Interest received in respect of delayed payment of compensation to be treated as accruals to the principal compensation amount
Interest amounts received by a taxpayer in respect of delayed payment of compensation under the Land Acquisition Act will be treated as accruals to the principal compensation amount and be classified as “Capital Gains’ for the purposes of the Income Tax Act
While the provisions of Section 56 (2)(viii) deal with interest on compensation or enhanced compensation, the said reference to compensation or enhanced compensation need not be seen as made in connection with compulsory acquisition of property. The applicability of Section 56 (2)(viii) will depend upon whether or not, in the particular factual situation, the interest amount can be treated as different in nature from the principal compensation amount.
Kerala High Court in the case of Anvar Ali Poolakkodan v. ITO { I.T.A. No 32 of 2023}, deted 11.04.2025
The copy of the order is as under:
