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

Amounts awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquired agricultural land are treated as an accretion to compensation, not as interest income from other sources. The Tribunal applied the settled principle that such receipts fall within the compensation scheme under section 45(5) of the Income-tax Act, 1961 and are taxable accordingly on receipt, while section 56 does not apply where the substance of the receipt is compensation. On that basis, the addition made by the tax authorities was deleted.

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for acquisition of agricultural land is taxable as interest income from other sources or forms part of enhanced compensation.

Analysis: The Tribunal followed the settled position that amounts awarded under section 28 of the Land Acquisition Act, 1894 are an accretion to the compensation and not mere interest in the ordinary sense. It relied on the principle that enhanced compensation is taxable in the year of receipt under the scheme of section 45(5) of the Income-tax Act, 1961, while the treatment as income from other sources under section 56 and the related deduction provision do not apply when the receipt is in substance compensation. The Tribunal found no infirmity in the order of the first appellate authority, which had applied the binding precedents on the character of such receipts.

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

Final Conclusion: The Revenue's challenge to the deletion of the addition failed, and the assessee's supporting cross objection did not survive independently.

Ratio Decidendi: Amounts awarded under section 28 of the Land Acquisition Act, 1894 are part of enhanced compensation and are to be taxed as such under the Income-tax Act, 1961, rather than as interest income from other sources.

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