2016 (12) TMI 1084 - HC - Income Tax

TDS on the amount of compensation and interest received pursuant to judgment and award of the Land Acquisition Reference - Held that - The land of the petitioner was acquired for public purpose and he received compensation of ₹ 92,56,980/-, being additional amount of additional compensation and ₹ 3,06,39,391/- towards interest under the provisions of Land Acquisition Act, the assessee was not liable to pay any tax on the aforesaid amount received by him. Once on the aforesaid amounts, the petitioner was not liable to pay tax and/or the aforesaid sum of amount was not subject to tax, there was no question of deducting any tax at source, as has been done by the respondent no. 1. Identical question came to be considered in Movaliya Bhikhubhai Balabhai Versus Income Tax Officer - TDS - 1 - Surat & 1 2016 (5) TMI 488 - GUJARAT HIGH COURT held that the acquiring body was not justified in deducting the tax at source on the amount of compensation and the interest received under the provisions of the Land Acquisition Act. The impugned action of the respondent no. 1 in deducting and depositing a sum of ₹ 45,20,257/- towards TDS on the amount of compensation and interest received thereon pursuant to judgment and award of the Land Acquisition Reference is hereby quashed and set-aside. - Decided in favour of assessee

Summary

Issues:
Challenge of illegal deduction and deposit of TDS from compensation and interest amount.

Analysis:
The petitioner challenged the respondent no. 1-authority for deducting and depositing an amount of ?45,20,257/- towards TDS from the total compensation and interest received. The petitioner sought a writ, direction, or order to refund this amount. The petitioner, as the original claimant in a land reference case, was awarded ?92,56,980/- as additional compensation and ?3,06,39,391/- as interest. The respondent no. 1 deducted ?10,48,885/- towards TDS, surcharge, and education cess on the compensation amount and ?34,71,442/- on the interest amount. The total deduction amounted to ?45,20,257/-, which was deposited with the respondent no. 2. Feeling aggrieved, the petitioner filed the present petition challenging this deduction.

It was argued on behalf of the petitioner that since the compensation received for the acquired land was not subject to tax under the Land Acquisition Act, the deduction of TDS was unjustified. The petitioner relied on a previous court decision and a certificate from the income-tax authority stating no tax liability on the received amount. The respondent no. 1 failed to justify the deduction, while the respondent no. 2 acknowledged the issuance of a "NIL" TDS certificate and did not contest the issue covered by a previous court decision.

The court examined the case considering that the compensation and interest received by the petitioner were not taxable under the Land Acquisition Act. Referring to a previous court decision, it held that the deduction of TDS by the acquiring body was unwarranted. Following the precedent, the court quashed the deduction of ?45,20,257/- and directed the respondent no. 2 to deposit this amount with the Reference Court for disbursement to the petitioner within six weeks. The court ruled in favor of the petitioner based on the binding decision and ordered the refund of the wrongfully deducted TDS amount.

Overall, the court found in favor of the petitioner, concluding that the deduction of TDS from the compensation and interest amount was unjustified under the Land Acquisition Act. The court directed the refund of the deducted amount and ordered the respondent no. 2 to deposit it with the Reference Court for subsequent disbursement to the petitioner.