Accrual of interest on enhanced compensation arises only when the court awards it, not on dispossession or acquisition notification.

Interest on enhanced compensation under the Land Acquisition Act accrues for income-tax purposes only when the court awards it with the enhanced compensation, because the right to receive such interest arises only after a reference, enhancement, and exercise of judicial discretion. Mere dispossession or the acquisition notification does not create an enforceable present right to the interest, and therefore does not trigger accrual. Applying the accrual principle, income arises only when there is a corresponding debt due and a present right to receive it. The questions were answered in favour of the revenue and against the assessee.

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Issues: Whether interest awarded on enhanced compensation under the Land Acquisition Act accrues for income-tax purposes only when the court decrees such interest, or from the date of dispossession or acquisition notification.

Analysis: Interest on enhanced compensation under section 28 of the Land Acquisition Act is not an automatic or invariable consequence of acquisition. The right to such interest depends on a reference being made, the compensation being enhanced, and the court exercising its discretion to award interest. Until the court awards enhanced compensation and interest, the assessee does not acquire an enforceable right to receive that interest. On the principle that income accrues only when there is a present right to receive it and a corresponding debt due, the mere dispossession of the owner or the issue of the acquisition notification does not create accrual of the interest income.

Conclusion: Interest on enhanced compensation accrues only when the court decrees it while awarding the enhanced compensation, and not from the date of dispossession or the notification of acquisition; the questions were answered in favour of the revenue and against the assessee.

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