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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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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 to be treated as part of compensation and exempt under section 10(37) of the Income-tax Act, 1961, or as taxable income from other sources.
Analysis: The binding jurisdictional precedent held that interest awarded under section 28 of the Land Acquisition Act, 1894 is not mere interest in the ordinary sense but an accretion to the value of the acquired land and part of the enhanced compensation. That view was applied as the governing law for the present assessment year. On that footing, the amount could not be brought to tax under section 56(2)(viii) read with section 145A(b) of the Income-tax Act, 1961 as income from other sources, and the addition made by the Assessing Officer was unsustainable.
Conclusion: The interest received under section 28 of the Land Acquisition Act, 1894 was held to be part of compensation and the assessee was entitled to exemption under section 10(37) of the Income-tax Act, 1961.
Ratio Decidendi: Interest awarded under section 28 of the Land Acquisition Act, 1894 on enhanced compensation is an accretion to compensation, not taxable interest income, and where the statutory conditions are satisfied it follows the tax treatment of the compensation itself.
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