Land acquisition compensation held outside TDS under income tax law where award label misdescribed the payment as interest.

Payment described as 12% per annum in a land acquisition award was treated as additional compensation under section 23(1A) of the Land Acquisition Act, 1894, not as interest. The substance of the payment, rather than its label in the award, governed its tax character. Because the amount was additional compensation and not interest, no tax deduction at source was required under section 194A of the Income-tax Act, 1961. The competent authority's clarification supported the Tribunal's view, and the Revenue's challenge failed.

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Issues: Whether the payment described as 12% per annum in the land acquisition award was interest liable to tax deduction at source under section 194A of the Income-tax Act, 1961, or additional compensation under section 23(1A) of the Land Acquisition Act, 1894.

Analysis: The payment was examined in the light of the statutory scheme governing interest on compensation and enhanced compensation. The Tribunal's finding, accepted by the Court, was that the amount was paid under section 23(1A) of the Land Acquisition Act, 1894 and had been incorrectly described as interest in the award. The competent authority had clarified the correct nature of the payment, and the substance of the transaction, not its nomenclature, governed the tax treatment. Since the amount was additional compensation and not interest on which tax was required to be deducted under section 194A, the Revenue's challenge did not disclose any error in the Tribunal's view.

Conclusion: The payment was held to be additional compensation and not taxable interest for the purpose of section 194A of the Income-tax Act, 1961.

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