Taxability of interest on enhanced compensation: receipt basis applies for cash system assessees and non-bookkeepers.

Interest on enhanced compensation is taxable on receipt where the assessee follows the cash system of accountancy or maintains no books under any specified method. The Court treated such interest as part of the compensation itself and applied the principle that taxation arises in the year the amount is actually received. The issue was answered in favour of the Revenue.

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Issues: Whether interest on enhanced compensation is taxable in the year of receipt.

Analysis: The Court followed its earlier decision on the same question and held that where the assessee follows the cash system of accountancy, or does not maintain books by any specific method, the receipt of interest on enhanced compensation is taxable on receipt. The interest awarded on enhanced compensation partakes the character of compensation and falls for taxation in the year in which it is received.

Conclusion: The issue was answered in favour of the Revenue and the interest on enhanced compensation was held taxable in the year of receipt.

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