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TMI Blog2009 (8) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 4 of the Land Acquisition Act, 1894 (for brevity, "the 1894 Act"), for construction of Darba Ghaggar Drain. On October 15, 2001, an award was passed by the Land Acquisition Collector. The father of the petitioner preferred a reference under section 18 of the 1894 Act for enhancement of compensation (Reference No. 918LA of 2004) in the court of the learned Additional District Judge, Sirsa. The said reference was consolidated with other land references, which were decided, vide award dated June 14, 2007 (P-2). The land reference was eventually allowed partly vide short order dated March 11, 2008. A sum of Rs. 5,61,000 per acre was awarded as compensation for nehri land (P-1). On June 14, 2007, the petitioner received the compensation being the legal heir of Shri Kartar Singh. On September 4, 2008, respondent No. 3 issued a notice to the petitioner raising the demand of Rs. 4,023 on account of TDS on the amount of interest of compensation received by the petitioner (P-3). 3. The petitioner has filed the instant petition with the grievance that as per section 194LA of the Income-tax Act, 1961 (for brevity, "the Act") payment of compensation or enhanced compe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of interest" on which TDS is required to be paid. 6. We have heard learned counsel for the parties and have also perused the paper book along with the relevant statutory provisions. In order to put the whole controversy in its proper perspective it would first be necessary to read section 194LA of the Act, which postulates the payment of TDS when amount of compensation on acquisition of certain immovable property is made. Section 194LA of the Act reads thus : "194LA. Payment of compensation on acquisition of certain immovable property.-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 (other than agricultural land) shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent. of such sum as income-tax thereon : Provided that no deduction shall be made under this section where the amount of such payment or, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notification includes the land belonging to the petitioner and it has to be treated as "agricultural land". It is worthwhile to read the notification, which is as under : " 7. Vicinity of urban areas notified under proviso (ii)(B) to sub- clause (c) of clause (1A) for the purposes of exemption of income from agricultural house property. Whereas a draft notification was published by the Central Government in exercise of the powers conferred by item (B) of clause (ii) of the proviso to sub-clause (c) of clause (1A), and item (b) of sub- clause (iii) of clause (14) of section 2 of the Income-tax Act, 1961 (43 of 1961), in the Gazette of India, Extraordinary, Part II, section 3, sub-section (ii), dated February 13, 1991, under the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. S. O. 91(E), dated February 8, 1991, for specifying certain areas for the purposes of the said clauses and objections and suggestions were invited from the public within a period of 45 days from the date the copies of the Gazette of India containing such notification became available to the public ; And wherea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is published in the Official Gazette. Notification No. 9447 [F. No. 164/3/87-IT(A-I)], dated January 6, 1994." 9. It is, therefore, evident that the land in question is "agricultural land" and it is excluded from the operation of section 194LA of the Act. 10. The aforesaid finding that the land in question is "agricultural land" is further supported by the categorical admission made by the respondent- State in its affidavit dated May 20, 2009. However, the following question would arise for determination of this court : "Whether the interest accrued on the delayed payment of enhanced amount of compensation would partake of the character of compensation taken from agricultural land' and, therefore, is assess- able to deduction of TDS?" 11. The answer to the aforesaid question would depend upon as to whether interest is regarded as revenue receipt attracting the charging section of the Act or it could be described as damages or compensation in lieu of the owners right to retain possession. The controversy had erupted before the hon'ble Supreme Court in the case of Dr. Shamlal Narula v. CIT [1964] 53 ITR 151 ; AIR 1964 SC 1878. The Supreme Court, after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as income on the delayed payment of the compensation determined under section 28 or 31 of the Acquisition Act is a taxable event. Therefore, we hold that it is a revenue receipt exigible to tax under section 4 of the Income-tax Act. Section 194A of the Act has no application for the purpose of this case as it encompasses deduction of the income at the source. However, the appellants are entitled to spread over the income for the period for which payment came to be made so as to compute the income for assessing tax for the relevant accounting year." 14. Once interest is regarded as a revenue receipt then it would fall within the mischief of section 4 of the Act which is a charging section. Therefore, it follows that TDS under section 194A of the Act is to be paid by the petitioner in respect of the interest income on the delayed payment. 15. The argument of the counsel for the petitioner that interest income would partake of the character of the enhanced amount of compensation which is agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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