TaxTMI 
TaxTMI 
2014 (6) TMI 609
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.... detail. The grounds raised by the assessee are as under : "2. The learned CIT(A) erred in holding that the provisions of section 194LA are application to the compensation paid by the Greater Hyderabad Municipal Corporation for demolition of the structures on the lands acquired by it. 3. The learned CIT(A) erred in confirming the action of the A.O. in charging the tax u/s. 201(1) of Rs.6,50,73,301/- in respect of the compensation paid for demolition of the structures. The learned CIT(A) ought to have seen that the TDS under section 194LA is not required to be made from the compensation for demolition of the building. 4. The learned CIT(A) erred in confirming the charging of interest of Rs.2,68,19,138/- under section 201(1A) of the I.T. Act." 2. Briefly stated facts are that the Greater Hyderabad Municipal Corporation (in short "GHMC") was originally constituted as a department in the year 1869 by the Nizam Nawab. It has undergone lot of changes during the last century or so. April, 2007 onwards, the said body became Greater Hyderabad Municipal Corporation based on notification released on 16th April, 2007 by Government of....
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....mmovable property. In assessee's case, it was submitted that there is acquisition but it is not compulsory. The acquisition has taken place through negotiations and agreement voluntarily entered into between the assessee and owner of the property. Since the compensation has been paid for the demolition of the existing structure, the same cannot be said to have been paid on account of acquisition of immovable property. Further, it was submitted that assessee does not acquire any immovable property and the land owners voluntarily surrender the land for the purpose of public road/public facility. Therefore, the demolition of the structures on the area requisitioned for public purpose cannot be stated to be acquired by the assessee. There is no evidence to show that the ownership of the land actually passed on to the GHMC, even though the right to use the same for public purpose was vested with the GHMC. 5. Ld. CIT(A) did not agree and rejected the assessee's contentions by stating as under : "5.2. As regards the issue of non-deduction of TDS under section 194LA on the compensation paid for demolition of buildings, I am not in agreement with the appellant's submiss....
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....on 146, the acquisition is voluntary by mutual negotiations and only when provisions of section 146 could not be invoked and commissioner was unable to acquire any immovable property, then, provisions of Land Acquisition Act, 1984 are applicable under section 147. It was submitted that as Ld. CIT(A) has elaborately discussed this issue in A.Y. 2000-01, assessee has not deducted tax on the structural component of compensation paid to the land owners, even though assessee has deducted tax on the land value paid. 7. Learned D.R. however, submitted that the earlier CIT(A) order was in terms of section 194L of the I.T. Act whereas, the present provision is introduced subsequently as 194LA of the I.T. Act and assessee has not adduced any evidence that the property was acquired by mutual agreement and not by compulsory acquisition. He relied on the orders of the A.O. and CIT(A). 8. Before adverting to the analysis of the rival contentions, it is necessary to extract the provisions of section 194LA which are invoked by the A.O. in this case. Payment of compensation on acquisition of certain immovable property 194LA. Any person responsible for payin....
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.... On the basis of the interpretation sec.194L given by the DCIT, Circle-6(1)(TDS) in October, 1999, in bonafide belief and good faith, the appellant deducted tax at source on such payment of compensation in a few cases, but later, the appellant further examined the issue and came to the conclusion that in absence of any compulsory acquisition and tile payment being made as compensation for tile value of structures removed, the appellant was not liable to make any TDS. Even assuming that the land between the old structure and new structure vested in MCH, in the absence of invocation of any statute [or compulsory acquisition and in the absence of payment of any compensation for the land, the transaction was voluntary in nature and, hence, did not attract the provision of sec, 194L, 2.5. The appellant clarified to the Assessing Officer that there was no land acquisition made under the provision of the Land Acquisition Act, 1894 but, the land was acquirer! through voluntary agreement as per sec,146 of the HMCA, 1955, hence, there is no element of compulsory acquisition. 3. The learned A.R. of the appellant vehemently objected to the interpretation....
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....payment of any compensation under subsections (1), (2) or (3) shall be valid, if the price or compensation to be paid for such property or interest or right exceeds rupees five thousand unless and until such contract has been approved by the Corporation. (5) Every contract or other instrument relating to the acquisition of immovable property or any interest therein or any right thereto shall be executed by Commissioner, shall have the common seal of the Corporation affixed thereto in the presence of two officers nominated by the Commissioner] and shall also have tile signature of the said two members. in the manner provided in Section 125. (6) No contract for the acquisition of immovable property or any interest therein or any right thereto not executed as provided in sub-section (4) shall be binding on the Corporation. (7) The foregoing provisions of this section which apply to an original contract relating to the acquisition of immovable property, or any interest therein or any right thereto shall be deemed to apply also to any variation or discharge....
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.... by payment of compensation. As per the irrevocable General Power of Attorney, issued by the property owner, the MCH is permitted to deal with the properly, but, it is by agreement and not by compulsory acquisition of law. 4.6. The compensation is calculated only for the structures removed or to be removed and it is meant for compensating the damage/loss suffered by property owners for pulling down the structures coming in the line of road widening. 4.7. There was no compulsory acquisition of a capital asset by the MCH. Even if it is assumed that the land between the old boundary wall and new boundary wall becomes a public property, yet, there was no compulsory acquisition. nor any compensation was paid for it. 5. The provisions of sec.194L reads as under :- "[194L .. Payment of compensation on acquisition of capital asset Any person responsible for paying to a resident any sum being in the nature of compensation or the enhanced compensation or the consideration or the enhanced considerati....
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....ubstantiate that the contentions made before her were wrong and untenable. She has also not brought any facts on record, to prove that the acquisition of the land by the appellant for the purpose of road widening was actually in the nature of compulsory acquisition as envisaged in sec. 194L of the Act. In absence of any material to the contrary and in view of the fact that the documents produced by the appellant before the Assessing Officer as well as before me, clearly shows that the provisions of Land Acquisition Act, 1894 read with section 147 of the HMCA, 1955 was not invoked in any case where such compensation was paid she had no basis to hold that there was compulsory acquisition on any occasion in this case. Moreover, there is no evidence on record to show that the ownership of the land actually passed on to the appellant even though the right to use the same for public purposes was vested with the appellant. 6. Accordingly, it is held that section 194L has no application in the present case and therefore, the appellant cannot be treated as an "assessee in default" for non-deduction of tax at source on the payments made for demolition of super-structure, ....
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....perties were takenover by MCH under private negotiations and the Requisitioning Authority has requested to withdraw the land acquisition proposals. (Last para in page 5). Thus, in the above case the property was negotiated under section 146 of the HMC Act. This is one mode of acquiring the property. 9.2. As far as property No.2 i.e., premises No.3-6- 727/1 are concerned, the Draft Award proceedings determines the land value as well as structure value and this property was being acquired under the Land Acquisition Act. Therefore, the entire compensation paid to various land owners do come under the provisions of section 194LA of the I.T. Act. This is second mode of acquiring property ie. through Land Acquision Act. 9.3 As far as premises No.3 i.e., 3-6-752/1 to 5, on verification of the ownership, the draft order decides that compensation amount of Rs.15,7,044/- shall be deposited in the Civil Court under section 31 of the Land Acquisition Act as no claim for the said property has been received. Property No.4 i.e., 3-6-664/F4 also, the compensation amount was decided to be deposited in City Civil Court under section 31 of Land Acquisition Act for disbursement to the rightful owner....
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....he extent of property acquired under Land Acquisition Act, we are of the opinion that assessee is covered by provisions of section 194LA of the I.T. Act. We make it clear that to the extent of land and structures acquired through mutual negotiations under section 146 of GHMC Act, we agree with the opinion of the Ld. CIT(A) given in A.Y. 2001-02 under section 194L that the provisions are not applicable to the acquisition of property which is not compulsory. It is also to be noted that Revenue has not contested the said order. Therefore, issue on that has already been crystallized. 11. Assessing Officer has raised the demand on the entire structural portion which was paid by the assessee. There are no details before the A.O. or before Ld. CIT(A) as to how much of the amount was paid to the properties acquired through mutual negotiations under section 146 of GHMC Act or by way of compulsory acquisition under Land Acquisition Act. Assessee in the paper book provided some of the draft proceedings but not entire details of how much of the amounts involved in the structure payments were not covered by the acquisition under Land Acquisition Act. These details are required to be placed bef....