Year-to-year accrual of requisition compensation governs taxability, even where later quantified and paid in lump sum.

Rental compensation for requisitioned land was treated as a recurring annual accrual once the right to receive it arose on deprivation of possession under the Bombay Land Requisition framework. Later quantification or part payment in a lump sum did not change the character of the income, because an absolute and vested right to compensation gives rise to accrual when the right arises. The amount was therefore assessable on accrual basis year to year, not only in the year of receipt, and taxation had to be spread proportionately across the relevant years.

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Issues: Whether rental compensation payable for requisitioned land accrued year to year from the date of requisition or was taxable only in the year of lump-sum receipt.

Analysis: The right to compensation arose under section 8 of the Bombay Land Requisition Act, 1948, on deprivation of possession and was governed by the compensation scheme under Rule 4 of the Bombay Land Requisition (Determination of Compensation) Rules, 1949. The compensation was thus a recurring yearly accrual, and the later quantification or part payment did not alter the character of the income. On the principle that an absolute and vested right to receive compensation gives rise to accrual when the right arises, the amount could not be assessed on receipt basis merely because it was paid in part later in a lump sum. The reasoning was consistent with the principle that compensation-related income accrues annually and is taxable proportionately in the relevant years.

Conclusion: The compensation was taxable on accrual year to year and not as income of the year of receipt; the answer is in favour of the assessee.

Ratio Decidendi: Where compensation for requisitioned property gives rise to a vested right to receive a recurring annual amount, the income accrues year to year and is assessable on accrual basis notwithstanding later quantification or lump-sum payment.

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