Taxability of interest on land acquisition compensation follows receipt basis; exemption for compensation does not cover the interest component.

Interest received on compensation or enhanced compensation from land acquisition is taxable as income from other sources in the year of receipt under the amended income-tax regime, and the exemption for agricultural land compensation under section 10(37) does not extend to that interest component. The note also states that the settled view applied in Ajay Kumar was followed, with no distinguishing facts shown, and that TDS credit depends on the corresponding income being offered to tax. The stated effect is that the interest addition is sustained as taxable income.

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Issues: Whether interest received on compensation or enhanced compensation from land acquisition is taxable as income from other sources in the year of receipt and whether the exemption under section 10(37) applies to the interest component.

Analysis: The issue was held to be covered by the Coordinate Bench decision in Ajay Kumar. The reasoning adopted was that, after insertion of section 56(2)(viii) and section 145B(1), interest on compensation or enhanced compensation is taxable as income from other sources in the year of receipt. The exemption available for compensation on agricultural land under section 10(37) was not extended to the interest component. The assessee did not show any distinguishing facts or contrary legal position warranting departure from the settled view. The question of TDS credit was also treated as dependent on the corresponding income being offered to tax.

Conclusion: The interest component was held taxable and the addition was sustained against the assessee.

Final Conclusion: The appeal failed because the interest received on compensation was treated as taxable receipt under the amended income-tax regime and the order of the lower authority was affirmed.

Ratio Decidendi: Interest on compensation or enhanced compensation is taxable as income from other sources in the year of receipt under section 56(2)(viii) read with section 145B(1), and the exemption applicable to compensation does not automatically extend to the interest component.

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