TDS deductible on compensation paid for acquisition of immovable property at the time of payment

Leela Bhagwansing Advani Vs Union of India (Mumbai High Court)- Argument of the petitioners is that under Section 12(2) of the Land Acquisition Act, the compensation was payable to the petitioners immediately after the Award dated 30th May 1995. It is contended that if the amount of compensation was paid immediately after the Award, then there would have been no question of deducting tax at source under Section 194LA of the Act, because the said Section 194LA was not on the statute book on the date of the Award i.e. 30th May 1995 and that the said Section was inserted subsequently by Finance (No.2) Act, 2004 with effect from 1st October 2004.

There is no merit in the above contention because, the question of deducting tax at source arises at the time of making payment. In the present case, compensation was paid on 28^th April 2010 and on that day, Section 194LA was on the statute book and, therefore, tax had to be deducted while making the payment of compensation. For the delay in paying the compensation, the petitioners have been paid interest and, therefore, the fact that the compensation has been paid belatedly, cannot be a ground to hold that the compensation with interest has to be paid without deducting tax at source. Hence, the argument of the petitioners that the respondents ought not to have deducted tax at source while paying the compensation cannot be accepted.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY