Section 28 land acquisition interest treated as enhanced compensation, not income from other sources, for agricultural land.

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land was treated as an accretion to the compensation itself, not as independent interest income. The Tribunal held that this character meant the receipt fell within the exempt treatment applicable to enhanced compensation under section 10(37) of the Income-tax Act, 1961, and could not be assessed as income from other sources. The addition was therefore deleted.

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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 is taxable as income from other sources, or whether it forms part of enhanced compensation and is exempt under section 10(37) of the Income-tax Act, 1961.

Analysis: The interest in question arose under section 28 of the Land Acquisition Act, 1894 in relation to compulsory acquisition of agricultural land. The Tribunal followed the settled position that such interest is an accretion to the compensation and takes the same character as enhanced compensation, rather than constituting independent interest income. The authorities relied upon, including the statutory scheme under sections 145A(b), 56(2)(viii) and 57(iv) of the Income-tax Act, 1961, did not alter that character where the receipt was under section 28 of the Land Acquisition Act, 1894 and the land acquired was agricultural land. On that basis, the amount could not be taxed as income from other sources.

Conclusion: The issue was decided in favour of the assessee. The interest received under section 28 of the Land Acquisition Act, 1894 was treated as part of enhanced compensation and held not liable to income tax, with the consequential addition directed to be deleted.

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