Interest awarded under Section 28 of the Land Acquisition Act is an accretion to the compensation received for the compulsory acquisition of agricultural land and is therefore entitled to the same tax-exempt status as the primary compensation, rather than being taxable as income from other sources.

आदेश / O R D E R

Per, Dr. Arjun Lal Saini, AM

Captioned appeal filed by the assessee, pertaining to Assessment Year 2016-17, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), dated 20/03/2025, which in turn arises out of an order passed by the Assessing Officer dated 05/12/2018 u/s 143(3) of the Income Tax Act, 1961.

2. The appeal filed by the assessee for Assessment Year 2016-17, is barred by limitation by 84 days. The assessee has moved a petition requesting the Bench to condone the delay. I note that the reasons given in the affidavit for condonation of delay were convincing and these reasons would constitute reasonable and sufficient cause for the delay in filing this appeal. However, learned DR for the revenue, opposed the prayer of the assessee for condonation of delay. Having heard both the parties and after having gone through the affidavit as well the delay condonation, application, I am of the considered opinion that in the interest of justice, the delay deserves to be condoned. I, accordingly, condone the delay.

3. On merit, Learned Counsel for the assessee, submitted that the issue involved in the appeal of the assessee is that assessee had received interest on enhanced compensation of Rs. 18,51,082/- on account of compulsory acquisition of agricultural land, which is exempted under section 10(37) of the Income tax Act 1961. However, assessing officer treated it as taxable income of the assessee and made an addition of Rs. 18,51,082/- instead of exempt income, even though such interest is in the nature of compensation for compulsory acquisition of agricultural land, however, it is eligible for exemption under Section 10(37) of the Act.

4. However, learned DR for the revenue, on the other hand, submitted that interest on compensation is chargeable to tax under the head “income from other sources”, and it is not exempted from tax. Therefore, addition made by the assessing officer may be upheld.

5. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. After giving thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel for the assessee, I find that the issue involved in the present appeal is no longer res integra. The question as to whether the interest is in the nature of compensation for compulsory acquisition of agricultural land, and it is eligible for exemption under section 10(37) of the Act, has been decided, in favour of assessee, by the Co-ordinate Bench of ITAT Rajkot in the case of Mansukhbhai Kanjibhai Sakariya, ITA No.318/RJT/2024, for Assessment Year: 2016-17, wherein it was held as follows:

“12. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We note that Hon’ble Gujarat High Court in the case of Movaliya Bhikhubhai Balabhai Vs. ITO , SCA No.17944 of 2015 dated 31.3.2016 stated that the interest received for enhanced compensation is part of the compensation and this judgment has been delivered by the jurisdictional High Court of Gujarat, after the amendment made in section 145B and section 56 (2) (viii) of the Income Tax Act. We note that the ld.Pr.CIT has heav