Taxability of interest on delayed compensation affirmed, and challenge to tax deduction at source rejected.

Interest received on delayed payment of enhanced compensation is treated as a revenue receipt chargeable to tax under the Income-tax Act, following Supreme Court authority on interest under the Land Acquisition Act, 1894. The position is that such interest is taxable, and the challenge to deduction of tax at source does not succeed. The analysis also notes that section 194A was not applicable on the facts considered in the cited precedent, while recipients may claim spread over of the income for the relevant period for assessment purposes.

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Issues: Whether interest received on delayed payment of enhanced compensation is exigible to tax and whether tax at source can be directed to be deducted from such interest.

Analysis: The Court held that the question was no longer res integra in view of the Supreme Court's pronouncement that interest on delayed payment of compensation under the Land Acquisition Act, 1894 is a revenue receipt chargeable to tax under section 4 of the Income-tax Act, 1961. It further noted that section 194A of the Income-tax Act, 1961 was inapplicable to the facts considered in that precedent, while observing that the recipients would be entitled to a spread over of the income for the relevant period for assessment purposes.

Conclusion: The interest on delayed payment of enhanced compensation is taxable and the challenge to deduction of tax at source fails.

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