Ramavtar Vs ITO (ITAT Delhi)
Interest Under Section 28 of Land Acquisition Act Not Taxable as ‘Other Sources’ Because It Forms Part of Compensation: ITAT Delhi
The appeal for Assessment Year 2020-21 arose from the order dated 09.12.2025 passed by the CIT(A)/NFAC, Delhi in proceedings under Sections 147 read with 144 of the Income Tax Act, 1961. The sole issue for consideration was the correctness of assessing the interest component received on land acquisition compensation under Section 28 of the Land Acquisition Act, 1894, by invoking Sections 57(iv), 56(1)(a), and 145A(b) of the Act.
The Revenue relied upon the decisions of the Punjab & Haryana High Court in Mahender Pal Narang v. CBDT (2020) 423 ITR 13 and the Delhi High Court in PCIT v. Inderjit Singh Sodhi HUF (2024) 161 taxmann.com 301, contending that the interest component on enhanced compensation should be assessed as income from “other sources.”
The Tribunal considered its earlier detailed decision in Pawan Kumar v. PCIT (2024) 159 taxmann.com 61 (Delhi Tribunal), which examined the issue extensively. In that case, the Principal Commissioner had invoked Section 263 on the basis that interest received under Section 28 of the Land Acquisition Act should be taxed as income from other sources in light of amended provisions introduced by the Finance (No. 2) Act, 2009. The assessee had contended that such interest formed part of enhanced compensation and was exempt under Section 10(37), relying on the Supreme Court’s decision in CIT v. Ghanshyam (HUF) (2009) 315 ITR 1.
