Section 194LA on demolition compensation depends on compulsory acquisition, with remand for item-wise verification of TDS demand.

Section 194LA applied only to compensation linked to compulsory acquisition of immovable property; it did not extend to amounts paid for demolition of structures acquired by mutual agreement under the municipal law. Where acquisition was under the Land Acquisition Act, the compensation for land and structures fell within the provision and TDS could apply. Because the record did not show item-wise segregation between the two acquisition modes, and the recipients' tax payment status also required verification, the demands under section 201(1) and interest under section 201(1A) could not be finally sustained without recalculation. The matter was remanded for verification, giving the assessee only partial relief.

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Issues: Whether tax was deductible under section 194LA on compensation paid for demolition of structures in cases where acquisition of property was partly by mutual agreement and partly under land acquisition proceedings, and whether the demands under section 201(1) and section 201(1A) could be sustained without item-wise verification.

Analysis: Section 194LA applies only where the payment is in the nature of compensation or enhanced compensation on account of compulsory acquisition of immovable property. On the material placed, acquisitions undertaken by the municipal body were of three kinds: some through mutual negotiations under the municipal law, some through compulsory acquisition under the Land Acquisition Act, and some where compensation was deposited in court. To the extent acquisition was through mutual negotiations under the municipal law, the element of compulsory acquisition was absent and section 194LA would not apply. To the extent the property, including structures, was acquired through the Land Acquisition Act, the compensation fell within the expression "any immovable property" and section 194LA applied. The record did not disclose how much of the structural compensation belonged to each category, and the effect of tax payment by the recipients also required verification before any demand could be raised under section 201(1) or interest under section 201(1A).

Conclusion: Section 194LA was held inapplicable to acquisitions made by mutual agreement, but applicable to compulsory acquisitions under the Land Acquisition Act. The matter was sent back for verification and recalculation of the TDS demand and interest, so the assessee obtained only partial relief.

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