Case Law Details
Land Acquisition Office Vs DCIT (TDS) (ITAT Delhi)
The issue for consideration is whether the impugned interest received by the land owners on enhanced compensation is ‘income from other sources’ under section 56 of the Act attracting the TDS provision enshrined under section 194A of the Act. In the assessment proceedings for the assessment year 2012-13 the assessee submitted before the Ld. AO that no TDS is required to be deducted on the interest payments which fall under section 28 of the LA Act relying on the decision of the Hon’ble Jurisdictional High Court in the case of Jagmal Singh (supra) and during appellate proceedings filed an affidavit that interest on enhanced compensation was paid to the recipient land owners under section 28 of the LA Act and submitted that the provision of section 194A do not apply for the reason that interest under section 28 is a part of the amount of compensation itself. It was pointed out that there is vital difference between interest awarded under section 28 and interest paid under section 34 of the LA Act. Interest under section 28, unlike under section 34 is an accretion in value and regarded as part of the compensation itself which is not the case of interest under section 34 of the LA Act. Interest under section 34 is for delay in making payment after the amount is determined. In the additional grounds taken before us also it has been urged that interest under section 28 of LA Act is in the nature of compensation and not interest which is taxable as income from other sources under section 56 of the Act. Following the judgment of Hon’ble Punjab & Haryana High Court in Jagmal Singh (supra) and the judgment of the Hon’ble Supreme Court in Ghanshyam (HUF) (supra) we hold that the interest received by the land owners on enhanced compensation awarded by the court is not in the nature of income from other sources under section 56 of the Act. Consequently, the TDS provisions of section 194A will not be attracted.
FULL TEXT OF THE ORDER OF ITAT DELHI
These three appeals of the assessee Land Acquisition Office (“LAO”) are filed against the order dated 5.11.2015 under section 201(1) and 201(1A) of the Income Tax Act, 1961 (the “Act”) for the assessment years 2010-11 and 2011-12 and order dated 23.12.2015 for the assessment year 2012-13 passed by the Commissioner of Income Tax (Appeals)-2, Gurgaon (“CIT(A)”). These appeals were heard together and are being disposed of by this common order.
2. It is a case of TDS survey/inspection which was conducted by ACIT, TDS Circle, Gurgaon (“AO”) on 19.4.2012 at the office premises of the deductor, LAO. During the course of inspection and subsequent follow up, the Ld. AO found that the deductor LAO had deducted tax at source from the payment of interest to the farmers (land owners) on enhanced compensation in assessment year 2010-11 and 2011-12 at normal rate (which is 10%) whereas deduction should have been made @ 20% as the deductor had not been able to prove that PAN of each deductee was taken at the time of payment. In response to show cause notice, the assessee furnished explanation which was not acceptable to the Ld. AO who observed that the assessee failed to deduct tax at source as per the provisions of section 194A of the Act and raised demand of Rs. 23,99,524/- and Rs. 34,99,95,274/- for the assessment year 2010-11 and 2011-12 respectively under section 201(1) and 201(1A) of the Act.
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