Statutory interest on delayed land acquisition compensation is taxable income, not capital receipt or casual income.
Interest statutorily payable under section 34 of the Land Acquisition Act, 1894, for delayed payment of compensation is not part of the capital value of the acquired land. It is a statutory amount for the use or withholding of money after possession is taken, bears the character of income, and is therefore a revenue receipt chargeable to tax. The amount is also not exempt as casual or non-recurring income because it arises whenever compensation remains unpaid under the statutory scheme. Accordingly, the receipt was treated as taxable income rather than a capital receipt.
Issues: Whether interest payable under section 34 of the Land Acquisition Act, 1894, on delayed payment of compensation for compulsory acquisition is a capital receipt or a revenue receipt liable to income-tax, and whether such receipt is exempt as casual and non-recurring income.
Analysis: Compensation awarded under section 23 of the Land Acquisition Act represents the value of the capital asset acquired and retains the character of capital. By contrast, the amount payable under section 34 is not part of the price of the land but is a statutory payment for the delay in making good the compensation after possession has been taken. Its character is that of return for the use or withholding of money and not compensation for the loss of the land itself. The amount is calculated by reference to a period of delay and therefore bears the essential attributes of income. The receipt is also not casual or non-recurring, because it arises regularly whenever compensation remains unpaid after possession is taken and is payable by the statutory scheme itself.
Conclusion: The amount of Rs. 48,660 was not a capital receipt. It was a revenue receipt chargeable to tax and was not exempt as casual and non-recurring income.
Final Conclusion: The reference was answered against the assessee and in favour of the Revenue.
Ratio Decidendi: Interest statutorily payable for delayed payment of land acquisition compensation is taxable income where it represents compensation for the use or withholding of money and not part of the capital value of the acquired land.
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