Interest on delayed enhanced compensation is taxable on receipt, and tax deduction at source is upheld.

Interest received on delayed payment of enhanced compensation for acquired land was treated as taxable income from other sources, not as a separate exempt component. Where no specific accounting method was shown, the receipt was assessed on the cash system, so tax incidence arose in the year of receipt. The earlier ruling in Ghanshyam (HUF) was held not to assist on these facts. Tax deduction at source on such interest was therefore justified, and the challenge to withholding failed.

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Issues: Whether tax deducted at source from interest received on enhanced compensation for acquired land was illegal and refundable.

Analysis: The interest received on the enhanced amount was found to be interest for delayed payment of compensation and not a separate exempt component. In such circumstances, it was treated as taxable income, falling under income from other sources. The Court relied on the view that, where no specific method of accounting was shown, the receipt would be assessed on the cash system and the tax incidence would arise in the year of receipt. The earlier ruling in Ghanshyam (HUF) did not assist the petitioners on these facts, and the deduction of tax at source was held to be justified.

Conclusion: The challenge to deduction of tax at source failed and the petitioners were not entitled to refund.

Final Conclusion: Interest on delayed payment of enhanced compensation was held taxable on receipt, so the withholding of tax at source was upheld and the writ petitions were dismissed.

Ratio Decidendi: Interest received for delayed payment of enhanced compensation is taxable as income from other sources on receipt, and tax deduction at source on such amount is valid.

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