Interest on land acquisition compensation is taxable as income from other sources under the amended tax regime.

Interest received on compensation or enhanced compensation under the Land Acquisition Act, 1894 is brought to tax as income from other sources after the Finance (No. 2) Act, 2009 amendment. The statutory scheme under Section 56(2)(viii), read with Section 145B, specifically includes such interest within taxable income, while Section 28 concerns interest on excess compensation and Section 34 concerns interest for delay in payment. Earlier pre-amendment authority was held inapplicable to the post-amendment regime, and the later precedent did not address the effect of the 2010 change in taxability. The interest was therefore treated as taxable and not exempt as part of compensation.

---

---

Issues: Whether interest received on compensation or enhanced compensation under the Land Acquisition Act, 1894 is taxable as income from other sources under Section 56(2)(viii) of the Income-tax Act, 1961 after the Finance (No. 2) Act, 2009 amendment.

Analysis: Section 28 of the Land Acquisition Act, 1894 deals with interest on excess compensation, while Section 34 deals with interest for delay in payment. The statutory scheme introduced by Section 56(2)(viii) of the Income-tax Act, 1961, together with Section 145-B, specifically brings within the head "income from other sources" interest received on compensation or enhanced compensation. The earlier position relied upon from pre-amendment authority could not govern the post-amendment regime. The Court also found that the later precedent did not address the effect of the 2010 change in taxability.

Conclusion: The interest received on compensation or enhanced compensation is taxable under Section 56(2)(viii) of the Income-tax Act, 1961 and is not exempt as part of compensation for the period in question. The substantial question of law was answered in favour of the Revenue, and the order of the ITAT was set aside.

---