Land acquisition compensation treated as capital receipt, with Section 34 delay interest distinguished from compensation

Amounts received on acquisition, including a component labelled as interest, were treated as compensation and not as interest under Section 34 of the Land Acquisition Act, 1894. The Court applied the distinction drawn in Ghanshyam (HUF): interest under Section 28 forms part of compensation, whereas Section 34 interest is only for delay in payment after compensation is determined. On that basis, the receipt fell within Sections 23 and 28, was not taxable as Section 34 interest, and the question raised in the appeals did not survive for consideration.

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Issues: Whether the amount received towards enhanced compensation, including the component described as interest, was taxable in the year of receipt, and whether such amount was interest under Section 34 of the Land Acquisition Act, 1894 or part of compensation under Sections 23 and 28 of that Act.

Analysis: The amount received by the landowners arose from acquisition compensation. Relying on the Supreme Court's exposition in Ghanshyam (HUF), the Court noted the distinction between interest under Section 28, which forms part of the compensation, and interest under Section 34, which is payable only for delay in making payment after compensation is determined. It held that the amount in question was not interest under Section 34 but compensation within the scope of Sections 23 and 28. On that basis, the question framed in the appeals was treated as not surviving for consideration.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

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