These are the observation in the Case of Mahender Pal Narang v. CBDT [2020] 120 taxmann.com 400 (P & H) (HC)

Para .8 . Section 45 of the 1961 Act deals with capital gains. By Finance Act, 1987, sub-section (5) was inserted in Section 45 and as per its clause (b), the enhanced compensation shall be chargeable under the head “Capital gains” of the previous year in which the amount is received by the assessee. This issue came up before Apex Court in Ghanshyam’s case (supra). Considering Sections 45(5) and 155(16) of the 1961 Act, it was held that enhanced compensation received under the 1894 Act may be received in multiple stages but the same is to be treated as “deemed income” at the time when it is received and is to be taxed on receipt basis. It was further held, the fact that enhanced compensation is in dispute and the withdrawal is conditional will not make a difference. While dealing with the said issue, it was held that interest on enhanced value of land forms part of compensation and is exigible to tax in the year of receipt whereas interest on delayed payment of enhanced compensation is income in a different nature.
9. The scheme with regard to chargeability of interest received on compensation and enhanced compensation has undergone a sea change with the insertion of sections 56(2)(viii) and 57(iv) of the 1961 Act. Section 56 deals with income from other sources and a specific provision has been inserted by way of sub-section 2(viii), whereby the interest received on compensation or enhanced compensation, as referred to in clause (b) to section 145A has been included under the head ‘Income from other sources’. In clause (iv) to section 57, deduction of fifty per cent is provided on interest received on compensation or enhanced compensation.
10. In view of the amendments, the decision of Apex Court in Ghanshyam’s case (supra) does not come to the rescue of the petitioner to claim that interest received under section 28 of the 1894 Act is to be treated as compensation and to be dealt with under “Capital gains”. The fact that there is no amendment carried out under section 10(37) of the 1961 Act will not change the position. Section 10 deals with deductions and sub-section (37) thereof deals with capital gains arising from transfer of agricultural land, it no where provides as to what is to be included under the head “Capital gains”. The argument raised is not well founded.
11. Learned counsel has relied on Circular No. 5 of 2010 by merely reading clause 46.1. The said clause talks about undue hardship being caused as arrears of interest being taxable on accrual basis. Clause 46.2 states that Section 145A is amended to overcome the difficulty, by deeming the income for the year in which it is received. Clause 46.3 has been ignored in which section 56(2)(viii) is dealt with that interest on compensation or on enhanced compensation referred to in clause (b) of section 145A shall be assessed as “income from other sources”.
12. Gujarat High Court in Movaliya Bhikhubhai Balabhai’s case (supra) while dealing with deduction of tax at source relying upon Circular No. 5 of 2010 held that amendment to the provisions of the 1961 Act by Finance Act, 2010 Act was not in connection with the decision of Supreme Court in Ghanshyam’s case (supra) but to mitigate the hardship caused by the decision of Supreme Court in Rama Bai’s case (supra). It was held that interest under section 28 of the 1894 Act continues to part take the character of compensation and will not fall within the ambit of expression “interest”. In view of discussion above, we with utmost respect are not in agreement with the view taken by Gujarat High Court. There is another aspect, i.e. the language of sections 56(2)(viii) and 57(iv) of the 1961 Act is plain, simple and unambiguous. There is no scope of taking outside aid for giving an interpretation to newly inserted sub-sections and clauses. Supreme Court in I.T.C. Ltd. v. CCE [2004] 7 SCC 591 held as under:
“23. ……..These decisions exemplify the general rule of statutory construction that words have to be construed strictly according to their ordinary and natural meaning, particularly when the statute is a fiscal one irrespective of the object with which the provision was introduced. Of course if there is ambiguity in the statutory language, reference may be made to the legislative intent to resolve the ambiguity. But if the statutory language is unambiguous then that must be given effect to. The legislature is deemed to intend and mean what it says. The need for interpretation arises only when the words used in the statute are, on their own terms ambivalent and do not manifest the intention of the legislature.”
13. In view of the above, it is held that the interest received on compensation or enhanced compensation is to be treated as “income from other sources” and not under the head “Capital gains”.

The issue of whether TDS is to be deducted or not the issue before the High Court . Whether TDS is deducted or not taxability of interest will not have any consequences . If the assessee is not having taxable income he can make an application under section 197 of the Act for nil deduction of tax or lower ratee of deduction of tax at source . For further clarification the assessee may contact the Tax Consultant who may be in a position to guide properly .