Section 28 land acquisition interest treated as enhanced compensation, not income from other sources, despite later tax amendments.

Interest under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land is treated as an accretion to the value of the land and forms part of the compensation, while interest under section 34 remains distinct. The text notes that, on this settled distinction, such section 28 interest retains the character of enhanced compensation and is not taxable as income from other sources merely because of the later insertion of sections 56(2)(viii), 57(iv) and 145A(b) of the Income-tax Act, 1961. The resulting addition was therefore not sustainable.

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is to be treated as part of compensation and exempt, or taxable as income from other sources under the amended provisions of the Income-tax Act, 1961.

Analysis: The assessee had received interest on enhanced compensation for compulsory acquisition of agricultural land and had treated it as part of the compensation. The Tribunal accepted that the assessment record showed due enquiry by the Assessing Officer and that the controversy on taxability turned on the legal character of interest under section 28 of the Land Acquisition Act, 1894. It noted that this interest is distinct from interest under section 34 and, following the settled distinction relied upon in the earlier Tribunal reasoning adopted here, is an accretion to the value of land and forms part of enhanced compensation. The Tribunal further accepted that the later insertion of sections 56(2)(viii), 57(iv) and 145A(b) did not alter that character for the issue in hand.

Conclusion: The interest under section 28 of the Land Acquisition Act, 1894 was held to retain the character of enhanced compensation and the addition treating it as taxable income from other sources could not be sustained.

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