Interest on enhanced land compensation taxable as income from other sources, with TDS valid despite agricultural land status.

Interest on delayed or enhanced compensation for acquisition of agricultural land is taxable as income from other sources under Section 56 of the Income-tax Act, 1961, because it arises under Section 28 of the Land Acquisition Act, 1894 and does not form part of the compensation itself. The agricultural character of the acquired land does not extend to the interest component, so the payment is not exempt agricultural income. On that basis, tax deduction at source on the interest was held valid and the refund claim was rejected.

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Issues: Whether interest paid on enhanced compensation and delayed payment of compensation for acquired agricultural land is liable to tax deduction at source and can be treated as exempt agricultural income.

Analysis: The interest received on delayed payment was held to arise under Section 28 of the Land Acquisition Act, 1894 and not to form part of the compensation for acquisition of agricultural land. Such interest was therefore taxable as income from other sources under Section 56 of the Income-tax Act, 1961 and liable to deduction of tax at source. The character of the original land as agricultural did not extend to the interest component.

Conclusion: The tax deduction at source was held to be valid and the claim for refund was rejected.

Ratio Decidendi: Interest on delayed or enhanced compensation under the Land Acquisition Act is a taxable receipt assessable as income from other sources and is not exempt as agricultural income merely because the acquired land was agricultural in nature.

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