Interest on enhanced land acquisition compensation is taxable as income from other sources, not exempt under agricultural land relief.

Interest 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 after the insertion of section 56(2)(viii), read with section 57(iv) and section 145A(b) of the Income-tax Act, 1961. The post-2010 statutory scheme treats such interest as a separate revenue receipt taxable on receipt, with only the limited deduction permitted by section 57(iv). Section 10(37) exempts capital gains from transfer of agricultural land, but does not extend to the interest component once the later charging provisions apply.

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Issues: Whether interest awarded 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 or exempt as part of enhanced compensation under section 10(37) of the Income-tax Act, 1961.

Analysis: The dispute turned on the nature of interest under section 28 of the Land Acquisition Act, 1894 and the effect of the amendments introducing section 56(2)(viii), section 57(iv) and section 145A(b) of the Income-tax Act, 1961. The decision distinguished interest under section 28 from compensation only for the pre-amendment position considered in earlier authorities, and relied on the post-2010 statutory scheme which specifically brings interest on compensation or enhanced compensation within the head "Income from other sources" and allows a limited deduction under section 57(iv). It was also noted that section 10(37) grants exemption for capital gains arising from transfer of agricultural land, but does not exempt the interest component once the later charging provisions apply. The view that interest on compensation or enhanced compensation is taxable as revenue income was accepted as the governing law for the assessment year in question.

Conclusion: The interest received on enhanced compensation under section 28 is taxable as income from other sources and is not exempt under section 10(37); the finding was against the assessee.

Ratio Decidendi: After the insertion of section 56(2)(viii) and section 57(iv), interest on compensation or enhanced compensation is chargeable to tax under the head "Income from other sources" in the year of receipt, and cannot be treated as exempt capital compensation under section 10(37).

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