Karnataka High Court
Mysore Urban Development Authority vs The Income Tax Officer (Tds) on 6 June, 2008
Author: D.V.Shylendra Kumar
Bench: D.V.Shylendra Kumar
IN mm men comrr or xamwrum AT nmahwnn
mm Homsm MR. Jusncm n.v. '
Between:
1.
" '5
Q,
[and
nuns nus ms 6?" out or JUNE. ,
BEFORE: "
Writ Petition No.1_1_1395 oi".z9oIs "
MYSORE URBAN DEVELOPMENT'-.. V
AI}'1'Ir-IORI'§'Y,JLB ROAD,
MYSORE BY ITS COMMISSIONER.
THE CHIEF ACCOUNTS
MYSORE URBAN DEVELOP]MEPf'I"-- j I 'I
AUTHORITY, JLB ROAD, 1\gz*i's0R_E.' --- .
THE SPECIAL mzb 'Ac'QiJ1'sI{1§:QN 3 ~ I V'
OF'F'ICER,1\§!YSOR3E _
DEVELo.PIvIE_m' A.U'FHQRi'l_'Y,_j . .
JLB :fieoA:3,__MYsoI:h';;.-: I PE'f'I'I'IONERS
""" * E. Adv.]
THE INCOME Emx' (-)§'FICER mas),
NO." 55/ 1, SI1§ILPA'a'3H§2EE BUILDING,
. _VISHWESHW;%\RfiINAGAF2A,
I MYSORE «-577 003.
THECCQMMISSIONER FOR
INCOMEVTAX, MYSORE,
' Vi=E}YAHAVN«'1'A THEATER COMPLEX,
' SFSRLIHG TAX ROAD,
VISI-IWESHWARA NAGARA,
MIISORE - 577 008.
[E31511 A1avind,Adv. for Sri. M.V. sheshachaxa, case]
I I '1'!-{IS WRIT PETITION IS FILED UNDER ARTICLES 226 8: 227
WP11295.06
RESPONDENTS
I -,0? fI'HE CONS'I'ITU'I'ION OF INDIA PRAYING TO QUASH THE
IMPUGNED ASSESSMENT ORDER DATED 30.1.2006 AT
V. ANNEXURE - D AND ALSO THE ACCOMPANYING DEMAND NOTICE
DATED 30.1.2006 ISSUED UNDER SECTION 156 OF THE INCOME
TAX ACT, 1961 IN FORM--1 T.S.'?' AT ANNEXURE - C AND ETC.,
THIS PETITION COMING ON FOR HEARING, THIS DAY, THE
COURT MADE THE F'0LLOWING:-
3 WP11295.06
O R D E R
This writ yetition is a clear illustration of sifuafions where even the non-assessees under the _Act, 1961 [for short 'the Act'] can be by statutory provisions which safeguardm g of the interest "
distributors of income of recipients being mmpelled of amount to be aim-bugeg fou to the credit of the income virtually act as a payInent__of -on-the part of the recipient.
2. _ _Th.e "' ~p1fese1}1t A'--.siVtt;i}at'1'on is one seeking to oover V. ., ad.' eby"way of compensation on acquisition of property in terms of section 194LA of petition is examined for clarifying the legal in terms of section I94LA of the Act Writ petitioner is Mysore Urban Development 'V "Authority, a. statutory authority created under section 3 of the Kamalzaka Urban Development Authorities Act, 1987. 3 WP} 1295.06
4. The authority in the normal course of its functioning does acquire lands belonging to private persons other persons and develops the same and distrib1_1tef plots by forming layouts either for the or even for forming commen§ia1"C'om7plexeg; '.a].f'5I.d'j0t}1Cr:'.__ public amenities. V ' V
5. It appears the compensation ..the who had owned certain been acquired by the tune of Rs.3,6'7,94,840/--. The of the Vi6W that for the period
1.J.Q.2G04 to while this was the quantum of paid to owners whose property had been petitioner-authority, they had not i:()% of this amount and had not remitted the 'A the credit of the income tax authorities and 'tneiefore the petitionexvauthority had been called upon not only to remit this amount but also with interest of |_l\tI.zuu.:-snug.-nu :4. uuu;4.-- . 4 WP11295.06 Rs.5,88,717/-- for non-compliance with the statutory provisions of section 1941A of the Act.
6. Section 194LA of the Income Tax Act, 1961,__1__'eads as under: T d 194-LA - Pmmcnt qf acquisition of certain tmnwvable. Any person _fo"r~p.1ytng to a resident any sum, being it: the'n4iture'efeo?zzpensat1bn or the enhanced oomyensarubn oonsideration or the , on account of eomputsorg law for the " fame, "Qf immovable property (other.Vti:a1:tla1;td), shall, at the time ofBpayitLent"?o}' cash or by issue of a C'? any other mode, whichever iesearlier, equal to ten per cent of as thereon:
" £10 deduction shall be made under this '-s.ection"where the amount of such payment * .. _ case may be, the aggregate amount of P e'aeeii to a resident during thejinancial year-.. not exceed one hundred thousand nizwefefi " -- For the purpose of this section, -
(i) 'agricultural land' means agricultural land in mdia including land situate in any area referred to in items {Cl} and (b) of sub-
clcmse ('iii') of clause (1 4) of section 2,' nus.-magma. at ails n noggin: gum. . - IIAIII I..lIlI..tI&..ltflIII..J|u I gi, wP11295.o6 other than the immovable property for the purpose of section 1941A of the Act and therefore there is no obligation on their part to deduct such amount it to the income tax authorities.
8. The Income Tax Otfioer who had the representative of the aut11orit3;.,.e(ho i'f0rV.._ it the proposition and proceeded dated 30.1.2006 {copy at it m§1dsngr that the pet1fioner::e1.ithoi*ity not"'4oriiy.VEiab1e to make payment of earlier part of this order but vvivouldp Ievy of penalty under section 271{'1][c]:'otT is equal to the amount of tax v _ oligifit have Aibeeieudeducted. petitioner-authority afier being threatened not oriiy demand but also the proposed further penal .aetioi'3;V--- it appears preferred a revision petition under it 'section 264 before the respondent No.2 ---~ Commissioner of i Inoome"I'ax.
|..l|ILl'ILlat1In.uu: an' nu-54-; n -un--..m--.._. 7 WP11295.06
10. The authority had also sought for stay of the enforcement of the order and further pmceedings'~.ebefoIe the Commissioner. The Commissioner though. with the revision petition, nevertheless,..af§p§arS not ordered stay of further It stage the petitioner-authority. by filing this revision petition: _
11. This court on and granted interim relief and theI'6£iftéI" - V': ' '~h'e.ve entered appearance .
12,. I have Sri. P S Manjunath, learned counsel for and Sri. Aravind, learned counsel for the H ~responde;f:1ts~,f ' ' 'V A13. " Sri. P S Manjunath, learned counsel for the petitioner points out that a reading of section 194LA of the Vt makes it very clear that eompensation amount paid in respect of the agricultural land is not cevered by the provisions of section l94LA of the Act; that the 8 WP11295.06 understanding of the Income Tax Officer to the is in the teeth of the provisions; that the Incont1e~1'a.$§j:l§Oi'ficer while passing the iinpugned order has _ to invoke the definition of section 2(14) of the Act, as.clai1se""[iii] of section 2, agricultural indiii'l'ex.oiudes such agricultural land for development, even. for the pi '- therefore not only the are bad;
that irithout appreciating this position allowed the enforcing authority to iznatter which virtually amounts to .. «fhsrassment A therefore the matter Warrants interference to relieve the petitioner from further H ings.
ii the other hand, Sri. Aravind, learned counsel for gtizerespondents, would firstly urge that this court should wnot interfere in this matter at this stage, particuiarly, as the revision petition filed by the petitioner is still at large before the Commissioner and as this court has already ."'('" £91' (3: KLQRIATAIIA I.lI(':.I.l flfillnf fin Itnumlmrn VA unnnj mu:-unnv nun urn lung:-on ... -......_.. _._ -....._.. 9 WP}. 1295.06 stayed further proceedings, stay can be and directions issued to the Commissioner to ' the matter expeditiously.
15. Secondly, it is submitted;"1'ths§tl l the compensation paid land', the understanding of itself is such that it excludeslleny located in an urban of capital asset makes it the authorities are well in calling upon the petititiners as the petitioner had failed in conj1plying" -wi'thV11.he'-._reqt1irement of section 194LA of the A. .....
._1'6._._ T2*ie.,v_nei§tt"'contention urged is that it is not clear as to Wlietlier compensation paid is only in respect of 'ag1fic1ii'tiJral land or it could be other lands also and in the of information as to Whether the entire it "compensation is in respect of agricultural land or even other lands, the matter cannot be examined by this court; _._.. _..... ---_-.-uu.np- nusll dtlhllltl 1 1 WP1 1295.06 question of further examination of this aspect""--on the premise that it is either non-agricultural or CtC.,.
19. In so far as the :oi'__the' of section 194LA is concernechi 3 sections under the Act, short and simple. It does not4_._"give.'_VAiioreithevri ambiguity or interpretation. It and understood and The section which reads as "Payment, ofon acquisition of eertzam immoiiabie .._:is..:t~'ery indicative as to for What previsiofiu has been made. One should v _ the ivliability here is a artificial liability on the compensation in respect of as in the hands of the recipient the Acomfierrsation received may be capital gain which is sincollie taxable under the Act and therefore the legislature a safeguard in favour of the revenue by providing for deduction at source at some percentage of the amount paid by way of compensation so that the deducted M"
12 WP1129S.O6 amounts acts as security for realisation of the actual liability of tax to be determined by the authority __later at the end of the assessment year etc.,.
20. It is not the liability of the compensation, but the liabilitylitjof compensation amount. Now, " the obligation on the part of to is only in respect of com.per1s_éitior;i_ "~-._ae'qn_isition of certain immovable agrlc' ultural land undojahtediylis itjftirtjiiovatuiiit-§"V1iroperty, the main part of section 219-4i.A "eiii:3i_;des agicultural land from the imn:-.ovable"' eovered by section tI94LA as the 't V. = the bracket indicates i.e. [other than agricultural V 21? .. this further made very expiicit, particularly, by it * that the meaning of 'agicultmal land as found the definition of 'capital asset' under section 2(14) is not iznportzed for the purpose of section 194LA of the Act which not only refers to retaining the agricultural land as P'l'\I Efif ('E IIIBIIIEFAIII Illllil fltlhllllv DIP llnfinunlflnlln uuu¢nI Juana:-n-- Ln In-nnhmnnuununn .- .;..._...;........... 4... ..... 1.3 WP11295.06 it is for the purpose of section 19-4LA in all situations irrespective of their location but also by maxeeg clear that 'immovable propelty' means the other land other than reading and unde1'standi11;g.4_of with no ambiguity or the object and scope of this obligation cast on a person is only in respect of p property. Such rfixtclude agricultural land and --A -'may be located in any place includitxgc and the meaning of given in section 2(1-4) of the Act is for the purpose of section 194LA of the Act. Thebflauttlority functioxting under the Act has obviously gone Wrong by quoting artificial meaning of land' as contained in Section 2(14) of the Act, V. __rief.ning capital asset The definition of capital asset is given for the purpose of indicating that the transfer of capital asset if has resulted in some gain and becomes Au.--.lInU V -(ll:-,J__ "or semi-precious stones, 1 4 WP1 1295.06 capital yin, it is an income taxable as income' includes capital gains. The defnlition of capital asset 2(14) of the Act, which reads as under: '_ ' L. T (14)"capital asset" means 'of 7€'.:i.'*..l,_t'1'*:i;_' held by an assessee, 'I4_)h»ethe'sf"OT" not», ' connected with or * yrofessien, butdoes not (1') any ,~:tock~ita+'tr ade, ~ _ consumable stores or for the purposes of or (ii? personal to say.
llllfiflablfii _fiF'»'~.'<3~"'l;1.-'«'11"1§7 wearing
-apparel but excluding """ -_je+;»veli*ery)"heZdfof'pe7*sonal use by the _ . aseessee 'ar'any-- member of his family depefldenteénoohivn Explanation. -Fbr the of sub-
clause, "Jewellery ;'nelude:~s-_' " ' (a} made of silver;
platifium or may 'oti':e"r precious metal _or any one or more such érietals, whether or 'oontaim'_ng fprecious or semi- storteg' and whether or not :
woflced" pr sewii into any wearing eirmei: A A l w?:e'£her__or not set in any fizmiture, or other article or worked or ; 1/ into any wearing apparel; . e/ % {iii} agricultural land in India, not such distance, 15 WP11295.06 land situate-
within WW9
(a) in any area which is E _ the jurisdiction""-._of'jj..a municipality , municipality, corporation, notified » ._ ~ committee, town. area eon;mittee,'=--. town oonunittee, or 'by any'-~.other* name) or a 'eantonment boardfland of them f to the l"ast of which the relevant f been .pubiiShed; before the first day of f;, .-the or»-
than eight from the local limits of V * or oantonment to in item (a), as . ._the" Government may,
A '~ having regard to the extent of,' and for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Qflicial Gazette;
t (iv) 5 1/2 percent. Gold Bonds, 1977, or 7 percent. Goldfionds, 1980 or National Defence Gold Bands, 1980 issued by ' the Central Government;
(1)) Special Bearer Bonds, 1991, issued by the Central Government,"
15 WP1I295.06
(vi) Gold Deposit Bonds issued underjflae Gold oeposa Scheme, 1999 the Central Government,-' L" , "
is for the limited purpose of detetfitiinitzg legislature has, having as oft. ? agicuiturai land mough sgsi¢ny iefinases agricultural land, but if its got because of the potential for located in an urbanized 9%' 'development, has sought may make by :with potential for urban potential is in respect of agrictilttirai media' it s it has taken care to levy tax on the is other than agricultural income, knowing its"---1egis1ati'Ve limitations and by seeking to rope in income ..att1'ibiitab1e to transfer of asset with development ' which is essentially not an income attributable it "to agricultural operations. This exercise does not in any way affect or control the provisions of Section 19-4LA and I-Rlln? Al! llnnnlnluln an n:
Idhtl nIu:nnnn-- :n apnnn.-..'-nu'.-- -.._-. __.-....._... _..... ...... 17 win 1295.06 more so when the very provision expressly seeks.T'to_retain agricultural land with or Without urban an agricultural land only and further not immovable property.
24. When statutory rather surprising that the ai.1tI1o'1*itje:.. the Act has misread this enforced the provision in.,a.:iw-_ay the section itself and with the possibiiity of section 27 1(1) of the Act.
25. it that the Commissioner before whom the"~re'visioni'petition was taken, could not see the of section 194LA of the Act as a day light and allowed further against the complaining petitioner.
" understanding of the section 194LA of the Act is indicated in this order. Notwithstanding the pendency of the revision petition, as the impugned order passed by the Income Tax Ofiioer has to be examined only on the 13 w1=>1129s.o6 understanding of the provisions of section 194LA and on the understanding and as indicated in this order, the order cannot Withstand scrutiny. The order of Tax Ofiicer at A11nexure--A is quashed pendency of the revision petition 'the This order is passed as 1 find ee.ejeetmg further proceedings by asId;ii;:é_V"VL'1e '#0 before the Commissioner exarninetion of his revision petition is an
27. In petition is ailowed.
The 'the Income Tax Ofiicer, w2[1]['rI'Js},e V bearing F.No.TDS/TCS/W 26.12.2005 [copy at Annexure-
is in this petition itself and there is no H the petitioner to pursue the revision V 44 tinder section 264 of the Act. * Igetitioner awarded cost of Rs. 10,000/-- against the Aiiresnondents. Rule made absolute. n An/« S51/é Edits-@133 I"'l\IlI§'I' l\E Irnnnsn-o-nun IIIJOII continuum Alum: nan.-nag... gnu'... '._.-.__ __ ..--_..-__..-_.. ..--