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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is part of compensation or taxable as income from other sources under the Income-tax Act, 1961 after the insertion of sections 56(2)(viii) and 57(1)(v).
Analysis: The issue had been considered in the light of the Supreme Court and jurisdictional High Court authorities dealing with the nature of interest under sections 28 and 34 of the Land Acquisition Act, 1894. Interest under section 28 was treated as an accretion to the enhanced compensation and, in the context of the later statutory amendment, the Tribunal followed the view that such receipt does not retain exemption merely because it arises from land acquisition. The amended scheme of the Income-tax Act, 1961 brought such interest within the tax net, and the assessee could not derive support from the earlier contrary understanding.
Conclusion: Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was taxable as income from other sources and not exempt compensation. The issue was decided against the assessee and in favour of Revenue.
Ratio Decidendi: Interest awarded on enhanced compensation under section 28 of the Land Acquisition Act, 1894 is taxable as income from other sources under the Income-tax Act, 1961 after the statutory amendment bringing such receipts within the tax net.
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