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Issues: Whether interest on enhanced compensation awarded for compulsory acquisition of land accrues from the date of dispossession on a day-to-day basis, or only from the date of the court decree granting the enhanced compensation.
Analysis: The right to receive compensation arises on dispossession and is not postponed until quantification by the land acquisition officer or the court. Interest on delayed payment is distinct from compensation and is payable for deprivation of the use of money representing compensation. Once interest is awarded under the land acquisition law, its character does not change for tax purposes merely because the award is made by the court under the provision relating to excess compensation. The legal effect is that the entitlement to interest relates back to the date when possession was taken, and it accrues from day to day until payment.
Conclusion: Interest on compensation awarded for acquired land accrues from the date of taking possession and not only from the date of the decree. The question was answered in favour of the assessee.
Ratio Decidendi: Where compensation for acquired land is payable from the date of dispossession, statutory interest on delayed payment accrues day by day from that date and relates back to the acquisition of the right to compensation.
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