Equitable interest on compulsory purchase consideration may be awarded where payment is delayed after possession is taken.

In compulsory purchase proceedings under Chapter XXC of the Income-tax Act, equity may justify payment of interest on the consideration where the owner is compelled to part with property and payment is delayed while the Government enjoys possession and any appreciation in value. The High Court treated the rate and period of interest as dependent on the facts and circumstances, and recognised writ jurisdiction as available to award equitable interest on the amount payable. On the stated facts, the petitioners were held entitled to simple interest at 6% per annum from the date possession was taken until the date of payment.

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Issues: Entitlement of the petitioners to interest on the amount payable on compulsory purchase of property under Chapter XXC of the Income-tax Act, 1961.

Analysis: The claim arose from compulsory purchase proceedings under Section 269-UD(1) of the Income-tax Act, 1961. The Court relied on the principle that where an owner is compelled to part with property, equity may justify award of interest so that the owner is not made to bear the burden of delayed payment while the Government enjoys possession and the benefit of appreciation in value. The rate and period of interest were treated as matters depending on the facts and circumstances of the case.

Conclusion: The petitioners were held entitled to simple interest at 6% per annum from the date possession was taken until the date of payment.

Ratio Decidendi: In compulsory purchase proceedings, writ jurisdiction may be exercised to award equitable interest on the consideration payable, and the rate and duration of such interest depend on the circumstances of the case.

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