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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether tax deduction at source under section 194LA was required at the stage when the railway authority remitted compensation funds to the Competent Authority, or only when the Competent Authority paid compensation to the landowners.
Analysis: Section 194LA applies when a person responsible for paying compensation on compulsory acquisition makes payment to a resident in the nature of compensation or enhanced compensation for immovable property. The payment structure under the Metro Railways legislation showed that the railway authority deposits the amount with the Competent Authority, while the Competent Authority, on behalf of the Central Government, pays the amount to the persons entitled thereto. The remittance to the Competent Authority was only for enabling it to discharge its statutory function and was not the payment contemplated by section 194LA. The withholding obligation arose only at the point when the Competent Authority disbursed compensation to the actual beneficiaries. The alternative contention on limitation under section 201(3) did not require independent adjudication once the primary issue was decided in favour of the assessee.
Conclusion: The demand raised on the basis that tax was deductible when funds were remitted to the Competent Authority could not be sustained; the liability, if any, would arise at the stage of payment to the landowners by the Competent Authority.
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