Interest on Enhanced Compensation of Land

This query is : Resolved

CA RAMESH KUMAR AHUJA (Querist)
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13 July 2023 Income from Interest on Enhanced Compensation is taxable as Income from Other Sources u/s 56(2)(viii) read with Section 145B. Also a deduction u/s 57(iv) for 50% of such interest is available as against such Interest Income. In other words, 50% of Interest is taxable only irrespective of the fact whether the expenses have been incurred or not. Up to assessment year 2010-11, such interest was taxable on due basis as per Supreme Court’s decision in the
case of Rama Bai v. CIT (1990) 181 ITR 400 (SC). Further, interest received on award by court u/s 28 of Land Acquisition Act, 1894 was treated differently.
Now, my query is regarding the nature of Interest income. Whether any interest on Enhanced Compensation will be eligible for such deduction or there is any specific distinction thereof?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 July 2023 The Pune Bench of Income Tax Appellate Tribunal (ITAT) has held that the interest granted by court order on enhanced compensation on land acquisition from the date of possession till the date of judgement would not be taxable.

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