Compensation for temporary government occupation of land classified as income from other sources and therefore taxable, not capital.

Payment received from government for temporary occupation of land was characterised as compensation for loss of income (prevention from enjoying the usufruct) rather than a capital receipt because there was no agreement as to rent, no damage, and no permanent deprivation or sterilisation of the capital asset; accordingly the sum is taxable as income from other sources and not excludable as capital.

---

---

Issues: Whether the sum of Rs. 8,272 received by the assessee from the Central Public Works Department was income from other sources liable to inclusion in total income or a capital receipt to be excluded from assessment.

Analysis: The payment arose from Government occupation of land for a period during which the assessee was prevented from earning income from that land. No material was produced to show any agreement as to rent, any damage to the land, or any permanent deprivation of the capital asset. The facts do not suggest sterilisation or immobilisation of the capital asset; rather they indicate loss of income (prevention from enjoying the usufruct) during temporary requisition. Authorities holding compensation for permanent deprivation or sterilisation to be capital are distinguishable on their facts.

Conclusion: The sum of Rs. 8,272 is taxable in the hands of the assessee as income from other sources; the question referred is answered in favour of the Income-tax Department and against the assessee.

---