Interest on delayed land acquisition compensation is a revenue receipt and taxable, not part of capital compensation.

Interest paid under section 34 of the Land Acquisition Act, 1894 for delayed payment of compensation is separate from the compensation itself. The statutory interest arises after possession is taken and represents payment for the use of money withheld, not consideration for the acquired land or for loss of title and possession. Because it is linked to deferred payment of the compensation amount, its character is a return for delay rather than a capital accretion. The amount is therefore a revenue receipt and is liable to income-tax.

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Issues: Whether interest paid under section 34 of the Land Acquisition Act, 1894 on delayed payment of compensation for acquired land is a capital receipt or a revenue receipt liable to income-tax.

Analysis: The scheme of the Land Acquisition Act, 1894 distinguishes compensation for compulsory acquisition from interest payable on delayed payment. Compensation is determined under the relevant provisions governing valuation and the taking of possession divests the owner of title and the right to possession. Interest under section 34 is separately provided as a statutory obligation arising after possession, and its character is that of payment for the use of money withheld, not compensation for the land or for loss of possession. The fact that possession may be taken before or after the award does not alter this position, because in either case the statutory interest is linked to delay in paying the compensation amount. It is therefore not a capital accretion but a return for deferred payment.

Conclusion: The amount received as interest under section 34 is a revenue receipt and is liable to tax.

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