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Issues: Whether interest on enhanced compensation is taxable as income from other sources under Section 56(2)(viii) of the Income-tax Act, 1961, and whether the Principal Commissioner was justified in invoking revisional jurisdiction under Section 263 of the Income-tax Act, 1961.
Analysis: The binding jurisdictional High Court decision held that interest on compensation or enhanced compensation is chargeable to tax as income from other sources in view of Section 56(2)(viii) and Section 145B of the Income-tax Act, 1961. The earlier view treating such interest as part of compensation was held to be unsustainable after the legislative amendment. Once that position is binding, the assessment order treating the receipt as exempt could not be regarded as a plausible view. The revisional authority was therefore entitled to set aside the assessment and direct fresh enquiry and assessment.
Conclusion: The issue is decided in favour of the Revenue. Interest on enhanced compensation is taxable as income from other sources, and the exercise of power under Section 263 of the Income-tax Act, 1961 was upheld.
Ratio Decidendi: Interest received on compensation or enhanced compensation is separately taxable as income from other sources under the amended law, and an assessment accepting a contrary view without proper enquiry is amenable to revision under Section 263 of the Income-tax Act, 1961.
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