Enhanced compensation interest under land acquisition law is part of exempt compensation, not taxable as other sources.

Interest awarded under section 28 of the Land Acquisition Act, 1894 was treated as an accretion to enhanced compensation for compulsory acquisition of agricultural land, not as independent interest income. Because the underlying compensation remained exempt under section 10(37) of the Income-tax Act, the receipt could not be assessed as income from other sources under sections 145A(b), 56(2)(viii) and 57(iv). The Tribunal applied binding Supreme Court and coordinate bench rulings and held that later statutory amendments did not change the character of the amount on these facts, so the addition was deleted in favour of the assessee.

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Issues: Whether interest received on enhanced compensation under section 28 of the Land Acquisition Act, 1894 is to be treated as part of compensation and, if so, whether it is exempt under section 10(37) of the Income-tax Act, 1961 or taxable as income from other sources under sections 145A(b), 56(2)(viii) and 57(iv) of the Income-tax Act, 1961.

Analysis: The assessee received enhanced compensation arising from compulsory acquisition of agricultural land. The Tribunal followed the settled principle that interest awarded under section 28 is an accretion to the compensation itself and not independent interest income chargeable under the head income from other sources. It noted that the compensation remained exempt under section 10(37), and the subsequent amendments invoked by the Revenue did not alter the character of the amount received on facts covered by the binding Supreme Court and coordinate bench decisions.

Conclusion: The amount received under section 28 was held to be part of compensation and not taxable as income from other sources. The addition was deleted and the issue was decided in favour of the assessee.

Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act, 1894 forms part of enhanced compensation and, where the compensation is exempt, such receipt cannot be taxed as income from other sources merely because of the later statutory amendments.

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