Tax deduction at source on compulsory acquisition compensation does not extend to voluntary surrender for development rights certificates.

Section 194LA applies only to compensation or enhanced compensation paid in money on account of compulsory acquisition of immovable property. Voluntary surrender of land under section 14-B of the Karnataka Town and Country Planning Act, 1961, in exchange for development rights certificates involved no acquisition proceedings, no quantified monetary compensation, and no cash or equivalent payment. The expression "any other mode" was read with the listed monetary modes and was not extended to non-monetary development rights certificates. The provision for tax deduction at source was therefore not attracted, and the payer could not be treated as an assessee in default under sections 201(1) and 201(1A).

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Issues: Whether tax was deductible at source under section 194LA of the Income-tax Act, 1961 on issue of development rights certificates for land surrendered to the municipal authority under section 14-B of the Karnataka Town and Country Planning Act, 1961, where the surrender was not by compulsory acquisition and no monetary compensation was paid.

Analysis: Section 194LA applies only where there is payment of compensation or enhanced compensation on account of compulsory acquisition of immovable property, and the payment must be of a sum of money. The landowners' surrender under the development rights scheme was voluntary and pursuant to the statutory option under section 14-B of the Karnataka Town and Country Planning Act, 1961, with no acquisition proceedings, no quantification of monetary compensation, and no cash or equivalent payment. The expression "any other mode" in section 194LA was read ejusdem generis with cash, cheque and draft, and was held not to extend to issue of development rights certificates. The provision for deduction at source could not be expanded by analogy to cover a non-monetary grant of development rights.

Conclusion: Section 194LA did not apply to the transaction, and the assessee could not be treated as an assessee in default under sections 201(1) and 201(1A).

Ratio Decidendi: A provision requiring deduction at source for compensation on compulsory acquisition applies only to monetary payments made in that context and cannot be extended to voluntary surrender of land in exchange for non-monetary development rights.

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