| Question And Answer | |
|---|---|
| Subject: | Interest on Enhanced Compensation on Compulsory Acquisition of Land |
| Category: | Income-Tax |
| Querist: | Ankur |
| Answered by: | Law Intern |
| Tags: | interest on enhanced compensation, Section 10(37) |
| Date: | July 26, 2026 |
Taxability of the same?
in case there are different judgements on the issue, whether assessee can make the payment under protest to save penal interest and penalty and at the same time claim the aforesaid interest as exempt u/s 10(37) of IT Act, 1961. How the same can be practically implemented?
In CIT v. Ghanshyam (HUF) [2009] 315 ITR 1 (SC), the Supreme Court held that interest u/s 28 of the Land Acquisition Act on enhanced compensation is an accretion to the compensation and forms part of it. However, as the Finance Act 2009 introduced s. 56(2)(viii) taxing interest on compensation/enhanced compensation as “Income from Other Sources,” the view has emerged that s. 10(37) exemption is not available.
The practical solution is to claim the interest as exempt u/s 10(37) while paying any demanded tax/interest/penalty under protest to avoid further penal consequences.