Taxability of interest on enhanced compensation treated as revenue receipt and taxed under the Income-tax Act.

Interest received on enhanced compensation under section 28 of the Land Acquisition Act was treated as a revenue receipt taxable under the Income-tax Act, 1961, rather than as an inseparable part of compensation. The Tribunal applied the controlling larger-bench authority on the facts before it and rejected the contention that such interest was not separately taxable. The additions made under the relevant income-tax provisions were therefore upheld, and the issue was decided in favour of the Revenue.

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Issues: Whether interest received on enhanced compensation under section 28 of the Land Acquisition Act was taxable as income from other sources under the Income-tax Act, 1961, or whether it formed part of compensation and was not separately taxable.

Analysis: The controversy turned on the character of the amount received under section 28 of the Land Acquisition Act and the effect of the decisions relied upon by the parties. The Tribunal noted that the interest was awarded in the context of enhanced compensation, but held that the controlling authority applicable on the facts was the larger-bench decision treating such interest as a revenue receipt taxable in the hands of the assessee. The view that it formed part of compensation was not accepted on the facts of the present case, and the additions made under the relevant provisions of the Income-tax Act, 1961 were upheld.

Conclusion: The issue was decided against the assessee and in favour of the Revenue; the interest on enhanced compensation was held to be taxable.

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