Taxability of land acquisition interest on receipt upheld under deemed income rules for compensation interest.

Interest received under section 28 of the Land Acquisition Act, 1894 on compensation or enhanced compensation was treated as taxable in the year of receipt because section 56(2)(viii), read with section 145A(b), deems such interest to be income of the year in which it is received. Following the jurisdictional High Court decision in Manjeet Singh (HUF), the addition was upheld and the amount was held chargeable to tax against the assessee.

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

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

Conclusion: The amount was rightly treated as chargeable to tax, and the issue was decided against the assessee.

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