Section 194LA TDS exclusion for agricultural land applied on prima facie revenue records and composite acquisition facts.

Section 194LA is a special TDS provision for compensation on compulsory acquisition of immovable property, and its agricultural land exclusion must be read on its own terms rather than by importing the capital asset definition in section 2(14)(iii). For TDS purposes, the acquiring authority may rely on prima facie material such as revenue records to assess agricultural character, without making a full assessment reserved for the AO in the landowners' hands. Revenue entries create a rebuttable presumption of agricultural land, and on the stated facts that basis extended to trees standing on the land and, in the composite acquisition, to the appurtenant residential constructions. The resulting section 201 demand was unsustainable.

---

---

Issues: Whether tax was deductible at source under section 194LA on compensation paid for acquisition of land, trees and residential constructions claimed to form part of agricultural land.

Analysis: Section 194LA is a specific provision governing deduction of tax at source on compensation for compulsory acquisition of immovable property, and its explanation separately excludes agricultural land. The definition of agricultural land in section 2(14)(iii) is framed for determining capital asset status and capital gains liability, and was held not to control the meaning of agricultural land under section 194LA. For the purpose of deduction at source, the Land Acquisition Officer was entitled to act on prima facie material, particularly revenue records, and was not required to undertake the assessment exercise reserved for the Assessing Officer in the individual hands of landowners. The entries in revenue records created a rebuttable presumption in favour of agricultural character, and on the facts available the Officer had sufficient basis to treat the land as agricultural. Trees standing on such land were treated as part of the agricultural land for the limited purpose of section 194LA. Residential houses and other constructions, when acquired as part of the same composite acquisition and appurtenant to the agricultural land, were also held not to attract TDS on the approach adopted by the Land Acquisition Officer.

Conclusion: The Land Acquisition Officer was justified in not deducting tax at source on the compensation paid for acquisition of the agricultural land, trees and houses, and the demand raised under section 201 was not sustainable.

Ratio Decidendi: For section 194LA, the acquiring authority may proceed on prima facie satisfaction based on revenue records to decide whether the property is agricultural land, and the capital-gains definition in section 2(14) cannot be imported to enlarge the TDS obligation under that special provision.

---