Section 28 interest on enhanced land acquisition compensation is treated as part of compensation and may be exempt under section 10(37).

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land is treated as part of the compensation itself, not as separate income from other sources. Where the conditions of section 10(37) of the Income-tax Act, 1961 are satisfied, such receipt is exempt in the hands of the individual recipient. The note relies on a coordinate bench view that section 28 interest retains the character of compensation, making any addition unsustainable.

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

Analysis: The receipt in question arose from compulsory acquisition of agricultural land and represented interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation. The relevant controversy was whether such receipt retained the character of compensation or stood separately taxable under the head income from other sources. Following the coordinate bench decision relied upon in the order, the receipt under section 28 was treated as part and parcel of the compensation itself. For an individual where the conditions of section 10(37) were satisfied, such receipt was held to be exempt and not taxable as income from other sources.

Conclusion: The addition was unsustainable. The interest received under section 28 of the Land Acquisition Act, 1894 formed part of the compensation and was exempt under section 10(37) of the Income-tax Act, 1961.

Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land is part of the compensation and, where section 10(37) applies, is not taxable as income from other sources.

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