Section 28 land acquisition compensation treated as exempt compensation, not taxable interest, for agricultural land receipts.

Amounts received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquisition of agricultural land were treated as part of compensation, not as interest for delay in payment under section 34. Applying Ghanshyam HUF, the section 28 component was held to be an accretion to market value and solatium, so later provisions taxing interest on compensation under sections 56(2)(viii) and 145A(b) did not change its character. As the land was agricultural land, the receipt remained exempt under section 10(37), and the addition as income from other sources was deleted.

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Issues: Whether the amount received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquisition of agricultural land is taxable as income from other sources under sections 56(2)(viii) and 145A(b) of the Income-tax Act, 1961, or is to be treated as part of compensation exempt under section 10(37).

Analysis: The amount in question was not interest in the ordinary sense for delay in payment under section 34 of the Land Acquisition Act, 1894. It was compensation awarded under section 28, which forms part of the enhanced compensation. The ruling in Ghanshyam HUF was applied to hold that section 28 amount partakes the character of compensation and is an accretion to the market value and solatium. The subsequent insertion of sections 56(2)(viii) and 145A(b) does not alter that character, because those provisions target interest received on compensation, not the component that is itself part of compensation under section 28.

Conclusion: The amount received under section 28 was held to be part of enhanced compensation and, since the land was agricultural land, the receipt was exempt under section 10(37). The addition made as income from other sources was deleted and the claim of the assessee was allowed.

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