Statutory interest on compensation is taxable on accrual year-wise, not as a single lump sum on receipt.

Interest payable under section 15(1) of the Andhra Pradesh (Telangana Area) Abolition of Inams Act, 1955 was treated as a statutory obligation arising from the date of vesting, with no discretion in quantification or grant. On that basis, the interest was regarded as accruing year-wise, similar to statutory interest under section 34 of the Land Acquisition Act, and taxable only in the year of accrual rather than as a single lump sum on receipt. Accordingly, only the amount relatable to the relevant year was brought to tax in the assessment year under appeal, and the balance addition was reduced.

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Issues: Whether the interest payable on compensation under section 15(1) of the Andhra Pradesh (Telangana Area) Abolition of Inams Act, 1955 was taxable in the year of receipt in lump sum or assessable year-wise on accrual basis.

Analysis: The interest under section 15(1) was held to be a statutory obligation arising from the date of vesting, with no discretion left to the Revenue Divisional Officer in quantifying or granting it. Such interest was treated as akin to statutory interest under section 34 of the Land Acquisition Act and, on the reasoning applied, was taxable in the year in which it accrued. Accordingly, only the amount relatable to the relevant year could be brought to tax in the assessment year under appeal, and not the entire sum received during the accounting year.

Conclusion: The interest was not assessable in a single lump sum for the assessment year under appeal; only Rs. 32,047 was taxable in that year, and the addition of Rs. 49,306 was reduced.

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