1992 (3) TMI 40 - HC - Income Tax

Summary

Issues Involved:
1. Whether the executing court can go behind the decree.
2. Whether interest awarded under the Land Acquisition Act is an integral part of compensation and exempt from deductions.
3. Whether the executing court is the "person responsible for paying" income by way of interest u/s 194A of the Income-tax Act.
4. Whether the executing court failed to provide an opportunity to the petitioners as per the proviso to section 194A and sub-section (3) of section 194A of the Income-tax Act.

Summary:

Issue 1: Executing Court and Decree Execution
- The petitioners initially argued that the executing court cannot alter the decree and must execute it as is. However, this point was later abandoned during arguments.

Issue 2: Interest as Integral Part of Compensation
- The petitioners also initially contended that interest awarded under the Land Acquisition Act is an integral part of the compensation and should not be subject to deductions. This point was also abandoned during arguments.

Issue 3: Person Responsible for Paying Interest u/s 194A
- The main contention was whether the executing court is the "person responsible for paying" income by way of interest u/s 194A of the Income-tax Act. The court held that the executing court is not the person responsible for paying interest. The responsibility lies with the Land Acquisition Collector, who had the money and was responsible for making the payment to the petitioners. The court acts merely as a conduit for payment in execution of a decree.
- The judgment emphasized that the liability to deduct tax at source arises at the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier. In this case, the Land Acquisition Collector should have deducted the tax at source when the amount was credited to the account of the payee.

Issue 4: Opportunity to Petitioners u/s 194A Proviso
- The petitioners argued that the executing court failed to provide an opportunity to furnish an affidavit or statement declaring that their estimated total income would be less than the minimum liable to income-tax, as required by the proviso to section 194A(1) and sub-section (3) of section 194A. The court held that since it is not the person responsible for making the payment, it was not required to follow this procedure.

Conclusion:
- The court concluded that it is not the "person responsible for paying" income by way of interest to the petitioners and thus should not deduct tax at source. The revision petitions were accepted, and the impugned order of the trial court was set aside. The court directed that any amount deducted and deposited in banks should be paid to the petitioners, and if already remitted to the Revenue, it should be accounted for and refunded in accordance with the law.