Contractual compensation and delayed-payment interest treated as revenue receipts and held taxable where arising from trading operations.

Compensation received for non-supply of tippers in time was treated as a revenue receipt because it arose from work done under the contract and not from loss of a capital asset or capital structure, and it was therefore taxable. Interest awarded for delayed payment of contract amounts was also treated as revenue in character because it was an accretion to the trading receipt arising from the business transaction itself, and it was therefore taxable. The receipts were held to stem from contractual trading operations rather than a capital source, so the reference was answered in favour of the Revenue.

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Issues: (i) Whether the compensation received for non-supply of tippers in time was revenue in nature and taxable; (ii) whether the interest awarded for delayed receipt of contract amounts was taxable as a revenue receipt.

Issue (i): Whether the compensation received for non-supply of tippers in time was revenue in nature and taxable.

Analysis: The Tribunal's finding was that the amount was paid for work done and not by way of damages for loss of a capital asset or capital structure. On the facts found, the receipt represented consideration arising from the contractual operations of the assessee.

Conclusion: The compensation was held to be a revenue receipt and therefore taxable, against the assessee.

Issue (ii): Whether the interest awarded for delayed receipt of contract amounts was taxable as a revenue receipt.

Analysis: The interest was found to have been awarded only for the period of delay in payment of contract amounts due to the assessee. Such interest was an accretion to the trading receipt arising from the business transaction itself.

Conclusion: The interest was held to be a revenue receipt and therefore taxable, against the assessee.

Final Conclusion: Both receipts were treated as revenue in character and the reference was answered in favour of the Revenue.

Ratio Decidendi: Amounts received for work done, including interest for delayed payment of contract dues, are revenue receipts where they arise from the contractual trading operations and not from a capital source.

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