2002 (10) TMI 24 - HC - Income Tax

Tax deduction at source - (a) That whether the provisions of section 194A of the Income-tax Act, 1961, are applicable in its strict sense to the court of reference under sections 18 and 30 of the Land Acquisition Act? - (b) If so, whether the court is liable to deposit the deducted amount by T.D.S. challan and to issue deduction certificate in Form No. 25A of the Income-tax Rules and to file the return like a private individual? - (c) If not, then at what point of time and by whom this tax is to be deducted? - (d) Whether the court of reference can itself retain the amount of approximate tax and inform the concerned Income-tax Officer to collect it by means of voucher?

Issues Involved:
1. Applicability of Section 194A of the Income-tax Act, 1961, to the court of reference under sections 18 and 30 of the Land Acquisition Act.
2. Liability of the court to deposit the deducted amount by TDS challan and issue deduction certificate in Form No. 25A of the Income-tax Rules.
3. Determination of the point of time and the person responsible for deducting the tax.
4. Authority of the court of reference to retain the amount of approximate tax and inform the concerned Income-tax Officer to collect it by means of voucher.

Issue-wise Detailed Analysis:

1. Applicability of Section 194A of the Income-tax Act, 1961:
The court examined whether Section 194A, which mandates tax deduction at source (TDS) on interest, applies to interest on compensation awarded under sections 18 and 30 of the Land Acquisition Act. It was concluded that Section 194A does apply to such interest, as it is considered income. The court cited the case of Baldeep Singh v. Union of India, where it was held that the executing court is not the person responsible for paying the interest; rather, it is the entity that holds and disburses the funds, i.e., the Land Acquisition Officer.

2. Liability of the Court to Deposit TDS and Issue Deduction Certificates:
The court determined that it is not liable to deposit the deducted amount by TDS challan or issue a deduction certificate in Form No. 25A. The reasoning is that the court acts merely as a conduit in the payment process. The responsibility for TDS lies with the entity that has possession of the funds and is responsible for making the payment, which in this case is the Land Acquisition Officer.

3. Determination of the Point of Time and Person Responsible for Deducting Tax:
The court clarified that the person responsible for deducting tax on the interest is the Land Acquisition Officer or Collector, who holds the funds and makes the payment. The court emphasized that the tax should be deducted at the earliest point of time by the person actually responsible for the payment, which is not the court but the Land Acquisition Officer.

4. Authority of the Court to Retain Approximate Tax Amount:
The court concluded that it does not have the authority to retain the approximate tax amount and inform the Income-tax Officer to collect it. Since the court is not responsible for deducting the tax, it should not withhold any amount for this purpose. The responsibility lies solely with the Land Acquisition Officer, who should deduct the tax before remitting the funds to the claimants.

Conclusion:
The court directed that the opinion be forwarded to the Fifth Additional Judge to the court of the District Judge, Indore, for the proper disposal of the execution in accordance with the law. The judgment emphasized the roles and responsibilities of the Land Acquisition Officer in the context of TDS on interest payments under the Land Acquisition Act, ensuring clarity on the application of Section 194A of the Income-tax Act, 1961.

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