Taxability of Section 28 interest on enhanced land compensation upheld, with exemption claims left for factual examination.

Interest received under Section 28 of the Land Acquisition Act, 1894 on enhanced compensation is treated as a revenue receipt and is taxable under the Income-tax Act, 1961 as income from other sources. The Court distinguished such interest from interest under Section 34 and followed the settled position that delayed payment interest remains exigible to tax unless a specific exemption applies. Claims based on Section 10(37) and Section 57(iv) required factual examination by the Assessing Officer, so relief on those grounds was not granted at this stage. The issue of tax deduction at source was left open.

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Issues: Whether interest received under Section 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable under the Income-tax Act, 1961, and whether the assessee could obtain relief against the reassessment proceedings on the basis of exemption and deduction claims.

Analysis: Interest awarded under Section 28 of the Land Acquisition Act, 1894 was treated as part of the enhanced compensation only for the limited purpose considered in the cited land acquisition and income-tax authorities, but the binding income-tax decisions relied upon by the Court had consistently held that such interest is a revenue receipt and taxable income. The Court distinguished interest under Section 28 from interest under Section 34 of the Land Acquisition Act, 1894, and followed the settled position that interest on delayed payment of compensation is exigible to tax under the Income-tax Act, 1961. The Court also noted that the assessee's claim based on Section 10(37) and Section 57(iv) of the Income-tax Act, 1961 required factual examination before the Assessing Officer, while the issue of tax deduction at source was expressly left open.

Conclusion: Interest received under Section 28 of the Land Acquisition Act, 1894 is taxable under the Income-tax Act, 1961 as revenue receipt and income from other sources. The challenge to the proceedings failed, while the exemption and deduction claims were left to be pursued before the Assessing Officer in accordance with law.

Ratio Decidendi: Interest on delayed or enhanced compensation under Section 28 of the Land Acquisition Act, 1894 is a revenue receipt chargeable to tax under the Income-tax Act, 1961 unless a specific exemption applies.

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