Interest on deferred partition payment is taxable income, not a capital receipt, even when paid under an arbitration award.

Amounts received as compensation for the use of money under a partition arrangement were taxable as income and not a capital receipt. The receipt arose because one co-sharer retained money otherwise payable to another while agreeing to make periodic payments with interest; that character made it a periodical monetary return from a definite source, not accretion to capital or damages for wrongful detention. The fact that the payment was ultimately made under an arbitration award did not alter its essential nature. The amount was therefore assessable either as business income or as income from other sources.

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Issues: Whether the amount received under the arbitration award as interest on the deferred partition payment was income liable to tax or a capital receipt.

Analysis: The amount arose from an agreement under the partition deed by which one co-sharer was allowed to retain and use money otherwise payable to the assessee in consideration of making periodical payments with interest. The receipt was not an accretion to capital, nor was it damages for wrongful detention of money. It was compensation for the use of money, falling within the concept of interest as a periodical monetary return from a definite source. The receipt was therefore taxable whether regarded as business income or as income from other sources, and the fact that the payment was ultimately made under an award did not change its character.

Conclusion: The sum was income liable to tax and not a capital receipt.

Final Conclusion: The reference was answered in the affirmative, and the assessee's challenge to taxability failed.

Ratio Decidendi: Amounts received as recompense for the use of money under an enforceable arrangement are taxable income, and their character is not altered by subsequent compromise or arbitration.

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