Taxability of interest on delayed compensation upheld, with tax deduction at source permitted under the income-tax framework.

Interest paid on delayed land acquisition compensation was treated as a revenue receipt chargeable to income-tax, and the court held that tax deduction at source could apply to such interest under the relevant Income-tax Act provisions. The execution court had erred in proceeding on the assumption that no tax could be deducted from the interest component. The common order was set aside, and the civil revision petitions were allowed.

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Issues: Whether interest payable on delayed payment of compensation under the Land Acquisition Act is a taxable revenue receipt and whether deduction of tax at source was permissible under the Income-tax Act.

Analysis: The execution court had proceeded on the footing that tax could not be deducted from the interest component payable on compensation. The High Court held that interest received on delayed payment of compensation is a revenue receipt and is exigible to income-tax. It further held that the order under challenge had ignored the relevant statutory provisions governing deduction of tax, particularly the provisions dealing with tax deduction at source in respect of interest payments, and was therefore contrary to law.

Conclusion: The issue was answered in the affirmative and in favour of the petitioner, and the objection to deduction of tax on the interest amount could not be sustained.

Final Conclusion: The common order of the execution court was set aside and the civil revision petitions were allowed.

Ratio Decidendi: Interest awarded on delayed payment of land acquisition compensation constitutes a revenue receipt chargeable to tax, and the relevant tax deduction provisions may apply to such interest.

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