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2017 (8) TMI 532 - HC - Income TaxAgricultural or non agricultural land - ascertainment of nature of land - proof of agricultural operation - TDS u/s 194LA - TDS determined only on the basis of records furnished by assessee and no inquiry, investigation, physical verification is permissible/desirable at the end of assessing officer - Held that - The assessee is the Urban Development Authroity which requires the amount for the purpose of paying compensation to the agriculturists. In view of the observations which are made by the Supreme Court in Sarifabibi (1993 (9) TMI 10 - SUPREME Court ) wherein it has been held that on facts, under the Local Act which is a subject matter, the permission was taken and on the date on which, the contract was entered between the parties that too under cooperative society, it was an agriculture land, therefore exemption which was granted was on agriculture land. In that view of the matter, while acquisition done by the local authority which is statutory authority when they are paying compensation of an agricultural land, we are of the considered opinion that the judgment of Sarifabibi will not apply in the facts of the present case. While interpreting the view, we have to look into that the local authority is acting in the interest of State as a whole or not. In the present case, for the purpose of taxation, if the interpretation which has been canvassed by the counsel is accepted, it will put loss to the authority and they have to pay higher compensation. In that view of the matter, while considering the payment of compensation, it should be on a lower side and in our considered opinion, the authority has not committed any wrong. They have acted in the interest of the State and it should be considered as an agriculture land as rightly considered by the authority. - Decided in favour of the assessee.
Issues Involved:
1. Determination of TDS applicability under Section 194LA based on the nature of land (agricultural or non-agricultural). 2. Whether general law can override the provisions of the Income Tax Act concerning agricultural land and income. Issue-Wise Analysis: Issue 1: Determination of TDS Applicability under Section 194LA The appeals challenge the Tribunal's decision which favored the assessee by modifying the orders of the AO and CIT(A). The primary question is whether TDS under Section 194LA should be determined solely based on records furnished by the assessee without further inquiry or verification by the assessing officer. Observations by the AO: The AO conducted an investigation, including gathering Girdawari reports from Tehsildars, which revealed that the majority of the land acquired by the assessee was barren or unsustainable for cultivation. The AO noted that no cultivation had been undertaken on such land for several years, indicating it was not agricultural land. Observations by the CIT(A): The CIT(A) upheld the AO's findings, stating that the compensation paid for acquiring these lands required TDS deduction as per Section 194LA of the Income Tax Act. Observations by the Tribunal: The Tribunal held that the assessee demonstrated from records that the land acquired was agricultural per Section 194LA, Explanation (I), and thus, there was no obligation to deduct TDS. Consequently, the Tribunal reversed the lower authorities' orders and quashed the demands raised by the Department. Precedent Cases: - Supreme Court in Sharifabibi Mohmed Ibrahim: The Court emphasized that the nature of the land must be determined based on its actual use and intended use at the time of sale. - Supreme Court in Commissioner of Wealth Tax, Andhra Pradesh Vs. Officer-In-Charge (Court of Wards) Paigah: The Court held that the determination of land as agricultural should be based on its actual condition and intended use. Counsel for the Appellant: The appellant argued that the assessee was required to deduct TDS as the land was not agricultural based on the AO's findings and supported by various judgments emphasizing the need for actual agricultural use. Counsel for the Respondent: The respondent cited various judgments, including Sarifabibi, which stated that whether land is agricultural is a question of fact and should be determined based on a cumulative consideration of all relevant facts. Issue 2: General Law vs. Provisions of the Income Tax Act The second issue questions whether general law can override the specific provisions of the Income Tax Act regarding the definition and taxation of agricultural land. Relevant Judgments: - Kerala High Court in Nalini Vs. Deputy Collector: The Court observed that the competent authority to decide whether compensation is exigible to income tax is the Income Tax Officer and not the Land Acquisition Officer. - Gujarat High Court in Commissioner of Income Tax (TDS) Vs. Special Land Acquisition Officer: The Court held that the revenue records indicating land as agricultural provide a strong presumption, but this can be rebutted if evidence shows the land was not used or capable of being used for agricultural purposes. Counsel for the Respondent: The respondent argued that the Tribunal's decision should be upheld as the land was agricultural per the records and the specific provisions of the Income Tax Act should prevail. Conclusion: The High Court dismissed the appeals, agreeing with the Tribunal that the land in question was agricultural based on the records and the provisions of Section 194LA. The Court emphasized that the determination of land as agricultural should be based on its actual use and intended use, aligning with the precedents set by higher courts. The Court also noted that the local authority acted in the interest of the state, and the interpretation favoring the assessee was correct. The appeals were deemed devoid of merit and dismissed.
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