ITO, SALEM vs. THE DEPUTY CHEIF ENGINEER (CONSTRUCTION), SALEM

The deductor carried the matter in appeal before the ld. CIT(A). After considering the submissions of the assessee and facts and circumstances, the ld. CIT(A) held that the tax is not deductible under section 194LA of the Act and allowed the appeal.

Aggrieved, the Revenue is in appeal before the Tribunal and the contention of the Department is that the land acquired in Kosavampatti village falls within the municipality as per notification under section 2(1A)(C) proviso Clause (II)(B) and section 2(114)(III)(B) urbanization areas No. SO 9947 file No. 164/3/87-ITA.I dated 06.01.1994. Therefore, the ld. DR has pleaded the order of the ld. CIT(A) should be reversed and restored that of the Assessing Officer. On the other hand, the ld. Counsel for the assessee strongly supported the order passed by the ld. CIT(A).

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. Through the Revenue Department of Tamil Nadu State Government, the Railways acquired land at Namakkal Town & Kosavampatti for laying Salem-Karur Broad Gauge Railway Line Project, Namakkal. In connection with land acquisition, the Hon’ble Madras High Court has awarded enhanced compensation to the land owners and as per the directions of the Hon’ble High Court, the said compensation was drawn by cheque and deposited to Hon’ble Sub-ordinate Judge, Namakkal. Since the TDS was not effected on the compensation amount, the Assessing Officer levied tax under section 201(1) as well as interest under section 201(1) of the Act. As per the letter of the Special Tahsildar, Salem Karur New BG Line Project, Namakkal date 23.12.2016, the land acquired for the above said project was agricultural land. Further, as per notification under section 2(1A)(C) proviso Clause (II)(B) and section 2(114)(III)(B) urbanization areas No. SO 9947 file No. 164/3/87-ITA.I dated 06.01.1994, the areas upto a distance of 2 kms from the municipal limits in all directions of Namakkal will only come under the limits of municipality or cantonment board and the Kosavampatti village does not fall within the notified area. Over and above, as per section 10(37) (iii) and (iv) of the Act, if the transfer is by way of compulsory acquisition under any law, or a transfer the consideration for which was determined or approved by the Central Government or the Reserve Bank of India and income has arisen from the compensation or consideration for such transfer received by the assessee on or after the 1st day of April, 2004 is exempt. In this case, the compulsory acquisition was done by the Southern Railways, which is an organization of the Central Government and acquired the land during the financial year 2007-08 relevant to the assessment year 2008-09 through Revenue Department of Tamil Nadu State Government. As per the letter dated 23.12.2016 of the Special Tahsildar, Salem Karur New BG Line Project, Namakkal, the impugned land which are located in and around Namakkal District are purely agricultural land at the time of acquisition. Thus, the ld. CIT(A) has held that tax is not deductible under section 194LA of the Act.

Whether the land in question used for agricultural purpose or not is not the material for determining the question as to whether the land was agricultural land or not. In the case of CIT Vs Officer-in-charge [Court of Wards] (105 ITR 133), Hon'ble Supreme Court held that agricultural land must be a land which could be said to be either actually used or ordinarily used or meant to be used for agricultural purposes, and determination of the character of land, according to the purpose for which it was meant or set apart and can be used, is a matter of which have to be determined on the facts of each particular case. In the present case there was no doubt whatsoever, on the nature of the land being agricultural land before it was acquired by the Railways as per the certification of the Special Tahsildar, who is the ultimate authority of Revenue Department of the Tamil Nadu State Government. Further, in this case, the compulsory acquisition was done by the Southern Railways, which is an organization of the Central Government and acquired the land through Revenue Department and as per section 10(37) (iii) and (iv) of the Act, no tax could be demanded over and above the statute. Under the above facts and circumstances, the ld. CIT(A) has rightly held that no tax is deductible under section 194LA of the Act and the same stands confirmed.

In the result, the appeal filed by the Revenue is dismissed.