Taxability of interest on enhanced land acquisition compensation follows binding jurisdictional precedent and is not taxed here.

Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land was examined for taxability under the Income-tax Act, 1961. The Tribunal considered the competing views on whether such interest forms part of compensation or is separately assessable as income from other sources under section 56(2)(viii), and the effect of section 145A. Applying the jurisdictional High Court's binding view and the coordinate bench decision following it, the receipt was treated as not exigible to tax in the assessee's hands, 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 for compulsory acquisition of agricultural land is taxable as income from other sources under section 56(2)(viii) of the Income-tax Act, 1961, or is exempt.

Analysis: The dispute turned on the treatment of interest awarded on enhanced compensation. The Tribunal noted the competing lines of authority on whether such interest forms part of compensation or is separately taxable, and addressed the effect of the statutory insertion of section 56(2)(viii) read with section 145A of the Income-tax Act, 1961. It held that, for the facts before it, the governing jurisdictional High Court view supported the assessee, and that the coordinate bench decision following that view was applicable. The Tribunal accordingly treated the receipt as not exigible to tax in the assessee's hands.

Conclusion: The issue was decided in favour of the assessee; the addition made by treating the interest as taxable income from other sources was not sustained.

Final Conclusion: The appeal succeeded on merits and the assessee obtained relief in respect of the impugned tax addition.

Ratio Decidendi: Where the jurisdictional High Court view governs the field, interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is to be tested according to that binding precedent for its taxability under the Income-tax Act, 1961.

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