Interest on enhanced requisition compensation follows the character of the underlying revenue receipt and is taxable as income from other sources.

Interest awarded on enhanced compensation for requisitioned property was held to retain the character of the underlying receipt. Because the periodic compensation under the requisition scheme was revenue in nature, the additional sum described as interest did not become a capital receipt merely by that label. The statutory framework contained no provision for interest on delayed compensation, and there was no contractual basis for such payment; nor was there a finding that the amount represented damages. The amount was therefore taxable as income from other sources rather than an ex gratia capital payment.

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Issues: Whether interest awarded by the High Court on enhanced compensation for requisitioned property was assessable as income from other sources or was to be treated as an ex gratia payment by way of compensation.

Analysis: The assessment related to compensation payable for requisition, not acquisition, of property. The assessee was to receive periodic compensation under the requisition law, and the High Court enhanced that compensation while also directing payment termed as interest on the enhanced amount. The statutory scheme contained no provision for interest on delayed compensation and there was no contractual basis for such payment. However, the decisive factor was the character of the underlying receipt: the monthly compensation itself was of revenue nature, and the interest awarded on the enhanced compensation could not assume a different character merely because it was described as interest. There was no finding that the amount represented damages.

Conclusion: The amount of Rs. 21,295 was taxable as income from other sources and was not an ex gratia capital receipt; the question was answered in the negative and against the assessee.

Ratio Decidendi: Where the principal receipt is revenue in nature, an additional sum awarded as interest on enhanced compensation for requisition does not change its character into a capital receipt unless it is shown to be damages or some other non-revenue payment.

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