A two-judge bench of the Bombay High Court last week ruled that the Mumbai Metropolitan Regional Development Authority (MMRDA) is not liable to deduct TDS under sections 194L/194LA of the Income Tax Act for acquiring land from the illegal occupants for Government projects.
Assessee acquired immovable properties for various projects. The AO opined that while acquiring the properties, assessee paid compensation as per the Land Acquisition Act, 1894 and failed to deduct TDS as per the provisions of section 194L/194LA of the Income Tax Act. Consequently, proceedings were initiated against the assessee.
The assessee claimed that there was no payment of compensation for acquisition of any land or immovable property, and therefore, the said sections had no application to the facts of the present case.
The bench comprising Justice S C Dharmadhikari and Justice B.P.Colabawalla noted that as per the provisions of sections 194L/194LA, TDS is to be deducted when compensation is paid on account of compulsory acquisition under any law for the time being in force.
The bench upheld the findings of the Tribunal that for the purpose of implementing the scheme of the Government relating to road widening near the railway track, the assessee evacuated the illegal/unauthorized persons who were squatters/hutment dwellers.
“The fact of the matter was that the possession of these persons was unauthorized and illegal and they were not the owners of the land on which they had squatted/built their illegal hutments. In fact, they were trespassers. This being the case, there was no question of the land being acquired by the assessee. In fact the ITAT, and in our view correctly, came to the conclusion that the land always belonged to the State; it was encroached upon, which encroachment was removed by the assessee; and the encroaching squatters/hutment dwellers were rehabilitated. This being the case, we find that section 194L or section 194LA of the I.T. Act, 1961 had absolutely no application to the facts and circumstances of the present case,” the bench said.
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