Interest on land acquisition compensation is taxable as income from other sources after the amended income-tax scheme.

Interest received on compensation or enhanced compensation under the Land Acquisition Act is taxable as income from other sources after the 2010 amendments. Sections 56(2)(viii) and 57(iv) expressly place such interest under that head and allow only the specified deduction, while Section 10(37) governs exemption of capital gains on agricultural land but does not determine the tax treatment of interest. The earlier position in Ghanshyam (HUF) was held inapplicable because the statutory scheme changed, and the clear language of the amended provisions was given its ordinary meaning. Accordingly, the interest does not retain the character of compensation for capital gains purposes.

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Issues: Whether interest received under Section 28 of the Land Acquisition Act, 1894 on compensation or enhanced compensation, after insertion of Section 56(2)(viii) and Section 57(iv) of the Income-tax Act, 1961, is taxable as income from other sources or continues to partake the character of compensation and fall under capital gains.

Analysis: The insertion of Section 56(2)(viii) specifically brings interest received on compensation or enhanced compensation within the head "Income from other sources", and Section 57(iv) expressly provides a fifty per cent deduction for such income. The Court found that Section 10(37) governs exemption of capital gains from transfer of agricultural land, but does not control the head under which interest on compensation is taxed. The argument based on the earlier position in Ghanshyam (HUF) was rejected because the legislative scheme changed with the 2010 amendments. The Court also held that the statutory language of Sections 56(2)(viii) and 57(iv) is clear and unambiguous, and in a fiscal statute the ordinary and natural meaning must be given effect to.

Conclusion: Interest received on compensation or enhanced compensation is taxable as income from other sources and not under the head capital gains.

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