Section 194 LA : TDS on compensation on acquisition of certain immovable property

⁸[Payment of compensation on acquisition of certain immovable property⁹.

194LA. Any person responsible for paying to a resident any sum, being in the nature of compensation or the enhanced compensation¹⁰ 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 (other than agricultural land), shall, at the time of payment of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to ten per cent of such sum as income-tax thereon:

Provided that no deduction shall be made under this section where the amount of such payment or, as the case may be, the aggregate amount of such payments to a resident during the financial year does not exceed ¹¹[two] hundred thousand rupees.

Explanation.—For the purposes of this section,—

(i)  "agricultural land" means agricultural land in India including land situate in any area referred to in items (a) and (b) of sub-clause (iii) of clause (14) of section 2;

(ii)  "immovable property" means any land (other than agricultural land) or any building or part of a building.]

8.  Inserted by the Finance (No. 2) Act, 2004, w.e.f. 1-10-2004.

 9.  See rules 28, 28AA, 28AB, 30, 31, 31A, 31AB and 37BA and Form Nos. 13, 16A, 24G, 26AS, 26B, 26Q and 27A.

10. For the meaning of the term "compensation", see Taxmann's Direct Taxes Manual, Vol. 3.

11.  Substituted for "one" by the Finance Act, 2012, w.e.f. 1-7-2012.

Question : When the Assessee makes the payment to the competent authority for disbursement to the actual beneficiaries who is liable to deduct the TDS , the Assessee or Competent Authority ?

Answer Competent Authority . Obligation for deducting tax at source under section 194LA does not arise when payment is made by assessee-metro railways to Competent Authority, but arises when Competent Authority disburses such amount to actual beneficiaries. IN THE ITAT KOLKATA BENCH 'B' Metro Railway Kolkata v. Income-tax Officer (TDS), Ward 58(1), Kolkata [2013] 32 taxmann.com 232 (Kolkata - Trib.)

Question: When Act of the Assessee local authority does not contain power to compulsory acquire land, purchase of land under said Act by assessee-local authority by entering into mutual settlement with landowners could not be equated to compulsory acquisition of land and hence for TDS u/s 194LA ?

Answer Section 194LA of the Income-tax Act, 1961 - Deduction of tax at source - Payment of Compensation on Acquisition of Certain Immovable Property [Purchase of land under Chhattisgarh Nagar Tatha Gram Nivesh Adhiniyam (CGNTGNA), 1973] - Assessment year 2008-09 - Assessee-local authority purchased lands under provisions of CGNTGNA, 1973 from various landowners and paid compensation to them without deducting tax on such compensation - Assessing authority held that transaction amounted to compulsory acquisition of land under section 194LA and, accordingly, treated assessee in default under section 201(1) - Whether since assessee had no power to acquire land under provisions of CGNTGNA, 1973 and its duty was limited to entering into mutual settlements which could not be equated to compulsory acquisition of land, section 194LA was not applicable - Held, yes [Para 10] [In favour of assessee] IN THE ITAT BILASPUR BENCH Naya Raipur Development Authority v. Income-tax Officer  [2013] 38 taxmann.com 271 (Bilaspur - Trib.)

Question:Can the Govt deduct the TDS on compulsory acquisition of agriculture land on the please that the Assessee can  claim the refund of this TDS at the time of Assessement ?

Answer No. Deduction of tax at source is required to be made in respect of compensation paid for acquisition of immovable property other than agricultural land. There is no jurisdiction to make deduction from compensation for agricultural land. In the absence of jurisdiction to deduct tax from compensation for agricultural land, the stand of the Income-tax Department that since there is remedy of getting the assessment done and to receive refund, the writ petition was not maintainable, cannot be accepted. HIGH COURT OF PUNJAB AND HARYANA Risal Singh v. Union of India [2010] 321 ITR 251 (PUNJ. & HAR.)

Question : When at time of award of compensation section 194LA was not in statute book, but it was, when compensation was paid, whether tax had to be deducted while making payment ?

Section 194LA of the Income-tax Act, 1961 - Deduction of tax at source - Acquisition of immovable property, compensation payment - Whether provision of section 194LA is constitutionally valid - Held, yes - Whether question of deducting tax at source arises at time of making payment, and it has nothing to do with date of award of compensation - Held, yes - Whether, therefore, when at time of award of compensation section 194LA was not in statute book, but it was, when compensation was paid, tax had to be deducted while making payment - Held, yes [In favour of revenue] HIGH COURT OF BOMBAY Leela Bhagwansing Advani v. Union of India [2012] 21 taxmann.com 124 (Bom.)

Question: Who will deduct the TDS and issue the TDS certitficate in the case of compulsory acquisition?

Section 194LA of the Income-tax Act, 1961 - Deduction of tax at source - Compensation on acquisition of capital assets - Whether in every case of land acquisition, whether acquisition is for Central Government, State Government or other agencies, it is duty of Land Acquisition Officer to deduct tax due to income-tax department from amount of compensation and interest in accordance with provisions of section 194A or 194LA, as the case may be - Held, yes - Whether in case any deduction is made by way of income-tax, Land Acquisition Officer shall issue tax deduction certificate directly to party or produce same before Court to be given to claimants in accordance with rules framed for income-tax - Held, yes HIGH COURT OF KERALA State of Kerala v. Mariyamma K. PADMANABHAN NAIR, J. [2005] 144 TAXMAN 744 (KER.)