Interest on enhanced compensation for agricultural land was held not taxable where the compensation itself was not chargeable.

Interest received on enhanced compensation for acquisition of agricultural land was treated as part of the compensation structure and, on the facts found, was not chargeable to tax under the provisions invoked for interest on compensation. The reasoning followed Union of India v. Hari Singh, which had held that compensation or enhanced compensation for agricultural land was not taxable, and the appellate order was found defective because it gave no independent reason for sustaining the addition. The tax addition was therefore deleted.

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Issues: Whether interest received on enhanced compensation for acquisition of agricultural land was taxable under section 56(2)(viii) read with section 57(iv) of the Income-tax Act, 1961, or was a capital receipt not chargeable to tax.

Analysis: The interest arose from compensation for acquisition of agricultural land and was treated as part of the compensation structure. The decision in Union of India v. Hari Singh was applied to hold that no tax was payable on compensation or enhanced compensation received for agricultural land. The appellate order also did not record any independent reason justifying the addition made by the Assessing Officer.

Conclusion: The interest on enhanced compensation was not taxable in the assessee's hands and the addition was unsustainable.

Final Conclusion: The assessee succeeded, and the tax addition made on account of interest received with compensation for agricultural land was deleted.

Ratio Decidendi: Interest received on compensation for acquisition of agricultural land, where the compensation is not chargeable as taxable income on the facts found, cannot be brought to tax under the provisions applied for interest on compensation.

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