There are certain kinds of payments like motor vehicle accident claims or any other claim where the subject matter is quantam of compensation, a person is compelled to approach courts. These cases drag for years and in most cases, courts ultimately favour appellant i.e common people. Often ,courts also award certain rate of interest on the compensation . The question is whether the interest awarded by the court is taxable? This question also becomes more important because in many such cases, the compensation itself may be non-taxable. For example , the compensation awared for Motor Car Accident Tribunal is settled as capital receipt and therefore non taxable. But the issue is what if the interest is awarded by a court for late or non-payment of compensation to a victim of accident ?