Statutory interest on enhanced compensation accrues year by year and is taxable in the years to which it relates.

Statutory interest payable under section 8(2) of the Madhya Bharat Abolition of Jagirs Act, 1951 was treated as accruing from year to year because the right to receive it arose by operation of law, not by discretionary award. Interest of that kind was therefore taxable on accrual basis in the years to which it related, and only the portion attributable to the relevant year could be assessed in that year. Decisions concerning discretionary interest under section 28 of the Land Acquisition Act, 1894 were distinguished, while reasoning on similar statutory interest supported yearly assessment rather than taxation only on receipt.

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Issues: Whether statutory interest received on enhanced compensation under the Madhya Bharat Abolition of Jagirs Act, 1951 was taxable on receipt or had to be spread over and assessed year to year in the years to which it related.

Analysis: The interest was held to be statutory interest payable under section 8(2) of the Madhya Bharat Abolition of Jagirs Act, 1951. Such interest was treated as accruing from year to year because the right to receive it arose by statute and was not dependent on a discretionary award. The earlier pattern of assessment on accrual basis was also relevant, and the reasoning drawn from decisions on similar statutory interest under section 34 of the Land Acquisition Act, 1894 supported yearly accrual rather than taxation only on receipt. The authorities dealing with discretionary interest on enhanced compensation under section 28 of the Land Acquisition Act, 1894 were distinguished.

Conclusion: The interest was required to be taxed on accrual basis from year to year, and only the portion relatable to the relevant year could be assessed in that year.

Ratio Decidendi: Statutory interest that arises by operation of law accrues from year to year and is taxable in the periods to which it relates, not merely on actual receipt.

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