Interest on land acquisition compensation treated as enhanced compensation and exempt, not taxable as income from other sources.

Interest awarded under section 28 of the Land Acquisition Act, 1894 on delayed payment of compensation for compulsory acquisition of agricultural land is treated as part of enhanced compensation, not as separate income from other sources. On that basis, the receipt follows the tax treatment of the compensation itself and falls within the exemption available under section 10(37) of the Income-tax Act, 1961. The noted result is that the addition was deleted and relief was granted on the taxability of the amount received.

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on delayed payment of compensation for compulsory acquisition of agricultural land is taxable as income from other sources or is to be treated as part of enhanced compensation eligible for exemption under section 10(37) of the Income-tax Act, 1961.

Analysis: The issue was held to be covered by the earlier tribunal decision relied upon in the order, which followed the principle that interest awarded under section 28 of the Land Acquisition Act, 1894 partakes the character of enhanced compensation. Such receipt is not treated as independent interest income assessable under the head income from other sources. On that basis, the exemption available for compensation relating to acquired agricultural land was applied to the receipt in question.

Conclusion: The receipt under section 28 of the Land Acquisition Act, 1894 is part of enhanced compensation and is not taxable as income from other sources; the addition was liable to be deleted.

Final Conclusion: The appeals were allowed and the assessee obtained relief on the taxability of the amount received under section 28 of the Land Acquisition Act, 1894.

Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquired agricultural land is an accretion to compensation, not a separate interest receipt, and therefore follows the tax treatment of the compensation itself.

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