a) The assessee was travelling in a car, which met a serious accident, leaving her permanently disabled. She claimed a compensation for this tragic loss of her physical abilities. She did eventually get it after the long struggle of 21 years.
b) But this long struggle was not enough, the destiny had more in store for her. It is this settlement of the accident compensation claim that has led to a new round of litigation- this time about taxability of a component of compensation, i.e. interest component.
c) During assessment proceedings, the Assessing Officer held that that interest component on compensation was taxable as it is covered under section 145A(b) r.w.s. 56(viii).The CIT(A) had also confirmed this stand. The aggrieved-assessee filed the instant appeal.
The Tribunal held in favour of assessee as under: