Compensation for acquisition by agreement does not attract TDS under the compulsory-acquisition provision.

Section 194LA applies only where compensation is paid for compulsory acquisition of immovable property. Where properties are acquired by agreement under section 146 of the Hyderabad Municipal Corporation Act, 1955, on mutually agreed terms, and no compulsory acquisition proceedings under the Land Acquisition Act, 1894 are initiated, the statutory condition for tax deduction at source is not satisfied. On the facts stated, the payments made for acquisition by agreement did not attract deduction under section 194LA, and the Revenue's challenge failed.

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Issues: Whether compensation paid for acquisition of properties under section 146 of the Hyderabad Municipal Corporation Act, 1955 attracted tax deduction at source under section 194LA of the Income-tax Act, 1961.

Analysis: Section 194LA applies only where compensation or consideration is paid on account of compulsory acquisition of immovable property. Section 146 of the Hyderabad Municipal Corporation Act, 1955 permits acquisition by agreement on mutually agreed terms, while section 147 comes into play only when acquisition cannot be completed by agreement and proceedings are then taken under the Land Acquisition Act, 1894. On the facts, the properties were acquired through mutual negotiation under section 146 and no compulsory acquisition proceedings under the Land Acquisition Act were initiated. The acquisition therefore did not satisfy the statutory precondition for deduction under section 194LA.

Conclusion: Section 194LA was held inapplicable to the compensation paid for acquisition under section 146 of the Hyderabad Municipal Corporation Act, 1955, and the Revenue's challenge failed.

Final Conclusion: The Revenue's appeals were rejected because the payments made for acquisition by agreement did not create liability to deduct tax at source under the compulsory-acquisition provision.

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