Tax at source on land acquisition compensation was unjustified where section 28 interest was treated as part of compensation.

Interest awarded under section 28 of the Land Acquisition Act, 1894 was treated as part of compensation and not as interest for section 194A of the Income-tax Act, 1961. On that basis, tax at source could not be deducted from the compensation amount, and relief against such deduction was warranted.

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Issues: Whether tax at source could be deducted from the compensation amount, including the amount awarded under section 28 of the Land Acquisition Act, 1894.

Analysis: The Court followed the binding Division Bench view that interest awarded under section 28 of the Land Acquisition Act, 1894 partakes the character of compensation and does not fall within the ambit of interest for the purposes of section 194A of the Income-tax Act, 1961. On that basis, deduction of tax at source from such amount was held to be unjustified.

Conclusion: Tax at source was not deductible from the compensation amount awarded under section 28 of the Land Acquisition Act, 1894, and the petitioner was entitled to relief against such deduction.

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