Agricultural land and tax deduction: revenue records are relevant, and section 197 does not bar direct challenge to liability.

Revenue records relevant to the character of acquired land as agricultural land should be admitted as additional evidence, subject to proof of genuineness, because they bear directly on the factual determination and cannot be treated as irrelevant merely due to prior employee statements. Section 197 is only an enabling mechanism for obtaining lower or nil deduction and does not bar an assessee from disputing tax deduction liability directly in assessment or appellate proceedings. The expression "agricultural land" for this purpose is not controlled by section 2(14); its meaning must be assessed in its ordinary sense on evidence, and the Tribunal's contrary approach was legally unsound.

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Issues: (i) Whether revenue records could be admitted and considered as additional evidence to determine whether the acquired land was agricultural land; (ii) whether the assessee was bound to seek relief under section 197 before disputing the obligation to deduct tax at source under section 194LA; (iii) whether the Tribunal erred in treating the expression "agricultural land" as governed by section 2(14) and in rejecting the assessee's contention on the applicability of tax deduction at source.

Issue (i): Whether revenue records could be admitted and considered as additional evidence to determine whether the acquired land was agricultural land.

Analysis: The revenue records were relevant to the question whether the lands acquired were agricultural lands. The rejection of additional evidence proceeded on an erroneous view that the tenure shown in revenue records was irrelevant and that the question had already been conclusively answered by employee statements. Even if the revenue records did not by themselves conclusively establish the assessee's case, they could not be treated as irrelevant to the issue.

Conclusion: Yes. The revenue records were admissible and ought to have been considered, subject to proof of genuineness.

Issue (ii): Whether the assessee was bound to seek relief under section 197 before disputing the obligation to deduct tax at source under section 194LA.

Analysis: Section 197 is an enabling provision that permits an assessee to seek a certificate for deduction at a lower rate or for no deduction. It does not compel the assessee to make such an application as a precondition to contesting liability in assessment proceedings. The assessee could resist the department's claim directly in those proceedings.

Conclusion: No. The assessee was not precluded from raising the contention in the assessment and appellate proceedings without an under section 197.

Issue (iii): Whether the Tribunal erred in treating the expression "agricultural land" as governed by section 2(14) and in rejecting the assessee's contention on the applicability of tax deduction at source.

Analysis: The Act does not define the words "agricultural land" for this purpose, and the expressions "agriculture" and "agricultural purposes" have to be understood in their ordinary sense. The Tribunal's approach that the issue was to be determined with reference to section 2(14) was therefore incorrect in law. The assessee was entitled to establish, on evidence, whether the land was agricultural in character.

Conclusion: Yes. The Tribunal's reasoning on this aspect was legally unsound.

Final Conclusion: The substantial questions of law were answered in favour of the assessee, the Tribunal's order was set aside on those questions, and the matter was sent back for fresh consideration with an opportunity to lead further evidence.

Ratio Decidendi: Where a statutory provision creates only an enabling mechanism for obtaining lower or nil deduction, the assessee is not barred from disputing tax deduction liability in the assessment proceedings themselves, and relevant evidence bearing on the character of the property must be considered on merits.

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