2013 (4) TMI 550 - AT - Income Tax

TDS liability - Payment of compensation on acquisition of certain immovable property - demands raised on the appellant under section 201 r.w.s. 194 LA for non deduction of tax at source - Held that - The payment to the actual beneficiary is made by the Competent Authority of Metro Railways Kolkata and not by the Dy FA and CAO of Metro Railways Kolkata. No doubt, the tax deduction obligations are on the person who makes payment to the beneficiary, and it was an undisputed position that the payment for land acquisition was made by the Land Acquisition Officer. In this matter, as in decided in State of MP v. Parwatibai 2002 (10) TMI 740 - MADHYA PRADESH HIGH COURT the tax deduction obligation are on the person who had money in his possession and was responsible for making the payment of that income to the assessee (i.e. actual beneficiary of compensation in this case). It is important to bear in mind the fact that the assessee is this case was the person receiving the compensation in his own right and not in any fiduciary capacity. Therefore, even going by this principle, the tax deduction liability is on the Competent Authority of Metro Railways Kolkata who makes the payment to the person receiving compensation. For the reasons set out above, as also bearing in mind entirety of the case, the grievance of the assessee in principle but in effect remit the matter back to the file of the AO for fresh adjudication in accordance with the law, by way of a speaking order and after giving a fair and reasonable opportunity of hearing to the person concerned, i.e. Competent Authority of Metro Railways Kolkata.

Issues Involved:
1. Confirmation of addition made by the assessing officer.
2. Determination of responsibility and authority for deduction under Section 194 LA.
3. Proper handling of the Competent Authority's function in determining and paying compensation.
4. Validity of the demand notice under the Act.
5. Legality of tax imposition under Sections 201(1) and 201(1A).

Issue-wise Detailed Analysis:

1. Confirmation of Addition Made by the Assessing Officer:
The appellant contended that the CIT(A) was unjustified in confirming the addition made by the assessing officer. The Tribunal noted that the CIT(A) upheld the assessing officer's decision, stating that Metro Railway was responsible for making payments for compulsory land acquisition and thus liable for TDS. However, the Tribunal found that the Competent Authority, not Metro Railway, made the actual payments to beneficiaries, and hence the TDS obligation arose at this point.

2. Determination of Responsibility and Authority for Deduction under Section 194 LA:
The authorities below determined that Metro Railway, specifically the Dy FA and CAO, was responsible for TDS under Section 194 LA. The Tribunal disagreed, stating that the Competent Authority, who disburses the compensation to landowners, should handle the TDS obligations. The Tribunal highlighted that the Competent Authority acts on behalf of the Central Government and is the statutory authority responsible for these payments.

3. Proper Handling of the Competent Authority's Function in Determining and Paying Compensation:
The appellant argued that the authorities did not correctly address the role of the Competent Authority under the Metro Railways (Construction of Works) Amendment Act, 1987. The Tribunal agreed, noting that the Competent Authority determines and disburses compensation, and thus the TDS liability should be assessed at the point of payment to the beneficiaries.

4. Validity of the Demand Notice under the Act:
The appellant claimed that the demand notices were invalid and void ab initio. The Tribunal quashed the demand under Section 201 r.w.s. 194 LA, stating that the TDS liability should be assessed when the Competent Authority makes payments to the beneficiaries, not when Metro Railway transfers funds to the Competent Authority.

5. Legality of Tax Imposition under Sections 201(1) and 201(1A):
The appellant contested the imposition of tax under Sections 201(1) and 201(1A). The Tribunal found that the tax deduction obligations were incorrectly imposed on Metro Railway instead of the Competent Authority. Consequently, the Tribunal remitted the matter back to the Assessing Officer for fresh adjudication, emphasizing that the Competent Authority should handle the TDS obligations.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, remitting the matter back to the Assessing Officer to reassess the TDS obligations at the point of payment by the Competent Authority. The Tribunal's decision applies mutatis mutandis to all five appeals, emphasizing the need for a fresh adjudication in accordance with the law.

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