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TMI Blog1992 (3) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... Bhatinda was acquired by the Union of India for setting up a cantonment at Bhatinda. The notification under section 4 of the Land Acquisition Act, 1894 ( hereinafter referred to as " the Act") was published on May 10, 1979. The Collector gave his award on March 31, 1981. The petitioners filed a reference application under section 18 of the Act which was decided by the Additional District judge, Bhatinda, on November 6, 1985. The enhanced compensation was paid to the petitioners on their filing an execution application. Against the award of the Additional District judge, the petitioners filed R. F. A. No. 1356 of 1986 which was allowed on May 21, 1987, by D. V. Sehgal J., and the compensation amount payable to the petitioners was further enhanced. The respondents deposited the enhanced compensation payable to the petitioners under the orders of the High Court on December 21, 1990, in the executing court at Bhatinda along with the amount payable in some other case. The total amount payable to the petitioners was determined at Rs. 4,75,241.39 which included solatium as well as interest. The interest amount was determined at Rs. 2,87,631.70. On October 22, 1990, the Assistant Dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same being an integral part of the compensation, no deductions could be made in view of section 52A of the Land Acquisition Act (Local Amendment by Punjab Government); (iii) (a) that the executing court is not the person responsible for paying any income by way of interest and the same could only be the Land Acquisition Collector. Therefore, the executing court cannot deduct income-tax on the decretal amount under section 194A of the Income-tax Act ; (b) that section 194A envisages the tax to be deducted at source either at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. In this case, the amount stood credited to the account of the payee when the Land Acquisition Collector deposited the money in the court from its accounts and, therefore, only the Land Acquisition Collector could deduct the income-tax at source at the time of credit of the income to the account of the payee and not when it is actually being paid by the executing court as the credit entry was prior in point of time to the actual payment ; and (iv) that the executing court f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the filing of returns by the prescribed person in such form and verified in such manner and setting forth such particulars as may be prescribed from time to time. In order to appreciate the main contention raised by learned counsel appearing for the petitioners, the relevant extract of section 194A and section 204 of the Income-tax Act, 1961, are reproduced below 194A. Interest other than interest on securities (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income by way of interest on securities, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided that no such deduction shall be made in a case where the person (not being a company or a registered firm ) entitled to receive such income furnishes to the person responsible for making the payment (a) an affidavit, or (b) a statement in writing, declaring that his estimated total income assessable for the assessment year next foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... himself, or, if the payer is a company, the company itself including the principal officer thereof. Explanation-For the purposes of this section, (a) 'non-resident Indian' and 'foreign exchange asset' shall have the meanings assigned to them in Chapter XIIA; (b) 'authorised dealer' shall have the meaning assigned to it in clause (b) of section 2 of the Foreign Exchange Regulation Act, 1973 (46 of 1973). " Learned counsel appearing for the petitioners contended that the court is not a " person responsible for paying" any income by way of interest to the petitioners and, therefore, cannot deduct the tax at source in terms of section 194A, that the person responsible for paying income by way of interest in this case shall be the Special Land Acquisition Collector and the court is acting only as a conduit for making the payment. According to this section, the person responsible for paying, in the case of payments of income chargeable under the head " Salaries " other than payments by the Central Government and the Government of a State, is the employer himself, in the case of interest on securities, the borrower, and regarding any other sum chargeable tinder the Act, the payer h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... names of the first two plaintiffs and the first two defendants ; (c) how the money remitted is to be adjusted, that is to say, whether it is towards the principal, interest or costs ; (d) the number of the execution case of the court, where such case is pending ; and (e) the name and address of the payer. (4) On any amount paid under clause (a) or clause (c) of sub-rule (1), interest, if any, shall cease to run from the date of service of the notice referred to in sub-rule (2). (5) On any amount paid under clause (b) of sub-rule (1), interest, if any, shall cease to run from the date of such payment : Provided that, where the decree-holder refuses to accept the postal money order or payment through a bank, interest shall cease to run from the date on which the money was tendered to him, or where he avoids acceptance of the postal money order or payment through bank, interest shall cease to run from the date on which the money would have been tendered to him in the ordinary course of business of the postal authorities or the bank, as the case may be. " Thus, a money decree can either be paid through the process of court, at the direction of the court or out of court b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, then the person who makes the payment in the last, becomes the payer of the money and thus liable to deduct the tax at source and deposit the same with the Central Government, which is not the intention of the Legislature ; the intention of the Legislature is that a person who is responsible for paying an income by way of interest has to deduct the tax at source and deposit the same with the Central Government and not the last person who is actually making the payment. This can further be exemplified where a person remits the money by way of income of interest through a postal money order but fails to deduct the tax at source, can he shift the liability of deducting the tax at source to the postal authorities being the last person who has made the payment and thus becomes payer in terms of section 204(iii) of the Income-tax Act? The answer is clearly " No". "The person responsible for paying " in such a case, is the person who had borrowed the money and was responsible for paying income by way of interest, and no other person. Section 194A contemplates deduction of tax at two stages, namely, (a) at the time of credit of such income to the account of the payee, or (b) at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment of the income to the petitioners and, therefore, no tax at source could be deducted by the court at the time of actual payment of the money to the petitioners but in any case, whosoever would be the person responsible for making the payment by way of interest has to follow the procedure laid down in section 194A, in terms of the Division bench judgment of this court in C. W. P. No. 10749 of 1991, decided on December 13, 1991 (Tuhi Ram v. Land Acquisition Collector [1993] 199 ITR 490), in the following terms (at page 506) : " Before parting with the case, we would like to mention, and indeed learned standing counsel for the Department duly assisted by responsible officers of the Department, candidly conceded before the court, that the income by way of interest received as above shall have to be spread over all the years for the purpose of assessment of income-tax from the time it became due. This course has to be adopted for the assessment of income-tax indicated by the Supreme Court in Rama Bai v. CIT [1990] 181 ITR 400 and K. S. Krishna Rao v. CIT [1990] 181 ITR 408. The observation is that, where the compensation awarded under the Land Acquisition Act is enhanced by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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