Taxability of interest on enhanced land acquisition compensation: revenue income is assessed in full in the year of receipt.

Interest received under section 28 of the Land Acquisition Act on enhanced compensation is taxable as revenue income, not as a capital receipt, because its character is not altered by its link to compulsory acquisition proceedings. The amount is assessable in full in the assessment year of receipt and cannot be spread proportionately over earlier years merely because it relates to a prior period. The assessee's accounting method, and any treatment adopted in later assessment years, does not control the taxability of the amount in the relevant year, since each assessment year is a separate unit and there is no estoppel in income-tax law.

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Issues: (i) whether interest received under section 28 of the Land Acquisition Act on enhanced compensation is a capital receipt or a revenue receipt; (ii) whether the entire interest amount is assessable in the assessment year of receipt or only proportionately over the period to which it relates; (iii) whether the assessee's method of accounting or the department's treatment in later years affects the assessment of the amount in the relevant year.

Issue (i): whether interest received under section 28 of the Land Acquisition Act on enhanced compensation is a capital receipt or a revenue receipt.

Analysis: Interest received for delayed payment of enhanced compensation is taxable income of a revenue character. The character of the receipt is not altered by the fact that it arises out of land acquisition proceedings or is linked with compensation for compulsory acquisition.

Conclusion: The amount is a revenue receipt and not a capital receipt, against the assessee.

Issue (ii): whether the entire interest amount is assessable in the assessment year of receipt or only proportionately over the period to which it relates.

Analysis: The governing principle is that the interest awarded under section 28 is received when it is awarded and paid, and it cannot be split up and spread over earlier years merely because it relates to a preceding period. The amount therefore falls to be taxed in the year of receipt in its entirety.

Conclusion: The entire interest amount is assessable in the assessment year in which it was received, against the assessee.

Issue (iii): whether the assessee's method of accounting or the department's treatment in later years affects the assessment of the amount in the relevant year.

Analysis: In income-tax law, each assessment year is a separate unit and there is no estoppel or res judicata. The conclusion on taxability under the Land Acquisition Act does not depend on the assessee's accounting method, and a treatment adopted in later years does not control the assessment of the year in question.

Conclusion: The assessee cannot claim a different method of allocation for the relevant year, against the assessee.

Final Conclusion: The reference was answered by upholding taxation of the full interest on enhanced compensation in the year of receipt as revenue income.

Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act on enhanced compensation is taxable as revenue income in the year of receipt, and its assessability is not altered by the assessee's accounting method or by the treatment of similar amounts in other assessment years.

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