Section 28 land acquisition receipt treated as capital compensation and not taxable income.

Interest received under section 28 of the Land Acquisition Act was treated as part of enhanced compensation, not as interest for delay in payment. The distinction applied was that section 28 receipts differ from section 34 interest because section 28 is in the nature of solatium and forms an integral part of compensation. On that basis, the receipt was characterised as capital in nature and not taxable as income, and the addition was deleted.

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Issues: Whether interest received under section 28 of the Land Acquisition Act on compulsory acquisition of land is a capital receipt not chargeable to tax.

Analysis: The amount received under section 28 was treated as part of the enhanced compensation and not as interest for delay in payment. The reasoning followed the settled distinction that amounts awarded under section 28 stand on a different footing from interest under section 34, because section 28 is in the nature of solatium and forms an integral part of compensation. Such receipt is therefore capital in character and does not attract tax as income.

Conclusion: The amount received under section 28 of the Land Acquisition Act was held to be a capital receipt and not exigible to tax. The addition was deleted and the assessee succeeded on the substantive issue.

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