TDS on Section 28 land acquisition compensation for agricultural land does not apply where the amount forms part of enhanced compensation.

Tax deduction at source was not payable on the amount awarded under Section 28 of the Land Acquisition Act for acquisition of agricultural land. The reasoning distinguishes Section 28 interest from Section 34 interest: Section 28 interest on enhanced compensation is treated as an accretion to value and part of the compensation itself, while Section 34 interest is merely delay compensation. Because the land was agricultural and the relevant exemption provisions applied, Section 194LA did not justify TDS on the Section 28 amount. The amount deposited was therefore treated as compensation for agricultural land and not a separately taxable interest component.

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Issues: Whether tax deducted at source was payable on the compensation and interest awarded under Section 28 of the Land Acquisition Act, 1894 in respect of acquired agricultural land.

Analysis: The statutory scheme and the precedents considered in the judgment distinguish interest under Section 28 from interest under Section 34. Interest under Section 28, when awarded on enhanced compensation for agricultural land, is treated as an accretion in value and part of enhanced compensation, whereas interest for delay in payment under Section 34 does not partake that character. The judgment also notes that, for agricultural land, the relevant income-tax exemption provisions prevent deduction at source from such compensation, and Section 194LA applies only to cases where tax is otherwise deductible at source on compensation for acquisition of non-agricultural land. Applying this legal position, the amount deposited represented liability under Section 28 for agricultural land and therefore did not justify TDS.

Conclusion: Tax was not deductible at source from the amount awarded under Section 28 for acquisition of agricultural land, and the impugned direction to deposit the deducted amount was upheld.

Final Conclusion: The revision petitions failed because the interest component under Section 28 was treated as part of the compensation for agricultural land and therefore did not attract deduction of tax at source.

Ratio Decidendi: Where compensation for acquired agricultural land includes an amount awarded under Section 28 as enhanced compensation, that component is part of the compensation itself and is not liable to tax deduction at source under Section 194LA.

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