Interest on delayed compensation accrues annually as revenue income, with related trust and ownership income taxed to the assessee-family.

Interest on delayed compensation accrues year by year and is taxable on accrual under the mercantile system, so only the portion attributable to the relevant year is brought to tax; such interest remains revenue in character even though it arises from acquisition of a capital asset. The income from properties said to have been transferred to the trust was assessed in the hands of the assessee-family, as the point was governed by an earlier decision between the same parties. The sum of Rs. 10,000 was also treated as the assessee's income and not the college's, on the same basis.

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Issues: (i) Whether only the portion of interest on compensation relatable to the relevant year was taxable; (ii) Whether income from properties allegedly transferred to the trust was assessable in the hands of the assessee-family; (iii) Whether the sum of Rs. 10,000 belonged to the assessee or to the college.

Issue (i): Whether only the portion of interest on compensation relatable to the relevant year was taxable.

Analysis: Interest is chargeable to tax on accrual. Since the assessee followed the mercantile system, only the interest that accrued during the year under consideration could be brought to tax. Interest paid for delay in payment of compensation did not assume the character of capital receipt merely because it arose out of acquisition of a capital asset; it remained revenue in nature.

Conclusion: The interest was taxable, but only to the extent it related to the relevant year, and this was against the assessee.

Issue (ii): Whether income from properties allegedly transferred to the trust was assessable in the hands of the assessee-family.

Analysis: This issue was covered by an earlier decision between the same parties, which was followed without fresh examination.

Conclusion: The income was assessable in the hands of the assessee-family, against the assessee.

Issue (iii): Whether the sum of Rs. 10,000 belonged to the assessee or to the college.

Analysis: This issue was also governed by the earlier inter partes decision and was answered in the same manner.

Conclusion: The sum of Rs. 10,000 was the income of the assessee and not that of the college, against the assessee.

Final Conclusion: The reference was answered entirely in favour of the Revenue, with all questions decided against the assessee.

Ratio Decidendi: Interest on delayed compensation accrues year by year and is taxable as revenue income in the year of accrual, even where it arises from acquisition of a capital asset.

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