Tax on. compensation alongwith refund of principal on court order

In my amount Principal amount is in Capital Nature.It might have generated a Capital if everything has gone well, and you might have claimed as Work in progress in your Books of Accounts.Hence forth it is not taxable.

But the compensation is taxable  as Other Sources

Compensation amount other than principal amount is taxable because it is in the nature of income. So it is taxable under the Head IFOS

Amount of compensation received over and above the principal amount is in the nature of capital receipt which could be brought to tax only if the case falls u/s 45 of the Act as capital gains and since it was conspicuously a different case, such capital receipt could not be brought to tax. This is a capital receipt and hence tax exempt.