High Court Of Kerala
Nalini vs. Deputy Collector, Land Acquisition
Section 2(14)(iii), 194A, 194LA
K. Padmanabhan Nair, J.
CRP No. 187 of 2006
25th August, 2006
Counsel Appeared
Thiyyannoor Ramakrishnan, Arun Kumar P. & C. Chandrasekharan, for the Petitioner : Mohan C. Menon, P.K. Raveendranatha Menon & George K. George, for the Respondent
JUDGMENT
K. Padmanabhan Nair, J. :
The decree holder in E.P. No. 493 of 1999 in L.A.R. No. 19 of 1994 on the file of the Additional Subordinate Judge’s Court, Thrissur, is the revision petitioner. The property owned by the petitioner was acquired for a public purpose. The petitioner claimed additional compensation. The matter was referred to the Land Acquisition Court. The Land Acquisition Court enhanced the compensation awarded by the Land Acquisition Officer (LAO). The petitioner filed E.P. No. 493 of 1999 for realisation of the amount decreed. The requisitioning authority directly deposited an amount of Rs. 3,10,015 on 16th Aug., 2004, without deducting the income-tax due from the total amount of compensation. The petitioner filed a cheque application and a cheque for Rs. 2,87,617 was issued after deducting the amount of Rs. 22,398 towards income-tax. The LAO filed an application to issue a cheque for Rs. 22,398 for depositing the same as income-tax. The petitioner objected to the application of the LAO contending that the property acquired was agricultural land and that he is not liable to pay income-tax from the amount of compensation awarded. The executing Court overruled the objection raised by the petitioner. It was held that a statutory duty is cast upon the LAO to deduct income-tax at source. The executing Court relied on a decision in State of Kerala vs. Mariyamma (2006) 200 CTR (Ker) 361 : (2005) 2 KLT 587 and ordered a cheque for Rs. 22,398 to the LAO to be deposited as income-tax and also directed the LAO to issue a tax deduction certificate. Challenging that order, this civil revision petition is filed.
Since the question arising for consideration in this C.R.P. is deduction of income-tax at source notice was issued to senior standing counsel for the IT Department. The C.R.P. is disposed of after hearing Sri Thiyyannoor Ramakrishnan, counsel for the petitioner, Sri Mohan C. Menon, senior Government Pleader and Mr. George K. George, standing counsel for the IT Department. Learned counsel appearing for the petitioner had argued that in Mariyamma (supra), this Court has held that if the land acquired is agricultural land, the owner has no liability to pay income-tax and hence the Court below went wrong in deducting the income-tax. It is argued that the nature of the land involved in this case will show that the land acquired in this case was agricultural land. Sec. 194A of the IT Act deals with the liability to pay income-tax on interest awarded provided the amount of interest exceeds Rs. 5,000. So, for any interest payable on enhanced compensation, solatium and other interest, a statutory liability is cast upon the LAO to deduct income-tax at source provided the amount of interest is more than Rs. 5,000.
Learned counsel appearing for the petitioner has argued that the interest accrued in this case is not for a single year but for a number of years and if the interest is appropriated for each year, the interest accrued for each year will not exceed Rs. 5,000 and he would not be liable to pay any income-tax. The authority competent to consider the benefit claimed by the petitioner is the ITO. Sec. 194LA casts a statutory liability on the LAO to deduct income-tax at source if the amount of compensation is paid after 1st Oct., 2004, and the same exceeds one hundred thousand rupees. It is contended that the liability to deduct income-tax under s. 194LA arises only if the land acquired is not agricultural land. It is true that s. 194LA excludes agricultural land. Explanation to s. 194LA provides that “agricultural land” means agricultural land in India as referred to in items (a) and (b) of sub-cl. (iii) of cl. (14) of s. 2. Sec. 2(14) deals with capital asset. Sec. 2(14)(iii)(a) and (b) reads as follows : “(iii) agricultural land in India, not being land situate— (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; or (b) in any area within such distance, not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a), as the Central Government may, having regard to the extent of, and scope for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the Official Gazette.”
6. Whether a particular land is an agricultural land or not is to be determined with reference to the definition given in s. 2(14)(iii)(a) and (b) of the IT Act and not with reference to the tenure of the land shown in the land revenue records. A combined reading of s. 194LA and the definition of agricultural land given under s. 2(14)(iii)(a) and (b) makes it abundantly clear that the competent authority to decide whether any compensation awarded is exigible to income-tax is the ITO. So, it is clear that the remedy available to the party is either to approach the competent authority under s. 197 of the IT Act or pay the income-tax and get it refunded. Learned counsel appearing for the petitioner has argued that at present there is no practice of giving notice to the party regarding his liability to pay income-tax from the amount of compensation awarded by the LAO. It is argued that the parties are not even aware of any such deduction and there is no practice of issuing tax deduction certificate by the LAO under the relevant rules. It is argued that even when the enhanced compensation is awarded by the Court the parties are not informed about the quantum of income-tax deducted and also no certificate is issued. It is not disputed by the learned senior Government Pleader that at present no notice is issued by the LAO to the claimant informing him about the liability to pay income-tax. I am of the view that it is only just and proper that the parties are given advance notice regarding the liability to pay income-tax. The LAO can note this fact also, in the notice issued to the claimant under s. 9 of the Land Acquisition Act. The claimant shall be informed about this fact during award enquiry stage. In the award, the income-tax deducted shall be separately shown.
If the claimants are told about their liability to pay income-tax before deducting the same they will have an option to get a certificate of exemption from payment of tax, reduced rate of tax, etc., from the competent officer under s. 197 of the IT Act. So, it is only just and proper that the State Government issues necessary directions to the LAO to give notice regarding the liability of the claimants to pay income-tax even before passing of the award. Shri George K. George, learned standing counsel appearing for the IT Department, submitted that w.e.f. 1st Oct., 2004, any person who is responsible for paying to a resident, any sum, being in the nature of compensation or the enhanced compensation or the consideration or the enhanced consideration on account of compulsory acquisition, under any law for the time being in force, of any immovable property is liable to pay income-tax if the amount of payment exceeds rupees one lakh. It is also submitted that interest of any nature if it exceeds Rs. 5,000 the officer is bound to deduct income-tax. The proper time for deposit as s. 192(1A) of the IT Act r/w r. 30(1) of the IT Rules the tax deducted shall be remitted to the account of the Central Government in any branch of the RBI or the SBI or any authorised bank in accordance with law within one week from the last day of the month in which the deduction is made. In case of deduction by or on behalf of the Government, tax is to be deposited on the same day without any challan (book adjustment). Sec. 203A of the IT Act casts a duty to get a tax deductor’s accounting number or tax collector’s accounting number. It is submitted that every person deducting tax at source under ss. 192 to 196D shall obtain a tax deductor’s accounting number or tax collector’s accounting number (TAN for short). It is also pointed out that the time-limit for submitting an application for obtaining TAN is within one month from the end of the month in which the tax was deducted and the application for TAN shall be made in Form No. 49B. It is also submitted that the application is to be submitted before the agencies authorised by the Government, i.e., NSDL along with the prescribed fees. It is further pointed out that NSDL has designated certain parties in various parts of India to act on their behalf for accepting these application forms. In Cochin the following are the approved centres : Karvy Consultants Ltd., G-39, Panampilly Nagar, Cochin-36. Integrated Enterprises (India) Ltd., “Seema”, 41/426, Rajaji Road, EKM.
It is submitted that a mandatory duty is cast on every deductor to apply for TAN within the specified time. It is further submitted that the Finance (No. 2) Act, 2004, amended s. 206 of the IT Act, 1961, making it mandatory for the Government deductors to furnish each TDS returns from the financial year 2004-05. A statutory duty is cast upon the deductor to submit quarterly returns of TDS in respect of all payments other than salaries and payments to certain non-residents shall be filed in Form No. 26Q. It is also pointed out that if there is failure to deduct or pay tax the amount will carry interest @ 12 per cent. It is pointed out that the followings are the penalties prescribed in case of failure : Section Nature of default Penalty 271C Failure to deduct the whole or any part of Sum equal to the amount of tax tax at source which he failed to deduct 272B Failure to comply with the provisions of s. Rs. 10,000 It is submitted that the failure to pay tax deducted at source is an offence punishable with rigorous imprisonment for a minimum period of three months and a maximum of seven years. So, the LAOs who are liable to deduct tax at source would follow the provisions of the IT Act strictly and deposit the amount collected within one week from the last day of the month in which the deduction is made. Regarding the present practice of collecting tax, Shri Mohan C. Menon, learned senior Government Pleader, has submitted that at present the income-tax deducted is deposited to the Central Government account by using treasury challans (in triplicate) presented to concerned treasuries under the head of account 8658-00-112-IT. It is further submitteds that one copy of the challan is being forwarded to the accounts officer of the IT Department and details of amount collected and furnished to the Accountant General, Kerala. It is further submitted that intra-Governmental settlements of the income-tax amounts are done in between Accountant General, Kerala, and concerned Central Government Department. It is also submitted that one copy of the treasury challan in each and every remittances made under the IT Act is being furnished to the Income-tax Zonal Office by the treasury branches. The learned senior Government Pleader has made available a circular issued by the Thrissur District Collector to the LAOs working under him regarding the procedure to be followed regarding deduction of tax at source.
It is submitted that in uncontested L.A.R. cases the award amounts are given to the claimants by way of “D” form cheques after deducting income-tax. It is submitted that the amount of tax collected is deposited in the treasury and after receiving back a copy of the treasury challan for the remittance made, TDC is issued by the concerned LAO. It is further submitted that in L.A.R. cases a statement of account is prepared as per the judgment and decree of the concerned Court and if tax is deductible the same will be calculated and deducted. It is submitted that the amount calculated as per the statement of account is deposited by “D” form cheque along with a treasury challan for the amount to be deposited towards the income-tax into the Court through the Government Pleaders concerned. It is further submitted that the Courts will forward the “D” form cheques along with the treasury challan to the treasury for book adjustment. The treasury will then account the income-tax in the head of account 8658-00-112-TDS and forward a copy of the challan thereof to the concerned LAO. It is submitted that TDC will be issued by the LAO to the claimant at their request. It is also submitted that after the decision reported in Mariyamma’s case (supra), the income-tax calculated is directly remitted to the treasury and the amount due to the claimant is remitted to the Court by issuing ‘D’ form cheque by the LAO. It is further submitted that the particulars of remittance towards income-tax are gathered and tax deduction certificate (TDC) is issued by the LAO.
13. It is pointed out that in the case at hand the requisitioning authority was the Southern Railway and the entire compensation amount including the amount deductible as income-tax was directly sent to the Court by the requisitioning authority. So, the LAO had filed a cheque application towards the amount due to income-tax and the Court had issued a cheque. The amount transferred was credited to the income-tax on 14th Feb., 2006, and challan receipt was produced before the Court below.
14. Counsel for the petitioner submitted that though a statutory duty is cast upon the LAO to issue TDC in practice no such certificate is issued by them. It is submitted that the claimants are not even told the fact that income-tax is deducted from the compensation amount awarded to them. Sec. 203 of the IT Act enjoins that the officer deducting that tax is bound to issue a certificate for tax deducted. Sec. 203(1) of the IT Act reads as follows :
“203. Certificate for tax deducted.—(1) Every person deducting tax in accordance with the foregoing provisions of this Chapter shall, within such period as may be prescribed from the time of credit or payment of the sum, or, as the case may be, from the time of issue of a cheque or warrant for payment of any dividend to a shareholder, furnish to the person to whose account such credit is given or to whom such payment is made or the cheque or warrant is issued, a certificate to the effect that tax has been deducted and specifying the amount so deducted, the rate at which the tax has been deducted and such other particulars as may be prescribed.”
15. Rule 30 of the IT Rules deals with time and mode of payment to the Government account of tax deducted at source. Rule 31 of the IT Rules deals with certificate of tax deducted at source or tax paid under sub-s. (1A) of s. 192. Rule 31 of the IT Rules reads as follows : “(1) The certificate of deduction of tax at source or the certificate of payment of tax by the employer on behalf of the employee, under s. 203 to be furnished by any person deducting tax in accordance with the provisions of— (a)…… (b) s. 193, s. 194, s. 194A, s. 194B, s. 194BB, s. 194C, s. 194D, s. 194E, s. 194EE, s. 194F, s. 194G, s. 194-I, s. 194J, s. 194K, s. 194LA, s. 195, s. 196A, s. 196B, s. 196C and s. 196D shall be in Form No. 16A. (2) ……….. (3) The certificate mentioned in sub-r. (1) shall be furnished within a period of one month from the end of the month during which the credit has been given or the sums have been paid or, as the case may be, a cheque or warrant for payment of any dividend has been issued to a shareholder.”
16. So, r. 31 of the IT Rules enjoins that the claimants in land acquisition proceedings are entitled to get a tax deduction certificate in Form No. 16A within one month from the end of month during which the credit has been given or the sums have been paid or, as the case may be, a cheque or warrant for payment. The LAO shall issue tax deduction certificate within one month from the end of the month in which the amount was deposited. Sec.272A(1) of the IT Act provides for penalty for failure to issue tax deduction certificate. The penalty provided is Rs. 100 for every day during which the failure continues but the same shall not exceed the amount of tax deducted. If there is delay in issuing tax deduction certificate, the LAO is liable to pay penalty also. It is advisable that the LAOs consult the ITOs in such matters and ascertain the rate of IT to be deducted from the compensation and interest. In the case at hand, the petitioner claims exemption from the liability to pay income-tax on the ground that as per the Revenue records, the land acquired was agricultural land. The Land Acquisition Court has no jurisdiction to decide that issue and that is a matter to be decided by the ITO. So, the order passed by the Court below is correct. The remedy available to the petitioner is to get the TDC from the LAO and claim refund from the ITO. In the result the civil revision petition is dismissed. There will be a direction to the LAO to issue TDC to the petitioner in accordance with law as expeditiously as possible.
[Citation : 294 ITR 423]
