2011 (8) TMI 1195 - HC - Income Tax

Summary

Issues involved:
The issue in this case is whether respondent No.1 was justified in deducting tax at source from interest paid to the petitioners under Section 194A of the Income Tax Act, 1961.

Judgment Details:

Facts:
The petitioners owned agricultural land acquired by the State of Haryana for industrial development. The Land Acquisition Collector awarded compensation, and tax was deducted at source under Section 194-A of the Income Tax Act, 1961 on the interest amount.

Court's Analysis:
The Court referred to a previous case where it was held that interest on enhanced compensation falls under "income from other sources" and is taxable under Section 56 of the Act. The interest received due to delay in compensation payment is not exempt and is subject to tax. Therefore, the tax deduction by the payer was deemed appropriate.

Decision:
The Court noted that the petitioners were required to file a tax return as the interest amount was taxable in the year of receipt. The petitioners have the option to file income tax returns and adjust the tax deducted at source against their tax liability. Any excess tax deducted can be refunded to the petitioners as per the provisions of the Act.

Conclusion:
The writ petitions were disposed of, allowing the petitioners to file income tax returns and claim refunds for any excess tax deducted at source in accordance with the law.