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2015 (11) TMI 180 - ITAT BANGALORE

2015 (11) TMI 180 - ITAT BANGALORE - [2015] 44 ITR (Trib) 647 (ITAT [Bang]) - Non deduction of tds u/s 194LA - compensation paid to various persons for acquiring the non-agricultural land - Held that:- It is clear that the question of compulsory acquisition will arise only where the compensation cannot be determined by agreement. Sub-sec.3 & 4 will come into play only when there is a failure to determine the compensation through negotiation between State Government and the land owners.

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eements similar to the one entered by the assessee with Smt.Sumitra Shivanand Keeliputti, pertinent parts of which have been re-produced by us above, then these would not fall within the definition of compulsory acquisition. However, we are of the opinion, that the acquisition whether the acquisitions for which assessee had not deducted tax at source were based on agreements similar to the one produced by the assessee before us or in other words whether in all such compensation amounts were fixe .....

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uestion regarding nature of acquisition back to the file of the AO, the other question as to the failure of machinery provision for applying Sec.194LA is kept open at this juncture. - Decided partly in favour of assessee for statistical purposes. - ITA No.1375(B)/2013 - Dated:- 23-9-2015 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI ABRAHAM P GEORGE, ACCOUNTANT MEMBER For The Assessee : Shri Ashok Kulkarni, Advocate For The Revenue : Shri Gnanaprakash, CIT ORDER PER SHRI ABRAHAM P GEORGE, .....

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and owners. 4. Without prejudice and in the alternative, assuming there was a default on the part of the assessee, the act of nondeduction is attributable to a bona-fide error on the part of the assessee. 5. The CI(A) ought to have appreciated that there were serious ambiguities, confusion and doubt regarding liability to deduct tax necessitating legislative interference. 6. Alternatively ad without prejudice the CIT(A) ought to have reduced to the extent of the amount collected from the land ow .....

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ustrial Area Development Board represented by the SLAO and levied penalty and interest under section 201(1) & 201(1A) on the specific ground that the Karnataka Industrial Area Development Board has clearly violated the provisions of 194LA whereas the land here in question is as per the provisions of the Karnataka Industrial Aras Development Act and the Sections there under and the Notifications issued for the purpose of acquisition, payment of compensation were all made by the State Governme .....

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R 688(SC) 199 ITR 351 (Bom.FB) 193 ITR 624 (Ker.). Being unaware of the correct position in law and the same has not been brought to my knowledge by my counsels. We may add here that the very additional aground no.3 is only an alternative ground. Hence, it is prayed that the above ground may be entertained and disposed of in accordance with law . 3. Facts apropos are that the assessee a State Government undertaking was subject to a survey proceeding under the Act. During the course of survey pro .....

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the assessee the acquisition was for Airport Authority of India (AAI), Hubli. For non-deduction of tax, assessee had relied on Circular issued by the revenue department of Bangalore, on 20- 05-2008. As per the assessee it had not deducted tax on compensation paid during the period May 2010 to April 2011. The AO was of the opinion that reliance placed by the assessee on the Circular issued by their higher authorities would not absolve it from its duty to deduct tax at source. He held that the as .....

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sition of non-agricultural land during the period May 2010 to April 2011. As per the assessee the obligation to deduct tax at source was on the person responsible for deducting such tax. The person responsible was defined u/s 204 of the Act. As per the assessee, person responsible for paying in its case was the State Government and not the assessee. Reliance was also placed on amendment to Sec.204 of the IT Act, effective from 01-07- 2012, through which Drawing & Disbursement Officer (DDO) o .....

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of the AO. 6. Now before us, learned AR strongly assailing the orders of the CIT(A), submitted that the acquisitions were made by the State Government and the assessee was only a conduit. It was the State Government which was responsible for making the payments for the acquisition of the land. Just because an Officer of the assessee made the payments as per the learned AR, assessee could not be visited with the obligations stipulated u/s 194LA of the IT Act, 1961. Relying on Sec.2(2) of the Kar .....

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ed with the State Government and not with the Board. Relying on sub-section of 8 of Sec.28, the learned AR submitted that the State Government after it had taken possession of the land acquired by it, transferred the land to the Board, only where such land was required by the Board. As per the learned AR Sec.29 of the KIADB Act, clearly specified that it was for the State Government to pay for the acquisition. As per the learned AR where the compensation was determined by agreement between the S .....

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mt. Sumitra Shivanand Keeliputti being the owner, beneficiary, legal heir, successor and right holder of Land situated under the Survey No.636B, Plot No.16, Square Area, 0.01.03.75 situated at Unkal Village Talkuk Hobali in Dharwad Dist. As per the directions issued on behalf of the Hon ble Governor of Karnataka in favour of Authorities including the following terms and conditions of the said agreement which are as under; 1. Subject to my below mentioned right, the land situated under Survey No. .....

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ordingly further the land compensation amount has also been fixed & determined & thereby, we the land owners & the Govt. have mutually agreed for payment of land compensation to us & accordingly I am being the holder of the land & beneficiary for the land compensation amount, have submitted an application for claiming land compensation amount. Therefore, I have agreed as a land owner to receive the land compensation amount to be paid to the such owners fixed by the KIADB & .....

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or higher compensation amount over and above the compensation amount paid to me. I am also bound by & I have agreed that the land compensation amount included for all the ownership rights & building situated in the said land. 4. In case, in future, if it is provided that I am not the true & original owner of the acquired land, then I am bound by and omitted to refund the entire compensation amount obtained by me & I will indemnify the losses and cost to the Board or to the Govt. .....

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tion for land was fixed u/s 29(2) of the Act. As per the learned AR all the agreements through which land was acquired were typically worded as the one reproduced above, none of the acquisition could be termed as compulsory acquisition. 8. In any case, according to him, person responsible for paying as defined in Sec. 204 did not include the Disbursing Officer or a person acting on behalf of the Central Government or State Government prior to 01-07- 2012. Hence, according to him, even if it was .....

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ed 11-07-2014. 9. Per contra, learned DR strongly supported the orders of the authorities below and submitted that clause-iv added to sec.204 by Finance Act, 2012 was clarificatory in nature and this was explicitly stated in the Memorandum explaining the provisions in the Finance Bill, 2012. Being clarificatory, according to the learned AR it had to be given retrospective effect. Further, as per the learned DR, the Board was only an arm of the State and hence, the assessee was trying to wriggle .....

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or acquisition of non-agricultural land during the months of May 2010 to April, 2011. Arguments of the assessee can be divided in to two. The first limb of argument is that definition of person responsible for paying given in Sec.204, as it stood at the relevant point of time did not include an Officer of the Central Government or State Government and hence, computation provision failed. The second limb of its argument is that the acquisitions for which payment were effected were not compulsory .....

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yment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten percent of such sum as income-tax thereon. Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed. (two) hundred thousand rupees. Explanation….For the purpose of this section,- i) agricultural land means .....

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a (Supra). The question before the Hon ble Apex Court was whether solatium on account of compulsory acquisition forms part of compensation. At para-22 of its judgment their Lordship s explained what could be considered as compulsory acquisition in the following words; 22. Compulsory nature of acquisition is to be distinguished from voluntary sale or transfer. In the latter, the land owner has the widest advantage in finding out a would be buyer and in negotiating with him regarding the sale pric .....

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the land owner is deprived of the right and opportunity to negotiate and bargain for the sale price. It depends on what the Collector or the Court fixes as per the provisions of the Act. The solatium envisaged in sub-section (2) in consideration of the compulsory nature of the acquisition is thus not the same as damages on account of the distinction to part with the land acquired . 13. How far the above meaning could be applied in relation to interpretation of Sec.194LA of the IT Act, 1961 had .....

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efined in the IT Act or for that matter in any other statute. However, it is expropriation or is done in exercise of eminent domain the word, which was coined by 17th Century Jurist Grotius. 14. Halsbury s Laws of England, Vol.8(1), 4th Edition explains that where land on an interest in land is purchased or taken under statutory powers without the agreement of the owner . It is said to have been compulsorily acquired . 15. In Sunder Vs Union of India (2001) 7(SCC 211) the question involved befor .....

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r has no option. He can neither refuse to sell his land nor can he negotiate the price. The price is fixed by the statute itself. The conditions that must be satisfied before a purchase can be said to be compulsory acquisition are as follows; (i) The seller has no option but to sell the land. (ii) The seller cannot negotiate the price. It is fixed by the statute or determined under the principles mentioned therein. 17. There are many examples of such statutes. The Zamindari Abolition Acts, Ceili .....

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uired to re-produce para-2 of the agreement entered by the assessee with Smt.Sumitra Shivanand Keeliputti which has reproduced by us at para-6 According to the Sec.28(6) of the said Act, the Govt. has acquired the said land & in this regard the Notice has been served to the land owners & right holders & to successors & to us to make payment of land compensation amount u/s 29(2) & accordingly further the land compensation amount has also been fixed & determined & there .....

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under this Chapter, the State Government shall pay for such acquisition compensation in accordance with the provisions of this Act. (2) Where the amount of compensation has been determined by agreement between the State Government and the person to be compensated, it shall be paid in accordance with such agreement . (3) Where no such agreement can be reached, the State Government shall refer the case to the Deputy Commissioner for determination of the amount of compensation to be paid for such .....

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