Compulsory deposit interest was treated as taxable revenue receipt because it compensated only for loss of use of money.

Interest paid on compulsory deposits under the Compulsory Deposit Scheme, 1974 was treated as taxable income rather than exempt capital compensation. The decisive principle was that the character of a receipt depends on the nature of the right lost: where the assessee is deprived only of the use of money, the amount received for that deprivation is a revenue receipt. The statutory label attached to the payment was not conclusive, and the constitutional rules on compensation for acquisition or requisition did not govern this scheme. The reference to section 80L also indicated that the amount was intended to be chargeable to tax subject to the specified deduction.

---

---

Issues: Whether the amount described as interest on compulsory deposits under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 was taxable as income or was exempt as compensation of a capital nature.

Analysis: The obligation to make the deposit was compulsory, but compulsion by itself did not change the character of the payment received on the deposit. The description given by the statute was not conclusive, and the true nature of the receipt had to be determined from the right of which the assessee was deprived. The relevant right here was only the use of money, not the money itself. A receipt for deprivation of the use of money corresponds to revenue and not capital. The constitutional provision regarding compensation for acquisition or requisition of property did not govern the statutory payment under the 1974 Act. The court also held that the statutory scheme, including the reference to section 80L, showed that the amount was intended to be chargeable to tax subject to the specified deduction.

Conclusion: The amount paid on compulsory deposits was held to be taxable interest and not a capital compensation receipt, and the claim for exemption failed.

Final Conclusion: The appeals failed because the impugned receipt was treated as income chargeable to tax under the statutory scheme, and the orders of the lower authorities were sustained.

Ratio Decidendi: The character of a receipt depends on the nature of the right lost, and where the assessee is deprived only of the use of money, the amount received for that deprivation is a revenue receipt taxable as income notwithstanding the label attached to it by the statute.

---