Delhi HC to Review Taxation on Land Acquisition Interest

The Delhi High Court has decided to examine the constitutional validity of Section 56(2)(viii) of the Income Tax Act, which imposes tax on the interest accrued from enhanced compensation on compulsory land acquisitions. A Division Bench, composed of Justice V Kameswar Rao and Justice Vinod Kumar, addressed a plea filed by Gurugram farmer Suresh Kumar, and scheduled the matter for hearing on November 24.

The petitioner, represented by Advocates Tripurari Ray and Atul Wadera, contests the classification of interest received on compensation as 'income from other sources.' They argue that this interest is integral to the compensation for compulsory land acquisition under Section 28 of the Land Acquisition Act, 1894, and should be exempt under Section 10(37) of the Income Tax Act.

The challenge asserts that taxing this interest is unconstitutional and discriminatory, violating Articles 14, 19(1)(g), and 21 of the Constitution. It argues the law unjustly equates agricultural with non-agricultural land, infringing on the petitioner's rights. The case follows a previous petition, dismissed for procedural reasons, and is based on new grounds questioning jurisdiction in recent assessments. The petitioner seeks to have Section 56(2)(viii) declared unconstitutional without pursuing linked assessment appeals, given their finality in the Supreme Court.