AI Drafter 
TaxTMI 
TaxTMI 
2016 (6) TMI 1458
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....essing officer noted that assessee had paid the compensation in respect of agricultural land during the period 1.4.2012 to 31.12.2012 at Rs. 2,42,89,61,686/- which includes interest (exceeding Rs. 5000/- in each case) amounting to Rs. 31,75,13,979/-, on which the P/R has failed to deduct TDS as per the provisions of section 194A r.w.s. 206AA of I.T. Act, 1961. The assessee's response in this regard was as under:- "interest @ 12% per annum is to be paid from the date of initial notification to date of payment as per provisions in land acquisition act and this interest is part of land compensation amount / rate. No specific interest due to delayed payment or any other reason over and above the land compensation has been paid to the land owners. Therefore, TDS was not deducted on this compensation. Thus we have paid interest over and above the land cost on the basis of land acquisition act and have booked as land cost only. So it is not interest in real sense and TDS on that will further cause litigation. However, as a preventive measure, TDS on interest as mentioned above has been deducted for the payments made from Jan. 2013 onwards. In view of the above, it is requested to....
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....se on record. As per Provisions of clause (b) of section 145A of the Income Tax Act, 1961 interest received by an assessee on compensation or on enhanced compensation as the case may be, shall be deemed to be the income of the year in which it is received. Further as per provisions of section 56 (viii) of Income Tax Act, 1961, income by way of interest received on compensation or Enhanced compensation referred to in clause (b) of section 145A shall be chargeable to income-tax under the head 'Income from other sources.' TDS is deducted U/s 194A on the payment of interest other than "Interest on securities". As per provisions of Section 194LA, TDS is deducted on payment of compensation on acquisition of certain immovable property other than agricultural land. 5.1 As per the Award of the Competent Authority, word interest has been used. In this regard, letter of Special Secretary Revenue (K), Memo No. 24/51/2014-LR-1/1 1490, Chandigarh, Dated 21.07.2014 is as under- "The awards in these cases have been made under the provisions of Land Acquisition Act, 1894/State Policy on land acquisition. In the Land Acquisition Act 1894 & State's land acquisition Polic....
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....shall have been so paid or deposited. Provided that if such compensation or any part thereof is not paid or deposited within a period of one year from the date on which possession is taken, interest at the rate of fifteen per cent per annum shall be payable from the date of expiry of the said period of one year on the amount of compensation or part thereof which has not been paid or deposited before the date of such expiry." 22. Section 23(1 A) was introduced in the 1894 Act to mitigate the hardship caused to the owner of the land who is deprived of its enjoyment by taking possession from him and using it for public purpose, because of considerable delay in making the award and offering payment thereof [See Assistant Commissioner, Gadag Sub-Division, Gadag v. Mathapathi Basavannewwa and others- AIR 1995 SC 2492]. To obviate such hardship, Section 23(1A) was introduced and the Legislature envisaged that the owner is entitled to 12% per annum additional amount on the market value for a period commencing on or from the date of publication of the notification under Section 4(1) of the 1894 Act upto the date of the award of the Collector or the date of taking possessio....
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....espect of the excess amount, which is determined by the Court after a reference under Section 18 of the 1894 Act. Section 28 does not apply to cases of undue delay in making award for compensation [See: Ram Chand & others etc v. Union of India & Ors. -SCC 44]. In the case of Shree Vijay Cotton & Oil Mills Ltd. v. State of Gujrat - (1991) 1 SCC 262, this Court has held that interest is different from compensation. 24. To sum up, interest is different from compensation. However, interest paid on the excess amount under Section 28 of the 1894 Act depends upon a claim by the person whose land is acquired whereas interest under Section 34 is_for delay in making payment. This vital difference needs to be kept in mind in deciding this matter. Interest under Section 28 is part of the amount of compensation whereas interest under Section 34 is only for delay in making payment after the compensation amount is determined. Interest under Section 28 is a part of \ enhanced value of the land which is not the case in the matter of payment of interest under Section 34." 5.3 Further, reliance is made in the case of Hon'ble Punjab & Haryana High Court in the case of Jagmal Sing....
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.... Hon'ble High Court of Madhya Pradesh. In this case The High Court of Madhya Pradesh held as under- "10 The acquisition is of the year 2001 while the compensation has been paid somewhere in the year 2009. Keeping in view the law laid down by the Hon'ble Apex Court in the matter of Bikram Singh Vs. Land Acquisition Collector, reported in (1997) 10 SCC 423, this court is of the view that interest received on delayed payment is a revenue receipt exigible to Income -tax. Since the amount has already been deposited by the respondent Ujjain Development Authority and the deduction is in accordance with Section 194-A of the Act., therefore, this Court finds that no illegality has been committed by the Learned Court below in upholding the action taken by respondent Ujjain Development Authority in deducting the amount." f) The Assessing Officer has also relied in the case of Satish Bhardwaj & Ors. Vs. Nazir & Ors. COCP Mo. 1941 of 2011. Wherein it is held that:- "Hon'ble High Court of Punjab & Haryana vide their order dated 01.09,2011 in the case of Satish Bhardwaj & Ors. Vs. Nazir & Ors. COCP No 1941 of 2011 have held that " IDS is deductible in so far....
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....e of Haryana & Anr, the amount mentioned as interest @ 21 % in the award of Competent Authority which has been paid as per section 23{1A) of Land Acquisition Act of 1894 @ 12% per hum is held to be additional compensation not liable for deduction of tax at source U/s 194A of the IT. Act, 1961. In view of the above appeal is allowed on this ground." Against the above order, the Revenue is in appeal before us. 5. We have heard both the counsels and perused the records. Ld. DR Shri S.K. Mittal supported the ground of the Revenue. In this ground it has been urged that Ld. CIT(A) has erred by ignoring the decision of Hon'ble Punjab & Haryana High Court in the case of Manjit Singh (HUF) Vs. UOI & Others and Sunder Lal and Anr Vs. UOI (supra). 6. Per contra, Ld. Counsel for the assessee Shri Tej Mohan Singh, supported the order of the Ld. CIT(A). He submitted that this is not a case of payment of interest. He submitted that by inadvertent mistake, the term interest has been used in essence it is enhanced compensation. In this regard, he referred to the letter of the competent authority dated 30.5.2014 to the CIT(A) Ludhiana annexed in paper book at page No. 25. The said lette....
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....(A) has passed a reasonable order. It does not need any interference. 7. We have carefully considered the submissions. We find that as per Provisions of clause (b) of section 145A of the Income Tax Act, 1961 interest received by an assessee on compensation or on enhanced compensation as the case may be, shall be deemed to be the income of the year in which it is received. Further as per provisions of section 56 (viii) of the Income Tax Act, 1961, income by way of interest received on compensation or enhanced compensation referred to in clause (b) of section 145A shall be chargeable to income-tax under the head 'Income from other sources.' TDS is deducted U/s 194A on the payment of interest other than "Interest on securities". Also, as per provisions of Section 194LA, TDS is deducted on payment of compensation on acquisition of certain immovable property other than agricultural land. Furthermore, the competent authority in this regard has clearly clarified that word 'interest' has been wrongly used. It is in fact an enhanced compensation. This statement of the competent authority is unambiguous and it has also been accepted by the Assessing officer in the remand report. I....