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

Interest received under section 28 of the Land Acquisition Act, 1894 on enhanced compensation for compulsory acquisition of agricultural land is treated, after the 01.04.2010 amendment, as income from other sources under section 56(2)(viii) and deemed taxable in the year of receipt under section 145B(1). The exemption under section 10(37) is confined to capital gains arising from compulsory acquisition of agricultural land and does not extend to such interest. On this statutory scheme and binding High Court authorities, the Assessing Officer's view treating the interest as exempt was erroneous and prejudicial to the Revenue, so the revisional order under section 263 directing recomputation was sustainable.

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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 exempt under section 10(37) of the Income-tax Act, 1961 or is taxable as income from other sources under section 56(2)(viii) read with section 145B(1) of the Income-tax Act, 1961, and whether the revisional order under section 263 of the Income-tax Act, 1961 calling for recomputation was justified.

Analysis: Interest under section 28 of the Land Acquisition Act, 1894 is distinct from compensation and, after the legislative amendment effective from 01.04.2010, the statutory scheme specifically brings interest on compensation or enhanced compensation within the head "Income from other sources" under section 56(2)(viii), with section 145B(1) deeming it to be income of the year of receipt. The exemption under section 10(37) applies to capital gains arising from compulsory acquisition of agricultural land and does not extend to interest on such compensation. The earlier position under pre-amendment law and decisions rendered in that context did not govern the amended provisions. On the statutory text and binding High Court authorities, the Assessing Officer's view treating the interest as exempt was erroneous and prejudicial to the interests of the Revenue.

Conclusion: The interest on enhanced compensation was rightly held taxable as income from other sources, and the revisional direction under section 263 was sustainable.

Final Conclusion: The assessee's challenge failed, and the order directing taxation of the interest with the statutory deduction was left undisturbed.

Ratio Decidendi: After the 2010 amendment, interest received on compensation or enhanced compensation is taxable in the year of receipt as income from other sources, and exemption for agricultural land compensation does not cover such interest.

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