Interest on enhanced land acquisition compensation was treated as part of compensation, not taxable as other sources income.

Interest under section 28 of the Land Acquisition Act, 1894, received with enhanced compensation and solatium for compulsory acquisition of rural agricultural land, was treated as part of the compensation itself and not as income from other sources. As no interest was awarded under section 34 of that Act, the receipt did not fall within section 56 of the Income-tax Act, 1961. The restriction of relief to 50% had no legal basis on the facts stated, and the assessee succeeded on the taxability issue.

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Issues: Whether the interest received on enhanced compensation for compulsory acquisition of rural agricultural land, along with solatium, was taxable as income from other sources and whether only 50% relief could be sustained.

Analysis: The compensation awarded by the Civil Court consisted of enhanced compensation, solatium, and statutory interest under section 28 of the Land Acquisition Act, 1894. On the facts, no interest was awarded under section 34 of that Act. Interest under section 28 forms part of the enhanced compensation and partakes of the character of compensation itself. Such receipt is not taxable as income from other sources. The restriction of relief to 50% had no basis in law or reasoning.

Conclusion: The receipt was held not taxable under section 56 of the Income-tax Act, 1961, and the assessee succeeded on the issue.

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