2023 (6) TMI 564 - AT - Income Tax

Tax Appeal: TDS Non-Deduction & Interest Classification Dispute Resolved

Land Acquisition Collector Versus ITO (TDS) Hissar

The appeal involved issues of non-deduction of TDS under section 194A of the Income Tax Act, demand raised under section 201(1) & (1A), classification ... TDS u/s 194A - Addition u/s 201(1) & (1A) - failure on the part of the assessee to deposit TDS on interest payments - whether payments made on account of interest on compensation /enhanced compensation forms part of compensation and not part of interest? - HELD THAT:-Identical issue came up for consideration before the Delhi Bench of the Tribunal in assessee’s own case [2022 (3) TMI 1031 - ITAT DELHI] following the judgment of Ghanshyam (HUF) [2009 (7) TMI 12 - SUPREME COURT] we hold that interest received by the land owners on enhanced compensation awarded to them by the court under section 28 of the LA Act is not in the nature of income from other sources in the hands of the recipient land owners under section 56 of the Act and therefore, the LAO was not under any legal obligation to comply with the TDS provisions of section 194A of the Act. Decided in favour of assessee. Issues:The appeal involves issues such as non-deduction of TDS under section 194A of the Income Tax Act, 1961, demand raised under section 201(1) & (1A) for failure to deposit TDS on interest payments, classification of interest on compensation/enhanced compensation, denial of opportunity to produce supporting documents, and non-compliance with various judgments of jurisdictional High Court and ITAT.Non-deduction of TDS under section 194A:The appellant, a branch of a statutory body, failed to deduct TDS on interest payments amounting to Rs. 7,92,55,734/- during the relevant assessment year. The ITO (TDS) passed an order under section 201(1) and 201(1A) of the Act, raising a demand of Rs. 2,10,82,026/- for non-compliance. The appellant contended that TDS under section 194A was not applicable, leading to the dispute.Classification of interest on compensation/enhanced compensation:The Tribunal considered whether the interest received by landowners on enhanced compensation was 'income from other sources' under section 56 of the Act, attracting TDS provisions under section 194A. Citing relevant legal provisions and judgments, the Tribunal held that such interest was not taxable as income from other sources, concluding that TDS provisions were not applicable.Denial of opportunity to produce supporting documents:The appellant raised concerns regarding the lack of sufficient opportunity to present supporting documents before the authorities. However, the Tribunal found in favor of the appellant based on the decision in a previous case with similar facts, where the issue was resolved in favor of the assessee.Compliance with legal judgments:The appellant also argued that the authorities did not follow various judgments of the jurisdictional High Court and ITAT. The Tribunal, relying on precedent and legal provisions, allowed the grounds raised by the appellant, resulting in the appeal being allowed in favor of the assessee.Separate Judgment:The order was pronounced by Ms. Astha Chandra, Judicial Member, with the appeal being allowed based on the Tribunal's decision in a previous case and the legal provisions regarding the classification of interest on compensation/enhanced compensation.