Tax deducted on interest from enhanced compensation upheld; landowners must seek adjustment or refund through tax returns.

Interest paid on delayed enhanced compensation was treated as taxable income, not exempt compensation, and as income from other sources taxable in the year of receipt. On that basis, deduction of tax at source under Section 194A was justified. Landowners were directed to seek adjustment through income tax returns, and any excess deduction could be claimed as refund in accordance with law.

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Issues: Whether tax was deductible at source under Section 194A of the Income-tax Act, 1961 from interest paid on enhanced compensation awarded under the Land Acquisition Act, 1894, and whether the landowners were entitled to direct refund in writ proceedings.

Analysis: The interest component paid on delayed enhanced compensation was treated as taxable income and not as exempt compensation. Such interest was held to fall within the charge of tax as income from other sources under the Income-tax Act, 1961, and to be taxable in the year of receipt. Since the amount was liable to tax, deduction at source by the payer was justified. The landowners' remedy was to file income tax returns and claim adjustment of tax deducted at source, and any excess deduction could be refunded in accordance with law.

Conclusion: Deduction of tax at source was upheld, and the writ petitions were disposed of with liberty to seek adjustment or refund in accordance with the Income-tax Act, 1961.

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