Section 194LA applies only to compulsory acquisition compensation, while agreed land compensation may fall outside the deduction rule.

Tax deduction under section 194LA applies only to compensation paid on account of compulsory acquisition of immovable property other than agricultural land. Where compensation is fixed by mutual agreement under section 29(2) of the Karnataka Industrial Areas Development Act, the acquisition does not automatically constitute compulsory acquisition for that section. The record here did not establish that every disputed payment arose from the same agreed process, so each payment required factual verification before section 194LA could be applied. The operative point is that agreed compensation may fall outside section 194LA unless the underlying facts show a compulsory acquisition.

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Issues: Whether tax was deductible under section 194LA on compensation paid for acquisition of non-agricultural land, and whether payments made under agreements fixing compensation under the Karnataka Industrial Areas Development Act amounted to compulsory acquisition.

Analysis: Section 194LA applies only to sums paid on account of compulsory acquisition of immovable property other than agricultural land. The compensation papers showed that, at least in the agreement relied upon, the amount was fixed by agreement under section 29(2) of the Karnataka Industrial Areas Development Act. Where compensation is settled by mutual agreement, the acquisition does not answer the description of compulsory acquisition. At the same time, the record did not establish that all disputed payments were made under identical agreements, so the factual nature of each acquisition required verification.

Conclusion: Section 194LA was not shown to apply as a matter of law to acquisitions settled by agreement, and the matter was remitted to verify whether the disputed payments were in fact made pursuant to such agreements.

Ratio Decidendi: Tax deduction under section 194LA arises only where compensation is paid on account of compulsory acquisition, and an acquisition concluded by agreement on compensation fixed under the governing statute is outside that section unless the facts show otherwise.

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