Taxability of land acquisition interest on receipt upheld under amended income rules for compensation-related interest.

Interest received on compensation or enhanced compensation under section 28 of the Land Acquisition Act was treated as taxable income in the year of receipt. Applying the amended scheme of section 56(2)(viii), read with section 145A(b), the ITAT Delhi held that such interest is deemed to accrue in the year it is actually received. Following the jurisdictional High Court decision in Manjeet Singh (HUF), the addition made by the Assessing Officer was upheld and the interest was sustained as chargeable to tax on receipt.

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on compensation or enhanced compensation was chargeable to tax in the year of receipt under section 56 of the Income-tax Act, 1961.

Analysis: The interest received by the assessee was held to fall within the amended scheme of section 56(2)(viii), inserted by Finance (No. 2) Act, 2009 with effect from 01.04.2010, which, read with section 145A(b), deems such interest on compensation or enhanced compensation to be income of the year in which it is received. The jurisdictional High Court decision in Manjeet Singh (HUF) was followed, and the addition made by the Assessing Officer was upheld.

Conclusion: The amount of interest was rightly treated as chargeable to tax in the year of receipt, and the addition was sustained.

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