Kerala High Court: Compensation for Compulsory Acquisition of Agricultural Land to Be Taxed as 'Capital Gains'

The Kerala High Court has ruled that compensation received for the compulsory acquisition of agricultural land, along with any interest awarded due to delayed payment under the Land Acquisition Act, should be treated as 'Capital Gains' under the Income Tax Act.

The Court emphasized that interest amounts are considered part of the compensation and not as 'Income from Other Sources' under Section 56.

This classification is crucial because under Section 10(37), such capital gains are exempt from tax if the land is agricultural.

Consequently, both the compensation and the interest are eligible for tax exemption, provided the land qualifies as agricultural.