My client is an agriculturist having his agricultural land 30 kms away from taluka head quarters. ( In Gram panchayat area). Government acquired his agricultural land under compulsory acquisition proceedings. He has been paid compensation and piece of land in the year of 1997. Agrieved by the quantum of compensation, he approached the Court of law. Now in the month of March 2008 Court decided the case and enhanced the compensation and ordered to pay the interest on the enhanced compenssation from 1997. while paying the enhanced compensation with interst State Goverment authority deducted the tax at source @11% on interest portion.
Now my questions are:
1.Whether the interest on compensation is taxable? if es how to calculate the tax liability? on accrual basis or on receipt basis?
2. Hoble Supreme court observed in the case of CIT vs Govinda Choudhary SC 203 ITR that " interest partakes the same charector of principal" can I apply the same ratio to this case?
3. There is another case of land acquisition " Bikram Singh vs Land Acquisition collector 224 OTR 551 SC that " the assessee is entitled to spread over the interest for the respective previous years "
Kindly suggest how to file the return of income. Can I claim refund of TDS as interest is the part of compensation ?