Section 28 land acquisition interest treated as compensation and exempt for agricultural land under income tax law.

Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land was treated as part of the compensation itself. Because the land was agricultural land and the conditions for exemption were satisfied, the amount was held to fall within section 10(37) of the Income-tax Act, 1961. The Tribunal also applied the view that section 145A(b) and section 56(2)(viii) do not change the character of section 28 interest for this purpose, so the receipt was not taxable as income from other sources.

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Issues: Whether interest received on enhanced compensation under section 28 of the Land Acquisition Act, 1894 for compulsory acquisition of agricultural land is exempt under section 10(37) of the Income-tax Act, 1961 or taxable as income from other sources under sections 56(2)(viii), 57(iv) and 145A(b) of the Income-tax Act, 1961.

Analysis: The land acquired was agricultural land and the conditions in section 10(37) of the Income-tax Act, 1961 were satisfied. The amount in dispute represented interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation. Relying on the view that interest under section 28 partakes the character of compensation and forms an accretion to the enhanced value of the land, the Tribunal held that such amount does not fall within the expression "interest" contemplated by section 145A(b). The Tribunal also followed the judicial view that the substitution of section 145A and insertion of section 56(2)(viii) did not alter the character of section 28 interest for this purpose.

Conclusion: Interest received under section 28 of the Land Acquisition Act, 1894 was held to be exempt under section 10(37) of the Income-tax Act, 1961 and not taxable as income from other sources.

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