Taxability of interest on enhanced compensation: Tribunal treats it as income from other sources, not section 10(37) exempt.

Interest on enhanced compensation for compulsory acquisition of agricultural land was treated as taxable income from other sources under the receipt-based framework in section 56(2)(viii) read with section 145B(1). The Tribunal followed the coordinate bench ruling in Ajay Kumar and accepted that interest under section 28 of the Land Acquisition Act is not part of the exempt compensation itself for purposes of section 10(37). The exemption was therefore denied for the interest component, and the corresponding TDS credit claim was held inseparable from the taxable receipt.

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Issues: Taxability of interest on enhanced compensation received on compulsory acquisition of agricultural land, and the availability of exemption under Section 10(37) of the Income-tax Act, 1961.

Analysis: The appeal turned on whether the interest component on enhanced compensation falls within the charging framework for interest income introduced by Section 56(2)(viii) of the Income-tax Act, 1961, together with the receipt-based rule in Section 145B(1). The assessee relied on earlier authorities to contend that interest under Section 28 of the Land Acquisition Act forms part of compensation, but the Tribunal followed the coordinate bench decision in Ajay Kumar, which had already held that such interest is taxable as income from other sources in the year of receipt. The Tribunal also accepted that the exemption under Section 10(37) does not extend to the interest component and that the claim for TDS credit cannot be separated from the corresponding taxable receipt.

Conclusion: The interest on enhanced compensation was held taxable, the exemption claim was rejected, and the addition sustained by the lower authorities was upheld.

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