Taxability of enhanced land acquisition interest and fixed deposit income turns on binding precedent and actual income attribution.

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was treated as not taxable as interest income under the Income-tax Act, 1961, following binding jurisdictional precedent, and the corresponding addition was deleted. Interest from fixed deposits kept against a joint bank guarantee was attributed to the assessee rather than his sister because the sister had not disclosed that income in her return and the material did not support shifting the accrual to her. The addition on that issue was sustained. The matter therefore resulted in partial relief, with one addition deleted and the remaining addition upheld.

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Issues: (i) Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was taxable in the assessee's hands under the Income-tax Act, 1961. (ii) Whether interest income from fixed deposits maintained against the joint bank guarantee was taxable in the assessee's hands or in his sister's hands.

Issue (i): Whether interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation was taxable in the assessee's hands under the Income-tax Act, 1961.

Analysis: The interest in question arose from enhanced compensation under land acquisition proceedings. The jurisdictional High Court had already held that such interest under section 28 of the Land Acquisition Act, 1894 is not to be taxed as interest income under section 56(2)(viii) of the Income-tax Act, 1961 in the manner pressed by the Revenue for this dispute. The Tribunal followed that binding precedent and treated the issue as covered in favour of the assessee.

Conclusion: The addition relating to interest on enhanced land acquisition compensation was deleted in favour of the assessee.

Issue (ii): Whether interest income from fixed deposits maintained against the joint bank guarantee was taxable in the assessee's hands or in his sister's hands.

Analysis: The record showed that the sister had not offered the impugned interest income in her return for the relevant year, while the assessee's return also did not support shifting the income away from him. On the material before it, the Tribunal found no merit in the plea that the interest accrued solely to the sister.

Conclusion: The addition of interest from fixed deposits was sustained against the assessee.

Final Conclusion: The appeal succeeded only in part, with relief granted on the land acquisition interest issue and the remaining addition upheld.

Ratio Decidendi: Interest on enhanced compensation under section 28 of the Land Acquisition Act, 1894 must be governed by the binding jurisdictional precedent on its tax treatment, while income attribution must rest on the actual accrual and disclosure of the income in the relevant return.

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