Enhanced compensation under land acquisition law treated as exempt compensation, not separate interest, for income-tax purposes.

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was treated as an accretion to the compensation itself, not as separate interest simpliciter. On that basis, it was distinguished from interest under section 34, which relates to delayed payment. Because the receipt arose from compulsory acquisition of agricultural land and was received after section 10(37) of the Income-tax Act, 1961 had come into force, the exemption for compensation from such acquisition was applied. The later provisions taxing interest on compensation as income from other sources were held not to govern the assessment year in question, and the addition was deleted.

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Issues: Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is taxable in the assessment year of receipt, and whether such receipt is exempt under section 10(37) of the Income-tax Act, 1961.

Analysis: The amount received under section 28 was treated as an accretion to the enhanced value of the acquired land and not as interest simpliciter. On the strength of the Supreme Court's exposition of the scheme of compensation under the Land Acquisition Act, 1894, section 28 was understood as part of enhanced compensation, unlike interest for delayed payment under section 34. Since the receipt related to compulsory acquisition and was received after section 10(37) came into force, the statutory exemption for compensation arising from compulsory acquisition of agricultural land was held applicable. The later provisions dealing with interest on compensation as income from other sources were held not to govern the assessment year in question.

Conclusion: The receipt under section 28 was held not taxable as separate interest and was treated as compensation eligible for exemption under section 10(37); the addition was deleted.

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