2010 (6) TMI 661 - HC - Income Tax

Deduction Tax (TDS) u/s 194LA - The petitioner is aggrieved of the deduction of 10 per cent of the compensation deposited by the requisitioning authority in the Land Acquisition Court towards the income-tax, which according to the petitioner is not permissible to be deducted, the land in question being an agricultural land and is clearly excluded from the provisions of deduction of tax under s. 194LA of the IT Act. held that - , it is for the petitioner to approach the IT authorities by filing necessary proceedings and to get necessary certificates with regard to the nature and character of the land concerned and to have it produced before the concerned authority. Once the petitioner produces the certificate as to the nature of the property showing it as an agricultural land as contended, the Sub Court shall consider the same and appropriate orders shall be passed on Ext. P2 cheque application. If the amount has already been parted with and deposited with the IT Department, it will be open to the petitioner to submit such certificate before the IT authority, to get necessary refund.

Summary

Issues:
1. Deduction of income tax from compensation for acquired agricultural land under s. 194LA of the IT Act.

Analysis:
The petitioner challenged the deduction of 10% of the compensation deposited by the requisitioning authority towards income tax, arguing that it was not permissible as the land in question was classified as agricultural land and excluded from tax deduction under s. 194LA of the IT Act. The property was acquired for establishing a sub-station for a corporation, and the compensation was initially awarded by the LAO but later enhanced by the reference Court. The third respondent deposited the enhanced compensation along with amounts for other cases. However, the third respondent stipulated to deduct income tax as per Ext. P1, which the petitioner contested.

The petitioner contended that income tax should only apply to the interest amount, not the entire compensation, as the interest portion had been separately provided. Additionally, the petitioner argued that the property was agricultural land, exempting it from the provisions of s. 194LA of the IT Act. The petitioner cited the definition of agricultural land under s. 2(14)(iii)(a) and (b) and claimed that the exclusion specified did not apply to their case. The petitioner sought relief from the Court without having to approach the IT authorities for certificates.

The Court considered whether the property qualified as agricultural land under s. 2(14)(iii)(a) and (b) to avail the exemption under s. 194LA of the IT Act. It noted the absence of evidence regarding the property's location in a municipal area or within 8 kms, or any notification from the Central Government. The Court emphasized that the determination of whether the property was agricultural land required examination by the IT authority based on factual evidence. The Court could not adjudicate on the matter and directed the petitioner to approach the IT authorities for necessary certificates.

The Court instructed the petitioner to file proceedings with the IT authorities to obtain certificates regarding the land's nature and character. Once the petitioner provided a certificate showing the property as agricultural land, the Sub Court would consider it, and appropriate orders would be issued on the disputed cheque application. If the amount had already been remitted to the IT Department, the petitioner could submit the certificate for a refund. Ultimately, the writ petition was disposed of accordingly.