Enhanced land acquisition compensation forms part of capital gains compensation and qualifies for relief under tax law.

In land acquisition matters, compensation for capital gains purposes includes the final amount judicially determined, not merely the sum initially fixed by the Land Acquisition Officer. The distinction between compensation and enhanced compensation was treated as artificial because the statutory scheme contemplates market value together with the amounts ultimately awarded through reference and appeal proceedings. On that basis, enhanced compensation forms part of the compensable amount, and the assessee is entitled to relief under Section 54-H of the Income-tax Act, 1961 on the entire enhanced compensation.

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Issues: Whether the expression compensation in the capital gains provisions includes enhanced compensation awarded in land acquisition proceedings.

Analysis: The amount initially fixed by the Land Acquisition Officer is not the final compensation where the land owner pursues statutory reference and appeal remedies. Compensation under the land acquisition scheme comprises the market value and the statutory components attached to it, and its final figure is the amount ultimately determined by the competent court. The distinction sought to be drawn between compensation and additional compensation was held to be artificial and contrary to the scheme of the Land Acquisition Act and the Income-tax Act.

Conclusion: The enhanced amount awarded by the court forms part of compensation, and the assessee is entitled to the benefit under Section 54-H of the Income-tax Act, 1961 on the entire enhanced compensation.

Ratio Decidendi: In land acquisition matters, compensation includes the final judicially determined amount and is not confined to the award of the Land Acquisition Officer; enhanced compensation is part of the compensable amount for the purposes of capital gains relief.

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