Taxability of interest on enhanced land compensation upheld, with tax deduction at source and statutory refund remedy confirmed.

Interest on delayed payment of enhanced compensation for acquired land was treated as a revenue receipt, not exempt agricultural income, and held taxable as income from other sources under Section 56 of the Income-tax Act, 1961, in the year of receipt. The payer's deduction of tax at source was therefore upheld as lawful. On maintainability, the court held that writ relief was inappropriate because the petitioners had an efficacious statutory remedy: the deducted tax could be adjusted against their tax liability in returns, and any excess could be claimed as refund under the Act. The challenge to tax deduction at source was rejected, while the petitioners' right to seek adjustment or refund was preserved.

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Issues: (i) Whether interest paid on delayed payment of enhanced compensation for acquired land is taxable and liable to tax deduction at source. (ii) Whether the writ petitions were maintainable in view of the petitioners' alternative remedy of filing income-tax returns and seeking adjustment or refund.

Issue (i): Whether interest paid on delayed payment of enhanced compensation for acquired land is taxable and liable to tax deduction at source.

Analysis: The interest component on delayed payment of enhanced compensation was treated as revenue receipt and not as part of exempt agricultural income. It was held to fall within the ambit of interest on enhanced compensation under Section 28 of the Land Acquisition Act, 1894, and to be taxable as income from other sources under Section 56 of the Income-tax Act, 1961. The amount was also held exigible to tax in the year of receipt, and tax deduction at source by the payer was found to be justified.

Conclusion: The interest was taxable and deduction of tax at source was lawful.

Issue (ii): Whether the writ petitions were maintainable in view of the petitioners' alternative remedy of filing income-tax returns and seeking adjustment or refund.

Analysis: Since the amount deducted at source could be adjusted against the petitioners' tax liability in their income-tax returns, the petitioners had an efficacious alternative remedy. Any excess deduction, if established, could be sought as refund in accordance with law under the Income-tax Act, 1961. On that basis, invocation of writ jurisdiction was held to be inappropriate.

Conclusion: The writ petitions were not maintainable and the petitioners were left to pursue the statutory remedy.

Final Conclusion: The challenge to tax deduction at source failed, and the petitions were disposed of while preserving the petitioners' right to claim adjustment or refund of any excess tax in accordance with law.

Ratio Decidendi: Interest on delayed payment of enhanced compensation is taxable in the year of receipt as income from other sources, and when a statutory remedy exists for adjustment or refund of excess tax, writ relief is not the proper course.

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