Section 28 land acquisition interest treated as enhanced compensation, not separate taxable income under the Income-tax Act.

Amounts awarded under section 28 of the Land Acquisition Act, 1894 are treated as accretion to the value of acquired land and form part of enhanced compensation, while interest under section 34 is separate delay-related interest. On that basis, the receipt under section 28 is not taxable as income from other sources and remains exempt under section 10(37) of the Income-tax Act, 1961. The amendment to section 145A(b) and section 56(2)(viii) is stated not to change this position for the receipt in issue, and the addition was directed to be deleted.

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is part of compensation and exempt under section 10(37) of the Income-tax Act, 1961, or taxable as income from other sources in view of the amendment to section 145A(b) and section 56(2)(viii).

Analysis: The amount in question was awarded under section 28 of the Land Acquisition Act, 1894. The governing distinction, as applied, is that interest under section 28 is an accretion to the value of the acquired land and forms part of enhanced compensation, whereas interest under section 34 is for delay in payment after compensation has been determined. On that basis, the receipt could not be treated as mere interest taxable separately under the head "Income from other sources". The amendment referred to by the revenue was held not to alter this position for the receipt in issue.

Conclusion: The receipt under section 28 was held to be part of compensation and exempt under section 10(37) of the Income-tax Act, 1961. The addition was directed to be deleted and the assessee succeeded.

Ratio Decidendi: Amounts awarded under section 28 of the Land Acquisition Act, 1894 are part of enhanced compensation and are to be treated as compensation, not as independent interest taxable separately.

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