Section 28 land acquisition interest treated as exempt compensation, not income from other sources under income tax law.

Interest awarded under section 28 of the Land Acquisition Act on compulsory acquisition of agricultural land was treated as an accretion to enhanced compensation, not as independent interest income. Because the underlying compensation was exempt under section 10(37) of the Income-tax Act, the section 28 amount was also held to form part of the exempt compensation and not income chargeable under section 56. The addition as income from other sources was therefore not sustained.

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Issues: Whether interest received on enhanced compensation under section 28 of the Land Acquisition Act, 1894 is to be treated as part of compensation and, if so, whether it is exempt under section 10(37) of the Income-tax Act, 1961 rather than taxable as income from other sources.

Analysis: The appeal turned on the character of the amount received on compulsory acquisition of agricultural land. The binding principle applied was that interest awarded under section 28 of the Land Acquisition Act is an accretion to the enhanced compensation and not independent interest income in the ordinary sense. The Tribunal also followed the settled position that taxability, where applicable, is on receipt basis. Since the compensation itself was exempt under section 10(37), the amount received as section 28 interest was treated as part of the exempt compensation and not as income chargeable under section 56.

Conclusion: The addition made by treating the amount as income from other sources was not sustained, and the assessee succeeded on the issue.

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