Statutory interest on delayed compensation is a revenue receipt, not part of capital compensation, when the statute treats them separately.

Statutory interest payable on delayed compensation for resumption of jagir lands under the Madhya Bharat Abolition of Jagirs Act, 1951 was held to be distinct from the compensation itself because section 8(1) fixed compensation separately while section 8(2) provided simple interest from resumption until payment. The Court treated the interest as consideration for being kept out of money due, not as part of the capital compensation for loss of the jagir. It was therefore characterised as a revenue receipt and taxed under the Income-tax Act, with the reference answered in favour of the Revenue.

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Issues: Whether the statutory interest payable on compensation for resumption of jagir lands under the Madhya Bharat Abolition of Jagirs Act, 1951 formed part of the capital compensation or was a revenue receipt taxable under the Income-tax Act.

Analysis: The compensation for resumption of jagir lands was determined separately under section 8(1) read with the Schedule, while section 8(2) expressly provided for simple interest on the compensation amount from the date of resumption till payment. The statutory scheme, including sections 13, 14 and 15, treated compensation and interest as distinct concepts. The heading of section 8 and the use of the expression "compensation payable under section 8" in later provisions could not override the clear language of section 8(1) and 8(2). The interest was not an element in the computation of compensation and was payable because the assessee was kept out of the money due to him. Following the principle that interest paid for delayed payment is consideration for the use of money and not compensation for the capital asset itself, the receipt was held to be of a revenue character.

Conclusion: The statutory interest under section 8(2) was not part of the capital compensation for loss of the jagir, but a revenue receipt liable to tax. The answer to the reference was in the negative, in favour of the Revenue.

Ratio Decidendi: Where a statute separately provides for compensation and for interest on delayed payment of that compensation, the interest is a revenue receipt for the use of money and does not form part of the capital compensation.

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