Land Acquisition Officer Vs DCIT (TDS) (ITAT Delhi)
In the case of Land Acquisition Officer vs. DCIT (TDS), the Delhi ITAT ruled that interest awarded under Section 28 of the Land Acquisition Act (LA Act) does not attract TDS under Section 194A of the Income-tax Act, 1961. The appeal pertained to the assessment year 2013-14, involving proceedings under Sections 201(1) and 201(1A) of the Act. The ITAT overturned the Revenue’s claim that TDS at 20% was mandatory for recipients without a PAN, affirming that such interest constitutes compensation and not taxable income from other sources.
The ITAT cited earlier rulings, including Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC), to justify condoning the 47-day delay in filing the appeal. The tribunal also referred to its own prior decisions for assessment years 2010-12, where it held that interest under Section 28 of the LA Act is an integral part of compensation and not subject to TDS provisions. The distinction between interest under Sections 28 and 34 of the LA Act was critical. While Section 28 interest enhances the value of compensation, Section 34 interest compensates for delayed payment and is taxable as income from other sources.
Judicial precedents, including Jagmal Singh vs. State of Haryana (Punjab & Haryana HC) and Ghanshyam (HUF) vs. CIT (SC), reinforced the ITAT’s position. The Supreme Court in Ghanshyam (HUF) clarified that interest under Section 28 is part of the compensation and exempt from tax under Section 10(37) of the Income-tax Act when related to agricultural land. These rulings underscored the nature of such interest as non-taxable in the hands of landowners and exempt from TDS provisions.
The ITAT further noted that any income arising from the transfer of agricultural land by compulsory acquisition is exempt from capital gains tax under Section 10(37). As the Revenue failed to distinguish the facts of this case from prior rulings, the ITAT allowed the assessee’s appeal, holding that there was no legal obligation for the Land Acquisition Officer to deduct TDS on interest under Section 28.
This ruling provides clarity on the tax treatment of interest under Section 28 of the LA Act, establishing that it forms part of compensation and does not fall within the scope of taxable income or TDS provisions under Section 194A.
FULL TEXT OF THE ORDER OF ITAT DELHI
