenue accruing year by year, and the Tribunal held it capital. On reference, the High Court held it taxable but declined to answer the separate apportionment question (SCR pp.653-655; PDF pp.1-3).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
Following Dr. Shamlal Narula, the Court distinguished interest paid for delayed compensation from the capital compensation itself: statutory or contractual interest represents the return or loss associated with being kept out of money (SCR pp.655-656; PDF pp.3-4). The English damages decisions did not control because their so-called interest arose only in discretionary awards as a measure of compensation. Here Satinder Singh supplied the governing acquisition principle: dispossession implied an agreement to pay interest until compensation was made available. The Requisitioned Land scheme incorporated section 23(1) principles, and section 19(1)(g) did not exclude substantive rules concerning interest merely because it excluded other law from the arbitration procedure. Sections 28 and 34 therefore supported the right that the arbitrator and High Court implemented (SCR pp.656-660; PDF pp.4-8).
Source: Primary judgment: discussion
03 · Judicial decision
The Supreme Court held that the interest received by the assessees was taxable, dismissed Civil Appeals Nos.1425 and 1426 of 1966 with costs and allowed one hearing fee (SCR p.660; PDF p.8).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Revenue on the character of the receipt: the Rs.1,28,716 awarded as interest was taxable revenue. The judgment did not itself resolve the separate year-wise apportionment question that the High Court had declined to answer (SCR pp.654, 660; PDF pp.2, 8).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: when classifying an amount described as interest, identify the legal source of the payment, the period it compensates, whether it is additional to principal compensation, and whether the adjudicator merely enforced an existing statutory or contractual right or instead used an interest calculation only to measure damages. Keep character and year-of-taxability questions separate; this report decides the former, not the latter (based on SCR pp.655-660; PDF pp.3-8).
Source: Primary judgment: reviewPoint
Source & verification
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Statutory scope
The decision concerns interest on compensation under wartime requisition and acquisition enactments and the repealed Indian Income-tax Act, 1922. It does not itself determine current taxation of compulsory-acquisition compensation or interest, nor the effect of later statutory classifications, exemptions or timing provisions. No current-law or later-treatment clearance was undertaken.
Later treatment
Source checked 2026-10-11. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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