2015 (10) TMI 75 - AT - Income Tax

Non deduction of tax at source u/s 194LA - assessee paying compensation to the property owners on account of road widening - assessee corporation strongly contended that the acquisition proceedings made as per section 146 of Hyderabad Municipal Corporation Act, 1955 - CIT(A) delted the disallowance - Held that - After considering the provisions of section 146, 147 of GHMC Act and also section 194LA of I.T. Act, 1961, it is clear that sec.146 of HMCA, 1955 is an independent provision for acquiring immovable property by the assessee corporation through an agreement without taking recourse to the provisions of the Land Acquisition Act, 1894 and only in the event of failure to invoke the provision of sec.146 of the HMCA in any particular case, the question of compulsory acquisition of land under the Land Acquisition Act, 1894 arises. Admittedly, there is no dispute that the assessee corporation has acquired the land under section 146 of GHMC Act, 1955. So far as section 194LA of I.T. Act, 1961 is concerned, the language used in section and provision is Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property. Therefore, one of the ingredients is compensation on account of compulsory acquisition if fulfilled will impose the liability of deduction of TDS under this provision. As there is no compulsory acquisition and the acquisition is by a mutual agreement as contended by the assessee corporation, therefore, to the extent of properties acquired under section 146, we are of the opinion that provisions of section 194LA of the I.T. Act, 1961 do not apply for the present case on hand. After considering the facts and circumstances of the present case, we are of the firm view that there is no infirmity in the order of the Ld. CIT(A) and accordingly we confirm the same. - Decided in favour of assessee.

Summary

Issues Involved:
1. Non-deduction of TDS on professional fee paid.
2. Charging of interest for late remittance of TDS.
3. Non-deduction of TDS on contract and salary payments.
4. Short deduction of TDS on professional fee paid.
5. Non-deduction of TDS on payments made for acquisition of land under section 194LA.
6. Short deduction under section 194LA.
7. Deduction of TDS under section 194C instead of 194J.

Issue-wise Detailed Analysis:

1. Non-deduction of TDS on Professional Fee Paid:
The assessee, a Municipal Corporation, was inspected on 08.03.2006 for adherence to TDS provisions. The A.O. found defaults including non-deduction of TDS on professional fees. The Ld. CIT(A) partly allowed the grounds related to the demand raised for non-deduction of TDS on professional fees amounting to Rs. 32,334 and Rs. 36,303 under section 201. The Revenue did not appeal these findings to the Tribunal.

2. Charging of Interest for Late Remittance of TDS:
The A.O. also charged interest for late remittance of TDS under section 201A, amounting to Rs. 23,280 and Rs. 26,138, and an additional Rs. 5,29,390. These charges were also partly allowed by the Ld. CIT(A), and the Revenue did not contest these findings before the Tribunal.

3. Non-deduction of TDS on Contract and Salary Payments:
This issue was part of the initial inspection findings but was not specifically detailed in the judgment regarding the outcome or any specific appeal.

4. Short Deduction of TDS on Professional Fee Paid:
The Ld. CIT(A) dismissed the grounds related to short deduction of TDS on professional fees amounting to Rs. 16,600 and Rs. 11,995 under section 201(1A), confirming the A.O.'s order. The assessee did not appeal this decision to the Tribunal.

5. Non-deduction of TDS on Payments Made for Acquisition of Land under Section 194LA:
The primary contention revolved around whether the acquisition of land under section 146 of the Hyderabad Municipal Corporation Act constituted "compulsory acquisition" under section 194LA of the I.T. Act, 1961. The CIT(A) allowed the assessee's claim, stating that the acquisition was not compulsory and hence not liable for TDS under section 194LA. The Revenue appealed this decision, arguing that the acquisition should be considered compulsory as the assessee deducted TDS on the land component.

6. Short Deduction under Section 194LA:
The Ld. CIT(A) dismissed the grounds related to short deduction of tax on compensation paid towards land acquisition, confirming the A.O.'s order. The assessee did not appeal this decision to the Tribunal.

7. Deduction of TDS under Section 194C Instead of 194J:
The Ld. CIT(A) dismissed the grounds related to the deduction of TDS under section 194C instead of 194J, confirming the A.O.'s order. The assessee did not appeal this decision to the Tribunal.

Tribunal's Analysis and Decision:
The Tribunal examined the provisions of section 194LA, which mandates TDS on compensation for compulsory acquisition of immovable property. The Tribunal noted that section 146 of the HMC Act allows for acquisition by mutual agreement, distinguishing it from compulsory acquisition under the Land Acquisition Act, 1894. The Tribunal referenced a previous decision (ITA.No.140, 141, 142/Hyd/2014) supporting that acquisitions under section 146 do not invoke section 194LA's TDS requirements. Consequently, the Tribunal upheld the CIT(A)'s decision, affirming that the provisions of section 194LA did not apply to the acquisitions made by mutual agreement under section 146 of the HMC Act.

Conclusion:
The Tribunal dismissed the Revenue's appeals for both A.Y. 2006-2007 and 2007-2008, confirming that the acquisitions under section 146 of the HMC Act were not subject to TDS under section 194LA of the I.T. Act, 1961. The order was pronounced in open court on 04.09.2015.