2015 (12) TMI 1032 - HC - Income Tax

Refund of TDS in respect of the amount received on account of interest awarded under Section 28 on acquisition of the agricultural land - Held that - On enhanced amount of compensation in respect of the acquired land falls for taxation under Section 56 of the Act as income from other sources and is exigible to tax in the year of receipt under cash system of accountancy. It had also been observed that where the assessee is not maintaining books of accounts by adopting any specific method, it shall be treated to be cash system of accountancy. In the present case, the interest received by the petitioner was on account of delay in making the payment of enhanced compensation and, therefore, would fall under Section 28 of the 1894 Act. Such payment could not par-take the character of compensation for acquisition of agricultural land and, thus, was not exempt under the Act. Once that was so, the tax at source had been rightly deducted by the payer. See Sarti v. Haryana State Industrial and Infrastructure Development Corporation Ltd. and others 2011 (5) TMI 939 - PUNJAB AND HARYANA HIGH COURT In view of the above, the tax at source has been rightly deducted and the petitioners can claim the refund, if any, admissible to them by filing the income tax returns in accordance with law. - Decided against assessee

Summary

Issues Involved:
1. Validity of TDS Certificates dated 21.1.2015.
2. Entitlement to refund of TDS deducted from compensation for acquired land.
3. Taxability of interest awarded under Section 28 of the Land Acquisition Act, 1894.

Detailed Analysis:

1. Validity of TDS Certificates dated 21.1.2015:
The petitioners challenged the TDS Certificates issued by respondent No.5, arguing that the tax deducted was not valid. However, the court upheld the validity of these certificates. It was noted that the tax deducted at source (TDS) is a provisional collection of tax by the revenue, subject to final determination at the time of filing the return. The TDS certificates appended by the petitioners clearly indicated that tax had been deducted under Section 194A of the Income Tax Act, 1961, which pertains to interest other than "interest on securities."

2. Entitlement to refund of TDS deducted from compensation for acquired land:
The petitioners sought a writ of mandamus directing the respondents to release the amount deducted as TDS from the compensation of their acquired land. They argued that they were entitled to a refund of the TDS amount deducted from the interest awarded under Section 28 of the Land Acquisition Act, 1894. However, the court found no merit in this argument. The court referred to the amendments made to Section 56(2) and Section 145A of the Income Tax Act by the Finance (No.2) Act, 2009, which clarified that the interest component on the amount of compensation or enhanced compensation is taxable in the year of receipt, irrespective of the method of accounting employed by the assessee.

3. Taxability of interest awarded under Section 28 of the Land Acquisition Act, 1894:
The court examined the taxability of interest awarded under Section 28 of the Land Acquisition Act, 1894. The petitioners relied on the Supreme Court judgment in Commissioner of Income-tax v. Ghanshyam (HUF) and a judgment of the Punjab and Haryana High Court in Haryana Urban Development Authority v. Mandir Nar Singh Puri. However, the court noted that the interest awarded under Section 28 is considered a revenue receipt and is taxable. It referred to multiple Supreme Court judgments, including Dr. Shamlal Narula v. CIT and Bikram Singh vs. Land Acquisition Collector, which consistently held that interest on delayed payment of compensation is taxable as a revenue receipt. The court also referred to the amendments made by the Finance (No.2) Act, 2009, which further supported this interpretation.

In conclusion, the court dismissed the writ petition, holding that the tax at source had been rightly deducted. The petitioners were advised to claim any refund by filing income tax returns in accordance with the law. The judgment emphasized that the interest component on enhanced compensation is taxable as income from other sources in the year of receipt, aligning with the amendments to the Income Tax Act and consistent judicial pronouncements.