Tax deduction at source on land acquisition compensation remains mandatory despite recipient exemption under land acquisition law.

Compensation or consideration paid for acquisition or transfer of immovable property remains subject to tax deduction at source under Section 194LA or, where applicable, Section 194IA of the Income-tax Act, 1961. The payer's duty to deduct is not conditioned on whether the amount is taxable in the recipient's hands. Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 concerns the recipient's exemption from income tax and must be considered in the recipient's assessment; it does not relieve the payer of the statutory TDS obligation.

---

---

Issues: Whether the petitioner was bound to deduct tax at source from compensation or consideration paid for acquisition or transfer of immovable property, notwithstanding the exemption from income tax under Section 96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.

Analysis: The liability to deduct tax at source under Section 194LA or, as the case may be, Section 194IA of the Income-tax Act, 1961 attaches to a person responsible for paying consideration or compensation in connection with acquisition or transfer of immovable property. Those provisions do not make the obligation dependent on whether the amount is taxable in the hands of the recipient. The exemption in Section 96 of the 2013 Act concerns the taxability of the recipient's compensation and must be examined in the recipient's assessment. It does not relieve the payer of the statutory duty to deduct tax at source under the Income-tax Act.

Conclusion: The petitioner was not entitled to claim exemption from tax deduction at source on the basis of Section 96 of the 2013 Act, and was obliged to comply with Section 194LA or Section 194IA of the Income-tax Act, 1961.

---