Accrual of land acquisition interest year by year means tax follows annual apportionment, not single-year receipt taxation.

Interest payable under section 34 of the Land Acquisition Act, 1894 on enhanced compensation accrues year by year from the date of possession until the court order, rather than as a lump sum on the date of receipt. Applying Rama Bai and later authorities, the timing of taxation had to follow that accrual pattern, so assessment in a single year on receipt basis was rejected. The deletion of the addition was upheld in favour of the assessee.

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Issues: Whether interest received under section 34 of the Land Acquisition Act, 1894 on enhanced compensation was taxable in the year of receipt or had to be spread over on an annual basis from the date of delivery of possession till the date of the court order.

Analysis: The amount received by the assessee was interest under section 34 of the Land Acquisition Act, 1894. The law laid down in Rama Bai and followed in later decisions was applied to hold that such interest does not accrue as a lump sum on the date of the court order. Instead, the income accrues year by year from the date of possession up to the date of the order, and the timing of taxation must follow that accrual pattern. The reasoning that the receipt was taxable only in the year of receipt was therefore rejected.

Conclusion: The interest on enhanced compensation was not taxable in a single year on receipt basis and had to be apportioned on an annual basis; the deletion of the addition was upheld in favour of the assessee.

Final Conclusion: The revenue's challenge failed because the impugned interest was held to accrue over time and not as a one-time taxable receipt in the year under appeal.

Ratio Decidendi: Interest payable under section 34 of the Land Acquisition Act, 1894 on enhanced compensation accrues year by year from the date of possession until the date of the court order and cannot be taxed as a lump sum in the year of receipt.

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