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Issues: Whether interest payable on enhanced compensation under the Land Acquisition Act accrues on the date of the court order granting enhancement or accrues year after year from the date of delivery of possession until the date of such order, and is therefore assessable only to that extent in the relevant assessment year.
Analysis: The question turned on the point of time when interest under Sections 28 and 34 of the Land Acquisition Act, 1894 becomes taxable income. The Court held that the controlling principle was already settled by earlier authority and that the interest attached to the enhanced compensation is not a single sum arising only when the court makes the enhancement order. Instead, the liability to interest relates to the period during which the landowner is kept out of possession, so the interest accrues progressively from the date of dispossession or delivery of possession until the date of the award or appellate order granting enhanced compensation. On that basis, the entire amount could not be brought to tax in the year of the court's enhancement order.
Conclusion: The interest did not accrue wholly on the date of the enhancement order and was taxable only on a year-to-year basis for the period during which it actually accrued; the assessee's contention was accepted.
Ratio Decidendi: Interest on enhanced compensation under the Land Acquisition Act accrues year after year from the date of possession until the date of the award or appellate order, and not wholly on the date on which enhanced compensation is finally determined.
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