Section 28 land acquisition interest treated as part of exempt enhanced compensation, not taxable as other sources income.

Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land was treated as an accretion to the value of the land and therefore part of the enhanced compensation itself. Applying the Supreme Court distinction between section 28 interest and interest for delayed payment, the Tribunal held that the amended provisions of sections 56(2)(viii), 57(iv) and 145A(b) of the Income-tax Act, 1961 did not change the character of such receipts. The receipt remained exempt under section 10(37) and was not taxable as income from other sources under section 56(2)(viii).

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land is to be treated as part of enhanced compensation exempt under section 10(37) of the Income-tax Act, 1961, or as taxable interest under section 56(2)(viii) of the Income-tax Act, 1961.

Analysis: The issue was examined in the light of the Supreme Court's distinction between interest under section 28 of the Land Acquisition Act, 1894 and interest for delayed payment, and the principle that interest under section 28 is an accretion to the value of the acquired land and forms part of enhanced compensation. The amended provisions of sections 56(2)(viii), 57(iv) and 145A(b) of the Income-tax Act, 1961 were held not to alter that legal character for section 28 receipts. The earlier view of the Tribunal in the assessee's own matter was followed, and no new distinguishing facts were shown.

Conclusion: Interest received under section 28 of the Land Acquisition Act, 1894 was held to be part of enhanced compensation and exempt under section 10(37) of the Income-tax Act, 1961, not taxable as income from other sources under section 56(2)(viii).

Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is an integral part of the compensation itself and, where the compensation is exempt, such receipt does not assume the character of taxable interest under the head income from other sources.

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