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Issues involved:
The judgment involves the legality of tax deduction at source from compensation for acquired agricultural land and the entitlement of the petitioners to a refund of the deducted amount. Issue 1: Tax Deduction at Source The petitioners sought writ of certiorari to quash the respondents' action of deducting tax at source from the compensation for acquired agricultural land. The petitioners also sought a writ of mandamus to direct the release of the deducted amount along with interest. The respondents had deducted Rs.44,118/- as Tax at Source from the compensation paid for the acquired land, which the petitioners contended was not authorized under the Income Tax Act, 1961. The petitioners argued that no tax should have been deducted on the enhanced compensation for agricultural land acquired by the State. Issue 2: Legal Arguments The petitioners relied on a previous court order to support their claim that no tax was payable on the enhanced compensation for agricultural land. They contended that the tax deduction at source by the Land Acquisition Officer was unsustainable, and therefore, they were entitled to a refund of the deducted amount. The petitioners highlighted that tax had been deducted at source on both the principal amount of enhanced compensation and the interest received on it in all three writ petitions. Judgment The court noted that the interest element on the enhanced compensation was taxable in the year of receipt, requiring the petitioners to file a tax return as tax was payable on that amount. The court pointed out that the petitioners had the option to file income tax returns and adjust the tax deducted at source against their tax liability. If any excess amount had been deducted, the petitioners were entitled to a refund as per the provisions of the Income Tax Act. Consequently, the writ petitions were disposed of, granting the petitioners the liberty to file income tax returns and seek refunds of any excess tax deducted at source in accordance with the law.
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