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Issues: (i) Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquisition of agricultural land formed part of enhanced compensation and was eligible for exemption under section 10(37) of the Income-tax Act, 1961; (ii) whether the Revenue could succeed on the objection that the appellate authority had wrongly treated the receipt as falling under section 28 and that the assessee was bound by an earlier stand taken before the Assessing Officer.
Issue (i): Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquisition of agricultural land formed part of enhanced compensation and was eligible for exemption under section 10(37) of the Income-tax Act, 1961.
Analysis: The receipt was found to be interest payable under section 28 of the Land Acquisition Act, 1894, which, in the light of the Supreme Court's exposition on the scheme of sections 23, 23(1A), 23(2), 28 and 34 of that Act, is an accretion to the value of the acquired land and not a separate item of delayed-payment interest like section 34. Since the enhanced compensation itself had been accepted as exempt because the acquired land was agricultural land, the amount received under section 28 was to be treated on the same footing and could not be separated from the enhanced compensation for tax purposes.
Conclusion: The receipt under section 28 was part of enhanced compensation and was exempt under section 10(37) of the Income-tax Act, 1961, in favour of the assessee.
Issue (ii): Whether the Revenue could succeed on the objection that the appellate authority had wrongly treated the receipt as falling under section 28 and that the assessee was bound by an earlier stand taken before the Assessing Officer.
Analysis: The objection was rejected because the assessment order itself proceeded on the footing that the interest was part of enhanced compensation, and the later material confirmed payment under section 28. The earlier statement of the assessee did not preclude reliance on the correct legal position, since an erroneous concession of law does not bind the parties when the governing principle is otherwise established. The challenge based on fresh evidence and Rule 46A was also found to be misconceived on the facts.
Conclusion: The Revenue's procedural and evidentiary objections failed, in favour of the assessee.
Final Conclusion: The additions made by the Assessing Officer were not sustainable, and the exemption granted to the impugned receipt was upheld.
Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act, 1894 is an accretion to enhanced compensation and, where the underlying compensation for acquired agricultural land is exempt, such interest also assumes the same exempt character.
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