Taxability of interest on enhanced compensation: amended income-tax provisions treat it as income from other sources on receipt.

Interest received on enhanced compensation for acquired land is taxable as income from other sources under the amended Income-tax Act framework. The post-amendment scheme introduced by Finance (No. 2) Act, 2009, read with section 145B and section 57(iv), governs such receipts in the year of receipt, and the earlier view treating the amount as exempt no longer applies. The distinction between compensation and interest in land acquisition matters was noted, but the tax treatment of the interest component was held to follow the amended provisions. The exempt-character argument was rejected.

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Issues: Whether interest received on enhanced compensation for acquired land is taxable as income from other sources under the Income-tax Act, 1961.

Analysis: The controlling statutory scheme treats interest received on compensation or enhanced compensation as income chargeable under the head "Income from other sources". The Court relied on the post-amendment position introduced by Finance (No. 2) Act, 2009, read with section 145B and section 57(iv), and held that the earlier understanding of the law could not govern cases arising after the amendment. It also noticed the distinction drawn in the land acquisition context between compensation and interest, but held that the tax treatment of such interest stands governed by the amended income-tax provisions. Following the jurisdictional precedent, the view that such interest retains an exempt character was rejected.

Conclusion: Interest received on enhanced compensation is taxable as income from other sources and is not exempt; the issue is decided against the assessee and in favour of the Revenue.

Ratio Decidendi: After the insertion of section 56(2)(viii) and the corresponding deeming provision in section 145B, interest received on compensation or enhanced compensation is taxable as income from other sources in the year of receipt.

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