My client received interest on enhanced compensation for compulsorily acquired land. Ghanshyam says it is part of compensation. Does that still hold?
Not in the Delhi High Court. It held that on a conjoint reading of s.56(2)(viii) and s.145B, interest received on compensation or on enhanced compensation is chargeable under the head 'income from other sources', and that the conclusions drawn from CIT v Ghanshyam (HUF), decided in 2009, are unsustainable because the position as it exists today came into being only in 2010. The Tribunal was held to have erred in following Ghanshyam and ignoring the changes made by the Finance (No.2) Act 2009 with effect from 1 April 2010.
Decided by the High Court (Yashwant Varma J and Purushaindra Kumar Kaurav J) on 2024-04-08, reported as ITA 769/2023 & CM APPL 65057/2023 (Delhi High Court), judgment reserved 5 March 2024 and pronounced 8 April 2024. It bears on section 145B, section 145B(1), section 56(2)(viii), section 57(iv), section 145A, section 10(37), section 45(5), section 260A of the Income Tax Act 1961, in Capital Gains, Assessment & Scrutiny and How Tax Law Is Read matters.
This is the Revenue's strongest recent authority on the point and it is a Division Bench of the Delhi High Court answering a substantial question of law squarely in the Revenue's favour. But the line is not settled: the Kerala High Court on 11 April 2025 in Anvar Ali Poolakkodan v ITO held the opposite — that interest on delayed payment of compensation under the Land Acquisition Act is an accretion to the principal compensation, is classifiable as capital gains, gets the s.10(37) benefit for agricultural land, and does not attract s.56 at all because it is not interest as defined in s.2(28A). A practitioner must know which High Court he is in. Two further points of detail matter: the deduction of fifty per cent under s.57(iv), inserted by the same 2009 Act, applies to income of the nature referred to in s.56(2)(viii) and no other deduction under s.57 is allowed; and s.145B(1) fixes the year — the interest is deemed to be the income of the previous year in which it is received, whatever the period it relates to.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a Hindu undivided family, filed its return for AY 2016-17 on 5 August 2016 declaring income of Rs.3,08,920. The return was selected for scrutiny and notices under s.143(2) and s.142(1) were issued and replied to. The Assessing Officer found that the assessee had claimed exemption on receipts totalling Rs.26,93,84,780, made up of compensation on compulsory acquisition of land of Rs.18,86,63,176, interest received on that acquisition of Rs.8,02,13,161, and dividend income of Rs.5,08,443. The Assessing Officer made an addition under s.56(2)(viii) in respect of the interest and the Commissioner (Appeals) concurred. The Tribunal, by order dated 19 June 2020, deleted the addition, relying on the Supreme Court's decision in CIT v. Ghanshyam (HUF) [(2009) 315 ITR 1] and on CIT v. Govindbhai Mamaiya [(2014) 16 SCC 449]. The Revenue appealed under s.260A. The court formally admitted the appeal on the substantial question whether the Tribunal had erred in setting aside the concurrent view of the Assessing Officer and the Commissioner (Appeals) that, after the amendment of s.56 by the Finance (No.2) Act 2009 with effect from 1 April 2010, no benefit could be derived from Ghanshyam.
The appeal was allowed. The order of the Tribunal dated 19 June 2020 was set aside and the concurrent findings of the Assessing Officer and the Commissioner (Appeals) were affirmed. The substantial question of law was answered in the affirmative and in favour of the Revenue: the Tribunal erred in relying on Ghanshyam and ignoring the changes brought about by the Finance (No.2) Act 2009, which came into effect in the year 2010, and interest, whether on compensation or on enhanced compensation, is to be considered as income from other sources and is exigible to income tax (paras 29 to 31).
A conjoint reading of s.56(2)(viii) and s.145B shows that income received by way of interest on compensation or on enhanced compensation is chargeable under the head 'income from other sources'; since the position as it exists today came into being only in 2010, the conclusions drawn from Ghanshyam, decided in 2009, are unsustainable on these facts (para 24). Govindbhai Mamaiya, on which the Tribunal placed reliance, itself relies on Ghanshyam and does not deal with the change in taxability effected by the 2010 amendment, so it lacks application (para 25). The court set out the three-Judge Bench decision in Sham Lal Narula v. CIT [(1964) 53 ITR 151], which held that interest awarded under s.28 of the Land Acquisition Act, like interest under s.34, is not compensation or damages for loss of the right to retain possession but compensation payable by the State for keeping back the amount payable to the owner (para 26), and Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], which followed it and held such interest to be a revenue receipt liable to tax (para 27). It then reproduced the Punjab and Haryana High Court's decision in Puneet Singh on the cumulative effect of s.145A(b) and s.56(2)(viii) and on the fifty per cent deduction inserted as s.57(iv) with effect from 1 April 2010 (para 28). The 2010 amendment was a conscious departure by the Legislature from the earlier position and that departure holds good law as on date; there was no challenge to the vires of the amendment and no ambiguity in its language (para 29).
we hold the same to unequivocally mean that interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax.
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Handle my notice → Ask a CA on WhatsAppNot in the Delhi High Court. It held that on a conjoint reading of s.56(2)(viii) and s.145B, interest received on compensation or on enhanced compensation is chargeable under the head 'income from other sources', and that the conclusions drawn from CIT v Ghanshyam (HUF), decided in 2009, are unsustainable because the position as it exists today came into being only in 2010. The Tribunal was held to have erred in following Ghanshyam and ignoring the changes made by the Finance (No.2) Act 2009 with effect from 1 April 2010. This was decided by the High Court (Yashwant Varma J and Purushaindra Kumar Kaurav J) and bears on section 145B, section 145B(1), section 56(2)(viii), section 57(iv), section 145A, section 10(37), section 45(5), section 260A of the Income Tax Act 1961. It is reported as ITA 769/2023 & CM APPL 65057/2023 (Delhi High Court), judgment reserved 5 March 2024 and pronounced 8 April 2024. This is the Revenue's strongest recent authority on the point and it is a Division Bench of the Delhi High Court answering a substantial question of law squarely in the Revenue's favour. But the line is not settled: the Kerala High Court on 11 April 2025 in Anvar Ali Poolakkodan v ITO held the opposite — that interest on delayed payment of compensation under the Land Acquisition Act is an accretion to the principal compensation, is classifiable as capital gains, gets the s.10(37) benefit for agricultural land, and does not attract s.56 at all because it is not interest as defined in s.2(28A). A practitioner must know which High Court he is in. Two further points of detail matter: the deduction of fifty per cent under s.57(iv), inserted by the same 2009 Act, applies to income of the nature referred to in s.56(2)(viii) and no other deduction under s.57 is allowed; and s.145B(1) fixes the year — the interest is deemed to be the income of the previous year in which it is received, whatever the period it relates to. If it applies to you, the first step is this: Identify the High Court whose decisions bind the assessment. In Delhi and in Punjab and Haryana the interest is taxable as income from other sources; in Kerala the contrary view of April 2025 is available.
The assessee, a Hindu undivided family, filed its return for AY 2016-17 on 5 August 2016 declaring income of Rs.3,08,920. The return was selected for scrutiny and notices under s.143(2) and s.142(1) were issued and replied to. The Assessing Officer found that the assessee had claimed exemption on receipts totalling Rs.26,93,84,780, made up of compensation on compulsory acquisition of land of Rs.18,86,63,176, interest received on that acquisition of Rs.8,02,13,161, and dividend income of Rs.5,08,443. The Assessing Officer made an addition under s.56(2)(viii) in respect of the interest and the Commissioner (Appeals) concurred. The Tribunal, by order dated 19 June 2020, deleted the addition, relying on the Supreme Court's decision in CIT v. Ghanshyam (HUF) [(2009) 315 ITR 1] and on CIT v. Govindbhai Mamaiya [(2014) 16 SCC 449]. The Revenue appealed under s.260A. The court formally admitted the appeal on the substantial question whether the Tribunal had erred in setting aside the concurrent view of the Assessing Officer and the Commissioner (Appeals) that, after the amendment of s.56 by the Finance (No.2) Act 2009 with effect from 1 April 2010, no benefit could be derived from Ghanshyam. The matter was decided on 2024-04-08 by the High Court (Yashwant Varma J and Purushaindra Kumar Kaurav J). On those facts the High Court held as follows. The appeal was allowed. The order of the Tribunal dated 19 June 2020 was set aside and the concurrent findings of the Assessing Officer and the Commissioner (Appeals) were affirmed. The substantial question of law was answered in the affirmative and in favour of the Revenue: the Tribunal erred in relying on Ghanshyam and ignoring the changes brought about by the Finance (No.2) Act 2009, which came into effect in the year 2010, and interest, whether on compensation or on enhanced compensation, is to be considered as income from other sources and is exigible to income tax (paras 29 to 31).
A conjoint reading of s.56(2)(viii) and s.145B shows that income received by way of interest on compensation or on enhanced compensation is chargeable under the head 'income from other sources'; since the position as it exists today came into being only in 2010, the conclusions drawn from Ghanshyam, decided in 2009, are unsustainable on these facts (para 24). Govindbhai Mamaiya, on which the Tribunal placed reliance, itself relies on Ghanshyam and does not deal with the change in taxability effected by the 2010 amendment, so it lacks application (para 25). The court set out the three-Judge Bench decision in Sham Lal Narula v. CIT [(1964) 53 ITR 151], which held that interest awarded under s.28 of the Land Acquisition Act, like interest under s.34, is not compensation or damages for loss of the right to retain possession but compensation payable by the State for keeping back the amount payable to the owner (para 26), and Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243], which followed it and held such interest to be a revenue receipt liable to tax (para 27). It then reproduced the Punjab and Haryana High Court's decision in Puneet Singh on the cumulative effect of s.145A(b) and s.56(2)(viii) and on the fifty per cent deduction inserted as s.57(iv) with effect from 1 April 2010 (para 28). The 2010 amendment was a conscious departure by the Legislature from the earlier position and that departure holds good law as on date; there was no challenge to the vires of the amendment and no ambiguity in its language (para 29). In the words reproduced by the source cited on this page: "we hold the same to unequivocally mean that interest, whether on compensation or on enhanced compensation, shall be considered as income from other sources and shall be exigible to income tax." The decision followed or applied Sham Lal Narula (Dr.) v. CIT [(1964) 53 ITR 151] — three-Judge Bench, relied upon; Bikram Singh v. Land Acquisition Collector [(1997) 10 SCC 243] — followed; Puneet Singh (Punjab and Haryana High Court) — reproduced and applied; CIT v. Ghanshyam (HUF) [(2009) 315 ITR 1] — held inapplicable after the 2010 amendment; CIT v. Govindbhai Mamaiya [(2014) 16 SCC 449] — distinguished.
It was decided by the High Court on 2024-04-08 and is reported as ITA 769/2023 & CM APPL 65057/2023 (Delhi High Court), judgment reserved 5 March 2024 and pronounced 8 April 2024. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 145B, section 145B(1), section 56(2)(viii), section 57(iv), section 145A, section 10(37), section 45(5), section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The appeal was allowed. The order of the Tribunal dated 19 June 2020 was set aside and the concurrent findings of the Assessing Officer and the Commissioner (Appeals) were affirmed. The substantial question of law was answered in the affirmative and in favour of the Revenue: the Tribunal erred in relying on Ghanshyam and ignoring the changes brought about by the Finance (No.2) Act 2009, which came into effect in the year 2010, and interest, whether on compensation or on enhanced compensation, is to be considered as income from other sources and is exigible to income tax (paras 29 to 31). It arises in Capital Gains, Assessment & Scrutiny and How Tax Law Is Read matters, on section 145B, section 145B(1), section 56(2)(viii), section 57(iv), section 145A, section 10(37), section 45(5), section 260A of the Income Tax Act 1961, and was decided by Yashwant Varma J and Purushaindra Kumar Kaurav J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If the interest is taxable, claim the fifty per cent deduction under s.57(iv) and note that no other deduction under s.57 is then allowed. Fix the year by s.145B(1): the interest is taxed in the previous year of receipt, so a lump sum spread over many years of delay falls into one year and the s.57(iv) deduction is computed on that year's receipt. Where the acquired land is agricultural and s.10(37) is in play, the Kerala line is worth taking because it carries the interest into the exemption; expect the department to rely on this Delhi decision against it. Distinguish CIT v Govindbhai Mamaiya as this court did — it follows Ghanshyam and does not deal with the change in taxability effected in 2010.
High Courts differ on this point. The Kerala High Court, in Anvar Ali Poolakkodan v. Income Tax Officer and Abdul Azeez Poolakkodan v. Income Tax Officer (I.T.A. Nos.32 of 2023 and 60 of 2024, decided 11 April 2025, neutral citation 2025:KER:31055), held at para 10 that interest on delayed payment of compensation under the Land Acquisition Act is an accrual to the principal compensation, is classifiable as capital gains, obtains the benefit of s.10(37) where the land is agricultural, and does not attract s.56 because it is not interest within s.2(28A). That is the opposite conclusion on the same question and I read that judgment in full. The Delhi High Court here follows the Punjab and Haryana High Court in Puneet Singh. I did NOT check whether a special leave petition has been filed against either decision, and I did not locate any Supreme Court decision resolving the conflict after April 2024. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment runs to 31 numbered paragraphs; para 31 is the last and contains the disposal. Paragraphs 22 and 23, which read like a dismissal of appeals, are NOT this court's own paragraphs — they are part of the extract from the Punjab and Haryana High Court's judgment in Puneet Singh reproduced at para 28 of this judgment, and the paragraph numbers 19 to 23 appearing there belong to that decision. Paragraphs 26 and 27 similarly reproduce extracts from Sham Lal Narula and Bikram Singh. This court's own operative paragraphs are 24, 25 and 29 to 31. Note that the Puneet Singh extract at para 28 speaks of 's.145A(b)', which was the location of the rule before the Finance Act 2018 moved it into s.145B(1); this court's own para 24 refers to s.145B. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was allowed. The order of the Tribunal dated 19 June 2020 was set aside and the concurrent findings of the Assessing Officer and the Commissioner (Appeals) were affirmed. The substantial question of law was answered in the affirmative and in favour of the Revenue: the Tribunal erred in relying on Ghanshyam and ignoring the changes brought about by the Finance (No.2) Act 2009, which came into effect in the year 2010, and interest, whether on compensation or on enhanced compensation, is to be considered as income from other sources and is exigible to income tax (paras 29 to 31).
TaxSphere, “PCIT v Inderjit Singh Sodhi (HUF) — interest on compensation and enhanced compensation is income from other sources after the 2010 amendment”, https://taxnotice.vittsphere.com/caselaw/case/pcit-v-inderjit-singh-sodhi-huf-interest-on-enhanced-compensation-taxable/ (validity last checked 2026-09-08)
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For a year after 2010, is the interest I received under s.28 of the Land Acquisition Act still capital gains following Ghanshyam, or has s.56(2)(viii) changed that?
The Tribunal split my client's land acquisition interest into 9 per cent as capital gains and 15 per cent as income from other sources. Is that right?
The land acquisition officer has deducted ten per cent from my compensation cheque. When is s.194LA actually attracted, what is the threshold now, and does the RFCTLARR exemption stop the deduction?
The Delhi High Court struck down parts of the ICDS in 2017. Can I still rely on that for an AY 2017-18 assessment?
