Case Number: ITA 41/DEL/2021
Appellant: Land Acquisition Office, Huda Complex, Sector 14, Gurgaon, Haryana – 122001
Respondent: DCIT (TDS), Gurgaon
Assessment Year: 2012-13
Case Filed On: 2021-01-20
Order Type: Final Tribunal Order
Date of Order: 2022-03-22
Pronounced On: 2022-03-22
The case revolves around the Land Acquisition Office (LAO) in Gurgaon, which acquired land for public purposes as per the directions of the Haryana Urban Development Authority (HUDA). During a TDS survey conducted by the ACIT, TDS Circle, Gurgaon on 19.4.2012, it was found that the LAO had deducted tax at source from the payment of interest to farmers (landowners) on enhanced compensation at the normal rate of 10%. However, it was argued that the deduction should have been made at 20% due to the absence of PAN details of the deductees.
The primary issue in this case was whether the interest received by the landowners on enhanced compensation is taxable as income from other sources under section 56 of the Income Tax Act, 1961, attracting the TDS provisions under section 194A.
The assessee, LAO, contended that the interest paid on enhanced compensation was part of the compensation itself and not interest, relying on judgments from the Hon’ble Punjab & Haryana High Court in the case of Jagmal Singh vs. State of Haryana and the Hon’ble Supreme Court in the case of CIT, Faridabad vs. Ghanshyam (HUF). The LAO argued that no TDS was required to be deducted on such interest payments.
The Income Tax Appellate Tribunal (ITAT) Delhi Bench “D” comprised of Shri N.K. Billaiya, Accountant Member, and Ms. Astha Chandra, Judicial Member, admitted the additional grounds presented by the assessee. The Tribunal held that the interest received by landowners on enhanced compensation under section 28 of the Land Acquisition Act, 1894, is not in the nature of income from other sources under section 56 of the Income Tax Act, 1961. Consequently, the TDS provisions under section 194A would not apply.
The Tribunal followed the judgments of the Hon’ble Punjab & Haryana High Court and the Hon’ble Supreme Court, reiterating that interest under section 28 of the Land Acquisition Act is part of the compensation itself. The Tribunal also emphasized that such interest is exempt from capital gains tax under section 10(37) of the Income Tax Act, 1961.
The Tribunal allowed the appeals of the assessee, concluding that the LAO was not under any legal obligation to deduct TDS on the interest paid on enhanced compensation. The original grounds of appeal were deemed infructuous.
ITA Nos. 39, 40 & 41/Del/2021
Land Acquisition Office vs DCIT
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH “D”: NEW DELHI
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER
ITA Nos. 39, 40 & 41/Del/2021
Asstt. Years: 2010-11, 2011-12 & 2012-13
Land Acquisition Office, Huda Complex, Sector 14, Gurgaon, Haryana – 122001, PAN RTKL00706G Vs. DCIT, (TDS) Gurgaon
Assessee by: Shri Jitender Wadhwa, CA
Department by: Shri N.C. Swain, CIT DR
Date of Hearing: 14/02/2022
Date of Pronouncement: 22/03/2022
ORDER
PER ASTHA CHANDRA, JM
These three appeals of the assessee Land Acquisition Office (“LAO”) are filed against the order dated 5.11.2015 under section 201(1) and 201(1A) of the Income Tax Act, 1961 (the “Act”) for the assessment years 2010-11 and 2011-12 and order dated 23.12.2015 for the assessment year 2012-13 passed by the Commissioner of Income Tax (Appeals)-2, Gurgaon (“CIT(A)”). These appeals were heard together and are being disposed of by this common order.
It is a case of TDS survey/inspection conducted by ACIT, TDS Circle, Gurgaon on 19.4.2012 at the office premises of the deductor, LAO. During the course of inspection and subsequent follow-up, the AO found that the deductor LAO had deducted tax at source from the payment of interest to the farmers (landowners) on enhanced compensation at the normal rate of 10%, whereas the deduction should have been made at 20% due to the absence of PAN details.
In response to the show cause notice, the assessee’s explanation was not accepted by the AO, who observed that the assessee failed to deduct tax at source as per the provisions of section 194A of the Act, raising a demand of Rs. 23,99,524/- and Rs. 34,99,95,274/- for the assessment years 2010-11 and 2011-12 respectively under section 201(1) and 201(1A) of the Act.
During the proceedings for the assessment year 2012-13, the assessee filed a letter on 17.1.2014 stating that, in view of the judgment dated 18.7.2013 of the Hon’ble Punjab & Haryana High Court in the case of Jagmal Singh vs. State of Haryana, no TDS is required to be deducted on interest payments falling under section 28 of the Land Acquisition Act, 1894, as it is part of the compensation. The AO replied on 17.2.2014, stating that the decision in Jagmal Singh is case-specific and not applicable to the assessee, asserting that the assessee was liable to deduct tax at source under section 194A of the Act.
Before the CIT(A), the assessee reiterated its stand and filed an affidavit stating that the entire interest had been paid on enhanced compensation under section 28 of the LA Act, which was held to be part of the compensation by the Hon’ble Punjab & Haryana High Court and the Hon’ble Supreme Court in CIT, Faridabad vs. Ghanshyam (HUF). The CIT(A) did not grant relief to the assessee, observing that the issues were debatable and no specific grounds of appeal were raised for the assessment years 2010-11 and 2011-12.
Aggrieved, the assessee appealed before the Tribunal. The Tribunal admitted the additional grounds, observing that the issues were legal and should be considered. Following the judgments of the Hon’ble Punjab & Haryana High Court and the Hon’ble Supreme Court, the Tribunal held that the interest received on enhanced compensation is not in the nature of income from other sources under section 56 of the Act, and therefore, the TDS provisions of section 194A do not apply. The Tribunal also held that such interest is exempt from capital gains tax under section 10(37) of the Act, as it is part of the compensation for compulsory acquisition of agricultural land.
In conclusion, the Tribunal allowed the appeals of the assessee, ruling that the LAO was not under any legal obligation to deduct TDS on the interest paid on enhanced compensation. The original grounds of appeal were deemed infructuous, and the assessee’s additional grounds were upheld.
Order pronounced in the open court on 22nd March, 2022.
sd/- (N.K. BILLAIYA) ACCOUNTANT MEMBER
sd/- (ASTHA CHANDRA) JUDICIAL MEMBER
Dated: 22/03/2022
Veena
Copy forwarded to:
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
Land Acquisition Office vs DCIT (TDS), Gurgaon: Case Filed Due to TDS Deduction on Interest
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