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Issues: Whether interest received on enhanced compensation for compulsory acquisition of agricultural land is taxable as income from other sources under section 56(2)(viii) of the Income-tax Act, 1961, or is exempt as part of compensation under section 10(37) of the Income-tax Act, 1961.
Analysis: The interest in question arose from compulsory acquisition of agricultural land and was received on enhanced compensation. The prevailing legal position, as applied by the Court, is that interest attributable to section 28 of the Land Acquisition Act, 1894 partakes the character of enhanced compensation and is an accretion to the value of the land, not a separate revenue receipt. The amendment introducing section 56(2)(viii) does not displace the exemption available where the underlying receipt relates to agricultural land covered by section 10(37). Following the jurisdictional High Court and the binding Supreme Court principles relied upon in the judgment, the impugned addition could not be sustained.
Conclusion: The issue is decided in favour of the assessee. The interest received on enhanced compensation was held not taxable under the head income from other sources and the addition was deleted.
Ratio Decidendi: Interest received under section 28 on enhanced compensation for acquired agricultural land is treated as part of the compensation itself and, where the land is otherwise covered by section 10(37), it is not separately taxable under section 56(2)(viii).
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