Taxability of land acquisition interest on receipt upheld under the deeming provisions of the Income-tax Act.

Interest received on compensation or enhanced compensation under section 28 of the Land Acquisition Act was treated as taxable under the Income-tax Act, 1961. The Tribunal applied section 56(2)(viii) read with section 145B(1), which deems such interest to be income in the year of receipt, and followed the jurisdictional High Court view that interest under section 28 is chargeable to tax. The contrary reliance on earlier authorities did not displace that binding position for the assessment year in question. The issue was decided against the assessee, and the impugned interest was held taxable.

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Issues: Whether interest received on compensation or enhanced compensation under section 28 of the Land Acquisition Act, 1894 was taxable under the Income-tax Act, 1961.

Analysis: The interest on compensation enhanced compensation was held to be taxable under the statutory scheme introduced by section 56(2)(viii) of the Income-tax Act, 1961 read with section 145B(1), which deems such interest to be income of the year in which it is received. The jurisdictional High Court view holding that interest under section 28 of the Land Acquisition Act is chargeable to tax was followed, and the Tribunal noted that the contrary submissions based on earlier authorities did not displace that binding position for the assessment year in question.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; the impugned interest was held taxable.

Final Conclusion: The appeal failed on the substantive controversy concerning taxability of the land acquisition interest, and the assessment was sustained.

Ratio Decidendi: Interest on compensation or enhanced compensation under the Land Acquisition Act is taxable on receipt and is chargeable under the deeming provisions governing interest on compensation in the Income-tax Act, 1961.

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