Compulsory acquisition compensation is taxable as business income on receipt, even while enhancement proceedings remain pending.

Compensation received on compulsory acquisition of an electricity undertaking is treated as "moneys payable" within section 41(2) of the Income-tax Act, and the excess over written down value is taxable as business income in the year the amount is received. The pendency of proceedings seeking enhancement of compensation does not defer taxability of the amount already determined and paid, because the receipt and accrual of that sum are complete for tax purposes. Any additional compensation received later would be taxable in the year of that later receipt.

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Issues: Whether the amount received by the assessee on compulsory acquisition of its electricity undertakings was taxable under section 41(2) of the Income-tax Act, 1961 in the year of receipt, notwithstanding pendency of proceedings for enhancement of compensation.

Analysis: Section 41(2) treats the excess of the moneys payable over the written down value, to the extent specified, as business income of the previous year in which the moneys payable became due. The expressions "moneys payable" and "sold" are of wide import and, by the statutory explanation, cover compensation paid on compulsory acquisition. Once compensation is determined and paid, the fact that the assessee disputes adequacy of the amount and seeks enhancement does not detract from the taxability of the amount actually received. Pendency of proceedings for additional compensation is irrelevant to the accrual and receipt of the amount already paid, and any further amount received later would be taxable in the year of such receipt.

Conclusion: The amount received on acquisition was chargeable to tax under section 41(2) in the year of receipt; the addition made by the Income-tax Officer was justified.

Ratio Decidendi: Where compensation on compulsory acquisition is determined and received, the amount constitutes "moneys payable" for purposes of section 41(2) and is taxable as business income in the year of receipt, even if proceedings for enhancement of compensation remain pending.

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