Section 28 land acquisition interest is part of enhanced compensation, not taxable interest under income tax law.

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is treated as an accretion to the compensation itself, not as ordinary interest. Applying the Supreme Court principle in Ghanshyam (HUF), the analysis distinguishes section 28 receipts from interest under section 34 and concludes that section 28 forms part of enhanced compensation. The introduction of section 56(2)(viii) in the Income-tax Act, 1961 does not change that position for section 28 receipts, so such amounts are not taxable as interest under that provision.

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable as interest under section 56(2)(viii) of the Income-tax Act, 1961 or is to be treated as part of compensation.

Analysis: The compensation arose from compulsory acquisition, and the additional amount received under section 28 was examined in the light of the Supreme Court ruling in Ghanshyam (HUF). The controlling principle applied was that interest under section 28 is not the ordinary interest contemplated by section 34, but an accretion to the compensation itself and therefore forms part of enhanced compensation. The amendment introducing section 56(2)(viii) was held not to alter that legal position for receipts falling under section 28.

Conclusion: The receipt under section 28 was held to be part of compensation and not taxable as interest under section 56(2)(viii); the Revenue's challenge failed.

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