Taxability of interest on delayed land compensation upheld; interest treated as revenue receipt and subject to tax deduction at source.

Interest on delayed disbursement of enhanced compensation for acquired land was treated as a separate revenue receipt and not as part of the compensation itself. The HC applied the settled position that such interest falls within the charging provisions of the Income-tax Act, and the agricultural character of the underlying land did not change the tax treatment of the interest component. On that basis, tax deduction at source was held applicable, and the revenue's demand was not shown to be illegal or arbitrary.

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Issues: Whether interest paid on delayed disbursement of enhanced compensation for acquired land formed a revenue receipt liable to tax deduction at source, and whether the demand raised under the Income-tax Act could be sustained.

Analysis: Interest received on delayed payment of compensation was treated as income distinct from the compensation itself. The settled position applied was that such interest is a revenue receipt and falls within the charging provisions of the Income-tax Act. The characterization of the underlying land as agricultural did not alter the taxability of the interest component. On that basis, deduction at source under the relevant provisions was held to be applicable, and the demand raised by the revenue authority was not shown to be illegal or arbitrary.

Conclusion: The issue was decided against the petitioner and in favour of the revenue; the interest component was held taxable and liable to tax deduction at source.

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