Section 28 land acquisition receipts may form part of compensation and remain outside income from other sources.

Interest received under section 28 of the Land Acquisition Act is to be examined as part of the compensation itself, not as separate interest income, whereas interest under section 34 is treated differently as interest for delayed payment. Applying this distinction, the receipt under section 28, if verified as such, is not taxable as income from other sources under section 56 of the Income-tax Act. The operative effect is that the tax treatment depends on the statutory source of the amount received, and a section 28 receipt is characterised as compensation rather than taxable interest.

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Issues: Whether interest received under section 28 of the Land Acquisition Act forms part of compensation and is therefore not taxable as income from other sources under section 56 of the Income-tax Act, 1961.

Analysis: The assessee claimed that the amount received under section 28 was an accretion to compensation and not interest for delayed payment. The Revenue treated it as taxable interest under section 56, with deduction under section 57(iv). The Court applied the distinction drawn in the Supreme Court ruling that interest under section 28 is to be examined with reference to whether it forms part of compensation, while interest under section 34 is separately treated as interest income. On the facts, the Assessing Officer was directed to verify whether the receipt was under section 28; if so, it had to be treated as compensation and not as taxable interest.

Conclusion: The amount received under section 28, if so verified, is part of compensation and is not taxable as income from other sources under section 56.

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