Jagmal Singh and Another vs State of Haryana and Another

K. Kannan, J.—The revision-petitioner is the land owner who has been found entitled to compensation for acquisition of property under the

Land Acquisition Act and is aggrieved by the deduction made for TDS (Tax Deducted Source) by the Collector towards the component of

compensation payable u/s 28 of the Land Acquisition Act, 1894. Learned counsel for the petitioner contended that interest paid u/s 28 of the Act

is in the nature of compensation and compensation paid for acquisition of land which is agricultural land is excepted u/s 194LA of the Income Tax

Act. The Executing Court ordered, without going into the controversy, that it will be always open for the land owner to apply for refund from the

Income Tax Department, if TDS is not liable to be remitted by the Collector to the Income Tax Department.

Learned counsel for the petitioner would contend that there are several persons like him who have lost the property in land acquisition and it

would be unfair for parties to be directed to Income Tax Department to claim refunds when there shall be no such deduction at all to be made by

the Collector at the time of deposit of amount. The counsel took me through the relevant provisions requiring TDS to be complied u/s 190 and

194-A which relate to deduction for interest other than income by way of interest and securities. Section 194-IA refers to the liability for transfer

of any immovable property other than agricultural land and 194LA refers to the liability for payment of compensation on acquisition of certain

immovable property. The acquisition of property by government involves transfer of property from an individual to the State, but even then, in view

of specific provision u/s 194LA, it is the latter provision that we have to turn to. The Section reads thus:-

194LA. Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the

consideration or the enhanced consideration on account of compulsory acquisition under any law for the time being in force of any immovable

property (other than agricultural land), shall at the time of payment of such sum in cash or by issue a cheque or draft or by any other mode,

whichever is earlier, deduct an amount equal to ten per cent of such sum as income tax thereon:

This section clearly reveals that liability is in respect of consideration for enhanced compensation for acquisition of immovable property other

than the agricultural land. The fact that the property acquired is agricultural is not denied. The liability is again with reference to the compensation

and the amount which was paid to the owners mere in terms of entitlement u/s 28 of the Land Acquisition Act.

The issue whether the interest which is paid on the compensation assessed by applying parameters u/s 23 of the Land Acquisition Act is not any

longer res integra. There are two stands of views on the subject. In Rakesh Kumar & Ors. Vs. Haryana State Industrial & Infrastructure

Development Corporation Ltd. (HSIDC) & Ors, CWP No. 14935 of 2011 decided on 17.8.2011, a Division Bench while addressing the issue of

whether TDS would require to be deducted for compensation assessed, has observed in the course of judgment by citing its own earlier judgment

passed in Sarti Vs. HSIDC in CWP No. 9739 of 2011. The Bench has observed thus:-

In the present case, the interest received by the petitioner was on account of delay in making the payment of enhanced compensation and,

therefore, would fall u/s 28 of the 1894 Act. Such payment could not par-take the character of compensation for acquisition of agricultural land

and, thus, was not exempt under the Act. Once that was so, the tax at source had been rightly deducted by the payer.

Learned counsel for the petitioner would refer to judgment of Supreme Court in Commissioner of income tax Faridabad Vs. Bir Singh (HUF),

Ballabgarh. In C.W.P. No. 4401 of 2009, the Court has specifically dealt with the meaning of'' consideration for enhanced compensation'' as given

in Section 194LA in the context of interest mentioned u/s 28. Section 28 of the Land Acquisition Act captions the text of the provision as

Collector may be directed to pay interest on excess compensation"" If the amount deposited is towards for liability u/s 28, and if it shall be taken

only as interest for delay in payment, then in the manner interpreted by the Division Bench of this Court in Sarti Vs. HSIDC as latter approved in

Rakesh Kumar & Ors. Vs. HSIDC & Ors., Section 194LA will not apply. Since the very same provision u/s 28 has been brought for

consideration by Supreme Court in CIT, Faridabad Vs. Gaushyam in Civil Appeal No. 4401 of 2009 decided on 16.7.2009 it has to be

examined. The following observation is relevant:-

It is true that ""interest"" is not compensation. It is equally true that Section 194LA of the 1961 Act refers to compensation. But as discussed

hereinabove, we have to go by the provisions of the 1894 Act, which awards ""interest"" both as an accretion in the value of the lands acquired and

interest for undue delay. Interest u/s 28 unlike interest u/s 34 is an accretion to the value, hence it is a part of enhanced compensation or

consideration which is not the case with interest u/s 34 of the 1894 Act.

It is clear from the observations of the Supreme Court that interest u/s 28 is, unlike u/s 34 of the 1894 Act, an accretion in value and regarded

as part of the compensation itself which is not the case of interest u/s 34. With a clear statement of law obtaining through the Supreme Court. I

would have no difficulty in saying that any component of compensation that goes towards the discharge of liability u/s 28 must be taken as part of

the compensation to which Section 194LA shall apply and that compensation being the value of agricultural land, then the exclusion as provided

under the Section shall also be attracted. In this case, compensation assessed and the interest calculated are for acquiring agricultural land and the

amount deposited represented the liability u/s 28. I have no doubt in my mind that there was no requirement for collecting TDS for this amount. I

clarify that in terms of the judgment of the Supreme Court any liability which goes towards interest calculated u/s 34 would not obtain the benefit

and if there is any deduction for TDS for such a component of interest, it shall be perfectly justified.

While any deduction made under TDS will not cause any serious prejudice even if the amount ought not to have been deducted by enabling a

party applying for refund, if, it might involve a large number of cases, it shall be quite unnecessary for land owners to be directed to apply for

income tax for refund in every case. Such a requirement is a needless circuitous exercise. What can be prevented even in the first place by not

requiring a TDS to be applied for compensation relatable to Section 23(IA), 23(2) and 28 of the Land Acquisition Act, in respect of the

acquisition of agricultural land, it shall not be unnecessarily gone through.

There shall be a direction to the Collector not to make such TDS for deposit of money in Court in satisfaction of the award. A shortfall in the

amount in the above cases is directed to be made good by depositing of the same and it shall be open to the Collector to obtain refund of the

amount remitted to TDS account, without any such legal requirement from the Income Tax Department, in accordance with law. All the impugned

orders are set aside. C.R. No. 7740 of 2012 and Civil Revision No. 5644 of 2010 are allowed.