Taxability of interest on delayed compensation upheld, with section 194A deduction applying to the receipt.

Interest received on delayed payment of enhanced compensation for acquired land was treated as interest on delayed money and not as part of the compensation itself. On that basis, it was characterised as a revenue receipt taxable under the Income-tax Act and not as agricultural income merely because the land acquired was agricultural. Once the receipt was held taxable, tax deduction at source under section 194A was attracted, and the claim for refund of the deducted amount failed.

---

---

Issues: Whether interest received on delayed payment of enhanced compensation for acquired land is a revenue receipt exigible to income tax and, if so, whether tax is deductible at source under section 194A.

Analysis: The interest paid on delayed compensation was treated as interest on the delayed payment of money and not as part of the compensation itself. The controlling principle applied was that such interest is a revenue receipt liable to tax under the charging provisions of the Income-tax Act, and not agricultural income merely because the underlying land was agricultural. Once the receipt is characterised as taxable income, deduction at source under section 194A follows, and the petitioners' claim for refund of the deducted amount cannot succeed.

Conclusion: The issue is decided against the petitioners and in favour of the Revenue.

---