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Issues: Whether interest received on enhanced compensation for acquisition of agricultural land under Section 28 of the Land Acquisition Act, 1894 is taxable as income from other sources under Section 56(2)(viii) read with Section 145A(b) of the Income-tax Act, 1961, or is exempt along with the compensation under Section 10(37) of that Act.
Analysis: The interest in question arose only from the enhanced compensation awarded for agricultural land. The decisive principle applied was that interest under Section 28 of the Land Acquisition Act, 1894 is not interest in the ordinary sense, but an accretion to the compensation itself and therefore forms part of the enhanced compensation. On that basis, the deemed taxation mechanism in Section 145A(b) and the charging provision in Section 56(2)(viii) do not treat such receipt as taxable interest from other sources. The addition made by the Assessing Officer under Section 57(iv) consequently could not survive.
Conclusion: The interest received on enhanced compensation under Section 28 of the Land Acquisition Act, 1894 is not chargeable to tax as income from other sources and is to be treated as part of the compensation; the addition was liable to be deleted, and the issue was decided in favour of the assessee.
Ratio Decidendi: Interest awarded under Section 28 of the Land Acquisition Act, 1894 is an accretion to enhanced compensation and not taxable interest under Section 56(2)(viii) read with Section 145A(b) of the Income-tax Act, 1961.
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