TDS on land acquisition compensation: Section 28 amount for agricultural land was treated as enhanced compensation, not taxable interest.

Compensation awarded under Section 28 of the Land Acquisition Act, 1894, was treated as an accretion to the value of agricultural land and part of enhanced compensation, not as interest for delayed payment. Because compensation for agricultural land is exempt from TDS, Section 194LA of the Income-tax Act, 1961 did not permit deduction at source from the Section 28 amount. On the facts found, the land acquired was agricultural land and the disputed sum was awarded under Section 28, so tax was not deductible at source and the revision petition failed.

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Issues: Whether tax was liable to be deducted at source from compensation and interest awarded under Section 28 of the Land Acquisition Act, 1894 in respect of acquisition of agricultural land.

Analysis: The governing distinction is between interest under Section 28 of the Land Acquisition Act, 1894, which is treated as an accretion to the value of the land and forms part of enhanced compensation, and interest under Section 34, which is only for delay in payment. For agricultural land, compensation itself is exempt from TDS, and where the amount awarded under Section 28 partakes the character of compensation, Section 194LA of the Income-tax Act, 1961 does not justify deduction at source. On the facts found, the land acquired was agricultural land and the amount in dispute was awarded under Section 28.

Conclusion: Tax was not deductible at source from the amount awarded under Section 28 for acquisition of agricultural land, and the revision petition failed.

Ratio Decidendi: Amounts awarded under Section 28 of the Land Acquisition Act, 1894, when they represent accretion in value of agricultural land and form part of enhanced compensation, are not subject to deduction of tax at source under Section 194LA of the Income-tax Act, 1961.

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