Punjab-Haryana High Court
Rupla And Others vs Union Of India And Others on 29 March, 2012
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
CWP No. 4389 of 2002
Date of Decision: March 29, 2012
Rupla and others
...Petitioners
Versus
Union of India and others
...Respondents
CORAM: HON'BLE MR. JUSTICE M.M. KUMAR
HON'BLE MR. JUSTICE ALOK SINGH
Present: Mr. Y.P. Malik, Advocate,
for the petitioners.
Mr. Puneet Bassi, Advocate,
for the respondents.
1. To be referred to the Reporters or not?
2. Whether the Judgment should be reported in the
Digest
M.M. KUMAR, J.
1. The only question of law involved in the present petition filed under Article 226 of the Constitution is "whether the interest accrued on the delayed payment of enhanced amount of compensation would partake the character of compensation taken from 'agricultural land' and, therefore, is assessable to deduction of TDS?"
2. The petitioners have approached this Court for issuance of direction to the respondents to give them refund of ` 2,49,273/- along with interest, which has been deducted as Tax at Source (TDS) out of the compensation of the land, which was acquired before 1.6.1999 i.e. in the month of November 1986.
3. Brief facts of the case are that the agricultural land of the petitioners was acquired by the State of Haryana for a public CWP No. 4389 of 2002 2 purpose, namely, for the construction of SLDC Complex (Sewah) near Panipat, in pursuance of the acquisition proceedings initiated vide notification dated 14.2.1986 under Section 4 of the Land Acquisition Act, 1894 (for brevity, '1894 Act'). Dissatisfied with the compensation awarded by the Land Acquisition Officer, Karnal, the petitioners firstly filed reference under Section 18 of the 1894 Act before the Additional District Judge, Karnal and thereafter filed regular first appeal before this Court for enhancement of the compensation. The appeal was allowed by this Court on 13.11.2000 and the amount of compensation of the acquired land was enhanced. In this way, a sum of `37,55,706/- was released to the petitioners on 11.12.2001. While depositing the amount of compensation, the Executive Engineer, Civil Works Construction Division, HVPN-respondent No. 5 deducted an amount of `2,49,273 being tax at source (TDS). The Certificate in Form No. 16-A has been placed on record (P-1). On 24.12.2001, the petitioners sent a legal notice for refund of the amount of TDS claiming that the same could not have been deducted under Section 194 of the Income-tax Act, 1961 (for brevity, 'the Act'). When the respondents did not respond to the legal notice sent by the petitioners, they filed the instant petition.
4. In the written statement(s) filed on behalf of the respondent(s), the stand taken is that TDS amount has been rightly deducted and deposited in the Central Government Account as per the provisions of Section 194A of the Act. The aforesaid provision contemplates deduction of TDS on the interest of enhanced amount of compensation in respect of land acquisition cases. Accordingly, TDS certificates have been issued to those persons who have filed their representations.
CWP No. 4389 of 2002 3
5. Having heard learned counsel for the parties at length we are of the considered view that the matter is no longer res integra. It is well settled that under Section 194A of the Act, TDS could be deducted from the interest realised from enhanced compensation. A similar petition came up for consideration before the Division Bench of this Court (of which one of us, M.M. Kumar, J. was a member) in the case of Karnail Singh v. State of Haryana and others (CWP No. 21077 of 2008, decided on 13.8.2009).
13.8.2009) After discussing the relevant provision of Section 194LA of the Act and the expression of 'agricultural land' as defined in Section 2(14)(iii)(a) & (b) of the Act as also the notification No. 9447 (F.No. 164/3/87-IT(A-1) dated 6.1.1994, issued by the Central Government, the Division Bench has answered the aforementioned question in the following terms:
" 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 Hon'ble the Supreme Court in the case of Dr. Sham Lal Narula v. CIT, CIT, AIR 1964 SC 1878.
1878 The Supreme Court after considering the concept of interest laid down by the Privy Council and many other judgments has held as under:
"In a case where title passes to the State, the statutory interest provided thereafter can only be regarded either as representing the profit which the owner of the land might have made if he had the use of the money or the loss he suffered because CWP No. 4389 of 2002 4 he had not that use. In no sense of the term can it be described as damages or compensation for the owner's right to retain possession, for he has no right to retain possession after possession was taken under Section 16 or Section 17 of the Act. We, therefore, hold that the statutory interest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income Tax Act."
The aforesaid proposition of law has been consistently reiterated by Hon'ble the Supreme Court in later judgments including the cases of T.K.N. Govindaraja Chetty v. CIT, CIT, (1967) 66 ITR 465 and K.S. Krishna Rao v. CIT, (1990) 181 ITR 408.
CIT, 408 Accordingly it has been accepted to be settled law that interest received on delayed payment of compensation is revenue receipt exigable to income tax.
The issue came up before Hon'ble the Supreme Court in the case of Bikram Singh v. Land Acquisition Collector Collector, or, (1997) 10 SCC 243.
243 After referring to various judgments of Hon'ble the Supreme Court it was concluded that interest on delayed payment on the acquisition of immovable property would be revenue receipt and would thus be exigable to tax. The view of Hon'ble the Supreme Court is discernible from the perusal of para 10 of the judgment which reads thus:
"10. But the question is whether the interest on delayed payment on the acquisition of the CWP No. 4389 of 2002 5 immovable property under the Acquisition Act would not be exigible to income tax? It is seen that this Court has consistently taken the view that it is a revenue receipt. The amended definition of "interest" was not intended to exclude the revenue receipt of interest on delayed payment of compensation from taxability. Once it is construed to be a revenue receipt, necessarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible 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 194-A 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."
Once interest is regarded as revenue receipt then it would fall within the mis-chief of Section 4 of the Act which is a charging section. Therefore, it follows that TDS CWP No. 4389 of 2002 6 under Section 194 A of the Act is to be paid by the petitioner in respect of the interest income on the delayed payment.
The argument of the counsel for the petitioner that interest income would partake the character of the enhanced amount of compensation which is agricultural income has to be answered in the negative and against the assessee.
As a sequel to the aforesaid discussion, the instant petition fails and the same is dismissed."
6. Therefore, no doubt is left that the issue raised in the instant petition is squarely covered by the Division Bench judgment rendered in the case of Karnail Singh (supra).
(supra) Accordingly, the instant petition fails and the same is dismissed in terms of Division Bench judgment rendered in the case of Karnail Singh (supra).
(supra) (M.M. KUMAR) JUDGE (ALOK SINGH) SINGH) March 29, 2012 2012 JUDGE PKapoor