The Income Tax Appellate Tribunal, Delhi bench has held that the Land Acquisition Office is not liable to pay TDS under section 194A of the Income Tax Act, 1961 on the payment of Interest to land-owners on the amount of enhanced compensation awarded by Court.
The Tribunal bench comprising N.K. Billaiya, Accountant Member and Ms. Astha Chandra, Judicial Member was considering an appeal filed by the assessee, Land Acquisition Office.
The Assessing Officer, during the relevant year, held that the assessee failed to deduct TDS from the payment of interest to the farmers (land owners) on enhanced compensation 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. While concluding the proceedings, the AO 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.
Following the judgment of Punjab & Haryana High Court in Jagmal Singh and the judgment of the Supreme Court in Ghanshyam (HUF),the Tribunal held 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.
In the light of the legal provisions set out above and following the judgment of the Hon’ble Supreme Court in Ghanshyam (HUF) (supra), we hold that interest received by the land owners on enhanced compensation awarded to them by the court under section 28 of the LA Act is not in the nature of income from other sources in the hands of the recipient land owners under section 56 of the Act and therefore, the LAO was not under any legal obligation to comply with the TDS provisions of section 194A of the Act. Accordingly, we allow the grounds raised by the assessee by way of additional grounds taken before the Tribunal. The assessee succeeds. The original grounds become infructous.
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