Interest on land acquisition compensation is taxable, while disputed land identity on capital gains was remitted for fresh examination.

Interest received under section 28 of the Land Acquisition Act is taxable as income from other sources under section 56(2)(viii), read with section 145B(1), and the later statutory scheme with binding jurisdictional precedent prevails over contrary earlier authority, so the addition on this issue was sustained. The long-term capital gain addition on acquisition of land was not finally decided because the identity and character of the acquired land remained disputed; as the additional material had not been examined by the lower authorities, the matter was remitted to the Assessing Officer for fresh adjudication on whether the land was agricultural or a capital asset.

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Issues: (i) Whether interest received under section 28 of the Land Acquisition Act is taxable as income from other sources under section 56(2)(viii) of the Income-tax Act, 1961. (ii) Whether the addition made as long-term capital gain on acquisition of land was sustainable, or whether the matter required fresh examination of the identity and character of the acquired land.

Issue (i): Whether interest received under section 28 of the Land Acquisition Act is taxable as income from other sources under section 56(2)(viii) of the Income-tax Act, 1961.

Analysis: The issue was examined in light of the statutory amendment by the Finance (No. 2) Act, 2009 inserting clause (viii) in section 56(2), together with section 145B(1), and the binding view of the jurisdictional High Court that interest under section 28 of the Land Acquisition Act is chargeable to tax. The contrary contention based on earlier authority was held not to prevail over the later statutory scheme and jurisdictional precedent.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; the interest was held taxable under section 56(2)(viii).

Issue (ii): Whether the addition made as long-term capital gain on acquisition of land was sustainable, or whether the matter required fresh examination of the identity and character of the acquired land.

Analysis: There was a factual dispute as to whether the acquired land was the land at Khadgaon relied upon by the Assessing Officer or the land at Gut No. 11, Vasangaon asserted by the assessee. Since the additional material had not been examined by the lower authorities and the correct identity of the acquired land was central to deciding whether it was an agricultural land or a capital asset, the matter was found fit for restoration to the Assessing Officer for fresh adjudication.

Conclusion: The issue was restored to the Assessing Officer for de novo consideration; no final finding on the capital gains addition was recorded at this stage.

Final Conclusion: The taxability of interest on enhanced compensation was upheld, while the capital gains dispute was remitted for fresh determination on the basis of the correct land identification and relevant evidence.

Ratio Decidendi: Interest received under section 28 of the Land Acquisition Act, after the statutory amendment introducing section 56(2)(viii) and section 145B(1) of the Income-tax Act, 1961, is taxable as income from other sources, and the Tribunal is bound by the jurisdictional High Court on that question.

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