Itta/665/2014 Of Commissioner Of Income Tax[Tds] v. M/S Greater Hyderbad Municipal Corporation

HIGH COURT OF JUDICATURE AT HYDERABADFOR THE STATE OF TELANGANA AND THE STATE OF ANDHRAPRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA ANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.665 OF 2014 DATED:26.11.2014 Between: Commissioner of Income Tax (TDS)I.T. Towers, A.C. GuardsHyderabad … Appellant And M/s. Greater Hyderabad Municipal CorporationHead Office, Tank Bund, Near LibertyHyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA ANDTHE HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A. NO.665 OF 2014 JUDGMENT:(per the Hon’ble The Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is sought to be admitted against the judgment andorder of the learned Tribunal, dated 18.6.2014, in relation to theassessment year 2010-2011, on the following suggested questions oflaw: i.“In the facts and circumstances of the case, whether theHon’ble Tribunal (ITAT) is correct in law in holding that theacquisition of land under Section 146 of the Hyderabad MunicipalCorporation Act does not fall under “Compulsory Acquisition” tobe liable to TDS [Tax Deduction at Source] under Section 194LAof the Income Tax Act, 1961? ii. In the facts and circumstances of the case, whether theHon’ble Tribunal is correct in law in holding that the acquisitionmade under Section 146 of the Hyderabad Municipal CorporationAct were not liable for TDS [Tax Deduction at Source] underSection 194LA of the Income Tax Act, 1961, without appreciationthat the deductor itself had deducted TDS [Tax Deduction atSource] on the land component of such acquisitions, whichclearly indicates that even the acquisitions so made were“Compulsory Acquisitions” only? iii. In the facts and circumstances of the case, whether theHon’ble Tribunal is correct in law in not holding that the deductorshould have deducted TDS (Tax Deduction at Source] in respectof the structural component also, having accepted theapplicability of Section 194LA of the Income Tax Act, 1961 inrespect of the land component of the acquisition made as perSection 146 of the Hyderabad Municipal Corporation Act?” We have heard Sri B. Narasimha Sarma, learned counsel for theappellant Revenue, who says that the learned Tribunal should have applied the provisions of Section 194LA of the Income Tax Act, 1961, ason fact it is a case of payment of compensation for acquisition ofimmovable property by the municipal body under Section 146 of theHyderabad Municipal Corporation Act, 1955 (hereinafter referred to as‘the HMC Act’). We are unable to accept his contention. Section 194LA of the Income Tax Act reads as under: “Payment of compensation on acquisition of certain immovable property. 194LA. Any person responsible for paying to a resident any sum, being in thenature of compensation or the enhanced compensation or the consideration orthe enhanced consideration on account of compulsory acquisition, under anylaw for the time being in force, of any immovable property (other thanagricultural land), shall, at the time of payment of such sum in cash or by issueof a cheque or draft or by any other mode, whichever is earlier, deduct anamount equal to ten per cent of such sum as income-tax thereon: Provided that no deduction shall be made under this section where the amountof such payment or, as the case may be, the aggregate amount of suchpayments to a resident during the financial year does not exceed two hundredthousand rupees.” 194LA. Any person responsible for paying to a resident any sum, being in thenature of compensation or the enhanced compensation or the consideration orthe enhanced consideration on account of compulsory acquisition, under anylaw for the time being in force, of any immovable property (other thanagricultural land), shall, at the time of payment of such sum in cash or by issueof a cheque or draft or by any other mode, whichever is earlier, deduct anamount equal to ten per cent of such sum as income-tax thereon: Provided that no deduction shall be made under this section where the amountof such payment or, as the case may be, the aggregate amount of suchpayments to a resident during the financial year does not exceed two hundredthousand rupees.” It is clear from the aforesaid Section that for making payment ofcompensation in the case of compulsory acquisition of immovableproperty the provisions of Section 194LA of the Act will be applied. On areading of Section 146 of the HMC Act, we notice that it is a voluntarytransfer by agreement. Compulsory acquisition of the property is nothingbut involuntary act of transfer, whereas Section 146 of the HMC Actenables the Commissioner of the Municipal Corporation to acquireproperty by agreement with the owner. In other words, it is a voluntarytransfer. The consideration money was paid for acquisition of theproperty under Section 146 of the HMC Act. The word ‘compensation’used in compulsory acquisition is wider one and it takes care of not onlymarket value but also other payments, namely solatium and interest andother things. Accordingly, we hold that the Tribunal has correctly notapplied the aforesaid provision in the transaction and it also appears fromthe impugned judgment that similar issue came up earlier in the case ofsame assessee in respect of previous year and it was held so. Therefore, we dismiss the appeal. There will be no order as to costs. ________________________ K.J. SENGUPTA, CJ _______________________ SANJAY KUMAR, J 26.11.2014 bnr