In Baranagore Jute Factory Plc. Mazdoor Sangh (Bms) Etc v. Baranagore Jute Factory Plc , the two-judge bench of the Supreme Court observed that TDS paid on land acquisition is part of Compensation, and the assessee cannot utilize it on refund by the Income Tax department when the same was deposited with the High Court as per its direction.
The National Highway Authority of India (NHAI) acquired the place of Baranagore Jute Factory Plc. As per the order of the High Court dated 23.02.2011, the total amount due to the Company on account of acquisition of the land was deposited with the High Court on after deducting TDS.The Company, while filing its IT return claimed and received TDS paid. The Company claims that the said amount was utilized for various purposes in connection with the affairs of the Company.The appellants,approached the High Court seeking appropriate action against the respondent-Companyfor violating the order dated 23.02.2011.
The respondent claimed that the direction to deposit the amount with the High Court was given to the NHAI and therefore, no action can be taken against them.
Allowing the petition, the Single Judge directed to freeze the bank account of the respondent-Company. on appeal, the division bench quashed the order of the single bench to extend affecting the operation of bank account.
The bench comprising of Justice Kurian Joseph and Justice Banumati noted the finding of the Single bench of the High Court that the National Highway Authority was restrained from making any payment on account of compensation to the company in liquidation except by way of an account payee cheque to the Registrar, Original Side of the High Court. “Therefore, it is fairly clear that the court had in mind the entire compensation paid by the NHAI in respect of the land acquired by them. Since the NHAI was bound to deduct TDS, an amount of Rs.10,55,60,331/- was paid to the Income-Tax Department. There can be no doubt whatsoever that the said amount formed part of the compensation. What the court in its order dated 23.02.2011 was requested and the court intended too was to protect the compensation amount. Merely because it goes through the Income-Tax Department, the same does not cease to be part of compensation. Even the respondents herein had submitted before the court at the time of passing the order dated 23.02.2011 that the compensation amount needed to be protected and they were willing to protect it subject to the order of the court.”
In view of the above findings, the bench observed that the respondents should not have appropriated the refund they received from the Income-Tax Department. “There is nothing wrong in claiming the refund. The problem is in utilising the refund received. The refund they received is actually the compensation in respect of the land acquired from the company and it is that amount which the court wanted to protect by its order dated 23.02.2011. Hence, prima facie, we are of the view that the appropriation made by the respondents of the refund amount they received from the Income-Tax Department was in violation of the order dated 23.02.2011.”
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