Land acquisition compensation-linked interest must be distinguished from delayed-payment interest; addition remanded for fresh consideration.

Interest attributable to section 28 of the Land Acquisition Act was required to be examined under the compensation framework, not taxed on the same footing as interest for delayed payment under section 34. The Tribunal applied the governing Supreme Court distinction between compensation-linked interest and delayed-payment interest, and held that the revenue's approach could not stand without verifying the relevant calculations and the applicability of those decisions. The addition was set aside and the matter remanded for fresh consideration after giving the assessee an opportunity of hearing.

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Issues: Whether the amount received under section 28 of the Land Acquisition Act was taxable as interest or formed part of the compensation, and whether the addition sustained by the lower authorities could stand.

Analysis: The receipt was treated by the Assessing Officer as taxable interest and only partial deduction was granted under section 57 of the Income-tax Act. The Tribunal followed its earlier view that interest attributable to section 28 of the Land Acquisition Act is not taxable in the manner adopted by the revenue authorities, and held that the matter had to be decided in accordance with the binding legal position laid down in the relevant Supreme Court decisions distinguishing interest under sections 23 and 28 from interest for delayed payment under section 34. Since the calculation, figures and applicability of those decisions required verification, the matter was sent back for fresh consideration after giving the assessee an opportunity of hearing.

Conclusion: The addition was set aside for reconsideration and the assessee succeeded to that extent.

Ratio Decidendi: Interest received under section 28 of the Land Acquisition Act, being linked to compensation, is to be treated in accordance with the governing compensation framework and cannot be taxed on the same footing as interest for delayed payment under section 34.

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