Andhra HC (Pre-Telangana)
Special Tahsildar And Land Acquisition ... vs Dandu Saraswatamma And Others. on 27 March, 1992
Equivalent citations: [1993]205ITR587(AP)
JUDGMENT
IMMANENI PANDURANGA RAO J. - The common question that arises in all the above civil revision petitions is :
"Whether under section 194A of the Income-tax Act, 1961 (for short "the Act"), the Revenue Department is entitled to deduct income-tax from the interest accrued on the compensation amount payable under the Land Acquisition Act ?"
The facts leading to the filing of the above revision petitions are, briefly, as follows :
The Commissioner of Income-tax, Andhra Pradesh-I, addressed a D.O. letter dated March 1, 1987, to the ten Revenue Secretary requesting him to issue instructions to all the officers concerned with land acquisition to deduct income-tax on payment of interest and to follow the provisions as laid down under section 194A and other provisions of the Act. In paragraph 2 of that D. O. letter, it is stated that while paying interest, income-tax is deductible at the rates in force during that financial year with effect from April 1, 1975, if the amount exceeded Rs. 1,000.
Basing on that D.O. letter, evidently, the principal secretary has addressed all the district Collectors and the Collector, West Godavari District, Eluru, and issued instructions to his subordinate officers by this letter dated March 21, 1988, with regard to the deduction of income-tax on payment of the interest amount while paying compensation under the Land Acquisition Act. Pursuant to those instructions, the Land Acquisition Officers while depositing the enhanced compensation amounts in various execution petitions filed before the learned Subordinate Judge, Kovvur, have deducted income-tax on the interest accrued on the compensation amount. The learned Assistant Government Pleader relying upon section 194A of the Act requested the learned Subordinate Judge, Kovvur, to record full satisfaction of the decrees. The decree-holders raised objection to that course.
The learned Subordinate Judge, Kovvur, mainly relying upon the decision of the Supreme Court in All India Reporter Ltd. v. Ramchandra D. Datar [1961] 41 ITR 446; AIR 1961 SC 943, held that section 194A of the Act which corresponds to section 18 of the Indian Income-tax Act, 1922, has no application; that unless it is established that the decree-holder is an assessee for that particular financial year the authorities cannot claim income-tax and, therefore, the judgment-debtor (Land Acquisition Officer) has no right to deduct income-tax on the interest accrued on the compensation amount. He accordingly directed the judgment-debtor (Land Acquisition Officer) to deposit the balance of the decree amount in the court within a specified time.
Aggrieved by the said decision in various execution petitions, the State has preferred the above revision petitions.
The learned Government Pleader for Civil Supplies appearing for the petitioner in the above revision petitions submitted that the learned Subordinate Judge has committed an error in treating the award made under the Land Acquisition Act as a decree passed by the civil court and failed to see that the decision of the Supreme Court in All India Reporters case [1961] 41 ITR 446, has no application to the facts of this case. In the decision of the Supreme Court referred to above, the account related to compensation for wrongful termination of employment, arrears of salary, salary due for the period of notice, interest and costs, less the withdrawals on salary account. The learned judges held that having regard to the nature of the decree, it is difficult to predicate which part of the decree represented the salary due and the in the absence of a provision in the decreed for payment of income-tax due by the decree-holder, the employer judgment-debtor cannot claim to deduct, under section 18 of the Indian Income-tax Act of 1922, the income-tax payable by the decree-holder upon the amount. Their Lordships held that when the claim is merged in the decree of the court, the claim assumes the character of a judgment debt, and that for judgment debts, section 18 of the Indian Income-tax Act of 1922, has not been made applicable. Finally, their Lordships concluded that the decree passed by the civil court must be executed subject to the deductions and adjustments permissible under the Code of Civil Procedure.
The learned Subordinate Judge, Kovvur, has overlooked the fact that the decrees which are sought to be executed before him are not mere decrees of a civil court. What has been awarded to the claimants in compensation payable under the provisions of the Land Acquisition Act. If the claimant is satisfied with the quantum of compensation awarded by the Land Acquisition Officer, he will not pursue the matter further. But, on the other hand, if he is not satisfied with the quantum of compensation, he will seek recourse to the civil court by means of a reference under section 18 of the Land Acquisition Act. The civil court, after making due enquiry, is either entitled to confirm the award passed by the Land Acquisition Officer or modify the same by enhancing the compensation amount. Thus, virtually, the decree passed by the civil court in a reference under section 18 of the Land Acquisition Act amount to either confirmation or modification of the award of the Land Acquisition Officer with regard to the compensation payable under the Land Acquisition Act. Thus the decree passed by the civil court under section 18 of the Land Acquisition Officer does not lost its character as an award of compensation. I, therefore, hold that the decision of the Supreme Court referred to above has no application to the facts of this case, especially because, their Lordships of the Supreme Court observed in the course of the judgment that it was difficult to predicate which part of the decree passed by the civil court represented the salary due. Consequently, it follows that from the nature of the decree passed by the civil court, their Lordships of the Supreme Court found it difficult to predicate which part of the decree represented the interest.
The D.O. letter addressed by the Commissioner of Income-tax to the Revenue Secretary and the follow up action taken by the Revenue Secretary by issuing instructions to his subordinates is not binding on the court. There is another Circular No. 526 dated December 5, 1988 [see [1989] 175 ITR (St.) 2], issued by the Central Board of Direct Taxes on the same lines as the D.O. Letter addressed by the Commissioner of Income-tax. Even that circular will not have any binding effect on the civil court unless the provisions of the Act are made applicable.
The Supreme Court a recent decision in Rama Bai v. CIT [1990] 181 ITR 400, held that the interest on enhanced compensation for land compulsorily acquired under the Land Acquisition Act awarded by the court on a reference under section 18 of the Land Acquisition Act or on further appeal has to be taken to have accrued not on the date of the order of the court granting enhanced compensation but as having accrued year after year from the date of delivery of possession of the land till the date of such order and such interest cannot be assessed to income-tax in one lump sum in the year in which the order is made. The above decision of the Supreme Court in Rama Bais case [1990] 181 ITR 400, has set at rest the conflict of decisions among some High Courts on the above issue. The effect of the decisions Supreme Court referred under section 18 of the Land Acquisition Act, interest is payable to the claimants. If so, section 194A of the Act empowers the person who is responsible for making the payment to deduct income-tax. But the direction given in the D.O. letter dated March 1, 1987, of the Commissioner of Income-tax stating that while paying interest, income-tax is deductible at the rates in force during that financial year with effect from April 1, 1975, if the amount exceeded Rs. 1,000 is not and cannot be valid. Such a direction does not get support from section 194A under which the Income-tax Department seeks deduction of income-tax at source.
On the other hand, as laid down by the Supreme Court in Rama Bais case [1990] 181 ITR 400, interest on enhanced compensation has to be taken to have accrued not on the date of the order of the court granting the enhanced compunction but as having accrued year after year from the date of delivery of possession of the land till the date of such order and such interest cannot be assessed to income-tax in one lump sum in the year in which the order is made.
The proviso to section 194A of the Act empowers the assessee to receive the income by filing an affidavit or statement in writing declaring that his estimated total income assessable to tax for the assessment year next following the financial year in which the income is credited or paid will be less than the minimum liable to income-tax.
The orders under revision do not disclose the break-up in each execution petition about the compensation amount awarded and the interest payable thereon. The orders also do not disclose as to when possession of the land concerned in each execution petition was taken by the Government and the date of depositing of the compensation amount. In the absence of those details, it is not possible to determine whether the individual claimants are liable to pay income-tax or not. Therefore, the respondents-claimants in each of the civil revision petitions are directed to file, within a month from today, an affidavit or a statement in writing declaring whether the estimated total income due to them in each execution petition when spread over for the period between the date of delivery of possession of the land from him/her till the date of deposit will be less than the minimum liable to income-tax. On such declaration or affidavit being filed, the revision petitioner Land Acquisition Officer in each civil revision petition shall be liable to deposit the interest which is withheld by him while depositing the compensation amount under each of the execution petitions within six weeks thereafter. If no such declaration is filed by any of the respondents-claimants within the period mentioned above, it shall be deemed that the estimated total income assessable to tax will exceed the taxable limit and the Land Acquisition Officer need not deposit the amount of interest withheld by him in that particular execution petition.
With the above directions, the above civil revision petitions are disposed of. No costs. Advocates fee Rs. 200 in each C.R.P.