Year-wise taxation of interest on enhanced compensation applies only to the portion accruing in the relevant previous year.

Interest on enhanced compensation under the Land Acquisition Act, 1894 is taxable on an accrual basis year-wise, not as a single sum merely because it is received in one assessment year. The interest component was treated as distinct from the compensation itself and, where it is quantified for a span of years, only the portion referable to the relevant previous year can be assessed in that year. The remaining interest is taxable in the years to which it relates. Accordingly, taxability was confined to the interest finally determined for the relevant year.

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Issues: Whether interest on enhanced compensation under the Land Acquisition Act, 1894 was taxable in full in the assessment year in which it was received, or only to the extent it related to the relevant previous year.

Analysis: The interest awarded on enhanced compensation under section 28 of the Land Acquisition Act, 1894 was distinguished from a mere one-time receipt and examined in the light of conflicting views on accrual. The Court considered that, although the enhanced compensation itself may relate back to the date of dispossession for capital gains purposes, the interest component should not be treated differently from interest under section 34 of the Land Acquisition Act, 1894. Where interest is quantified for a span of years, only the amount attributable to the relevant accounting year can be brought to tax in that year, and taxability is confined to the interest finally determined.

Conclusion: The whole amount of interest on enhanced compensation was not taxable in the assessment year merely because it was received in that year; only the portion referable to the relevant previous year was assessable. The revenue's appeal succeeded only to that limited extent.

Final Conclusion: The assessment had to be confined to the interest on enhanced compensation that actually pertained to the relevant previous year, leaving the remaining interest to be assessed in the years to which it related.

Ratio Decidendi: Interest on enhanced compensation under the Land Acquisition Act is taxable on an accrual basis year-wise, and only the portion referable to the relevant previous year can be assessed in that year.

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