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Income Tax Appellate Tribunal, ‘B’ BENCH LUCKNOW
Before: HON’BLE SHRI G. D. PADMAHSHALI & SHRI SUBHASH MALGURIA
द्वधरध / Appearances Assessee by : Akshay Agrawal [‘Ld. AR’] Revenue by : Mr Neil Jain [‘Ld. DR’] सुनवाई की तारीख / Date of conclusive Hearing : 08/07/2024 घोषणा की तारीख / Date of Pronouncement : 19/09/2024 आदेश / ORDER Per G. D. Padmahshali, AM; This bunch of three appeals of the assessee are assailed against separate DIN & Order No. ITBA/NFAC/S/250/2022-23/1049730458(1), 1049730982(1) & 1049731375(1) all dt. 14/02/2023 passed u/s 250 of the Income Tax Act [‘the Act’ in short] by National Faceless Appeal Centre, Delhi [‘Ld. NFAC’ in short] confirming respective orders dt. 29/03/2019 passed u/s 201(1) & 201(1A) of the Act by Dy. Commissioner of Income Tax-(TDS), Lucknow [‘Ld. AO’ in short] anent to assessment year 2017-18 to 2019-20 [‘AY’ in short].
ITAT-Lucknow Page 1 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 2. In view of para 4 of Central Board of Direct Taxes [‘Ld. CBDT’ in short] directions issued vide F. No. 272/M-37/2017-ITJ dt. 14/12/2017, the reasons stated by the Revenue in adjournment request letter addressed/signed by Ld. Admin Officer/DDO from the O/o Ld. DR-II, Lucknow in our considered view badly lacks from; (a) authority and (b) substantial cause/reasons, hence stands rejected. However, we also take on record the submission of the Ld. DR that, since he came on rotation basis for a week he was unaware of any such application tendered by DR-II office.
Since facts and threadbare issue involved in this bunch of appeals are common & identical, on the request from rival parties, for the sake of succinctness these appeals are heard together for being disposed-off by a common and consolidated order.
Tersely stated common facts emanating from case records are that; The assessee is a Land Acquisition Authority of a Uttar Pradesh State 4.1 Government [‘UP-Gov’ in short], which on authorisation acquired certain pieces of lands on the direction & behalf of National Highway Authority of India [‘NHAI’ in short] in accordance with the Notification dt. 07/03/2013 published by the Ministry of Road Transport and Highways authorising the acquisition of land in the state of Uttar Pradesh. Upon acquisition the assessee has paid compensation to respective farmers for their respective pieces of lands sold to NHAI. The total amount paid by the assessee in each ITAT-Lucknow Page 2 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 case was inclusive of interest for delayed payment on compensation. On the basis of information available on record, in order to ascertain the compliance of provisions of Chapter XVII i.e. deduction of taxes at source [‘TDS’ in short] in relation to compensation paid on compulsory acquisition of land the Revenue conducted a spot verification at the office of the payer assessee.
During the former verification it was noted by the Ld. AO that from 4.2 the payment of compensation/enhanced compensation paid to the various farmers/agriculturalist or land owner the applicable TDS were either remained to be deducted or short deducted in terms of section 194LA of the Act. In view of the aforestated failure, the Ld. AO held the assessee as ‘assessee in default’ for non/short deduction of tax u/s 201(1) of the Act and consequently determined the liability for non/short deduction of TDS and interest chargeable thereon u/s 201(1A) of the Act as under; Short/Non Total Demand Interest u/s Sr Year deduction of TDS Raised & Under 201(1A) @10% Challenge 1 125/LKW/2023 2017-18 1,07,08,002 38,54,880 1,45,62,880 2 126/LKW/2023 2018-19 (Q1) 14,22,04,696 3,41,29,127 17,63,33,820 3 127/LKW/2023 2019-20 58,42,581 7,01,109 65,43,690 Considering failure on part of the assessee to ensure deduction of TDS 4.3 on aforestated payments the Ld. AO accessing the provisions of Sec 156 of the Act had issued separate Demand Notices for the AY 2017-18 to 2019-20 on the single date of 29th March, 2019. ITAT-Lucknow Page 3 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) ITA No.125 to 127/LKW/2023 AY:2017-18 to 2019-20 Aggrieved assessee unsuccessfully contested the recovery of non/short 4.4 deduction of TDS and interest levied thereon in separate appeals before Ld. NFAC u/s 246A(1)(ha) of the Act.
Aggrieved by the orders of Ld. NFAC, the appellant assessee came in 4.5 this bunch of appeals with as many as three effective but argumentative grounds which prima-facie appeared to be inconsonance with rule 8 of Income Tax Appellate Tribunal Rules, 1963 [‘ITAT-Rules’ in short]. For the reason we deem re-production thereof unnecessary for the purpose of adjudication. However, it shall suffice to state that the sole & substantive issue in this bunch of appeals hinges around non-applicability of provisions of section 194LA of the Act in relation to compulsory acquisition of immovable property.
We have heard rival parties submission and subject to rule 18 of ITAT-Rules, 1963 perused the material placed on records and considered the facts in the light of settled position of law. At the outset we note that, the Ld. AO has squarely considered all the transaction vis-à-vis all payments made to respective farmers/land owners as payment falling under the ambit of section 194LA of the Act and thus liable for deduction of TDS @ 10%. Au contraire the appellant’s twofold contentions that; (a) lands acquired are agricultural as well as non-agricultural lands and (b) these are acquired under compulsory acquisition under the gazette for NHAI.
ITAT-Lucknow Page 4 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 6. First of all both the parties are in agreement that; (a) provisions of section 194LA applies to transaction of purchase of immovable properties (b) transaction under by the assessee includes agricultural land and non- agricultural lands (c) the assessee acquired these land on behalf of NHAI in terms of authorisation under compulsory scheme of acquisition. The only dispute between the rival parties is 194LA applies to all the transaction undertaken by assessee per contra assessee’s denial.
For the purpose of adjudication without re-producing the provisions of section 194LA of the Act, it shall be purposive to state that, person paying any compensation or enhanced compensation to any resident on account of compulsory acquisition of immovable property (other than agricultural land) shall at the time of payment of such compensation is liable to deduct TDS at the rate specified therein. The proviso to aforestated section clearly exempts the payer from attracting any liability to deduct TDS in two cases (a) where total compensation to a resident in any year does not exceed 2.50Lakhs or (b) where compensation is paid in pursuance of any award or agreement which has been exempted from levy of income tax u/s 96 of ‘The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013’ [‘RFCTLARR Act, 2013’ in short]
It is noteworthy to take account of page no. 83 showcasing a Notification No. ‚NH-11011/30/2015-LA‛ dt. 8th August, 2016 directed by ITAT-Lucknow Page 5 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 the Ministry of Road Transport and Highways to the NHAI wherein the land acquisition under the National Highways Act, 1956 is governed by the provisions of RFCTLARR Act, 2013when the land is acquired by the appropriate government under a special notification issued under the section 3(e)(v) of the RFCTLARR Act, 2013. Having said that the term appropriate government can be retrieved u/s 3(e)(v) of the RFCTLARR Act, 2013 which defines the Specified person being ‚appropriate government‛ as reproduced hereinbelow for ready reference; ‚The appropriate government in relation to the acquisition of land for the purpose of the Union as may be specified by notification, the Central Government: Provided that in respect of a public purpose in a District for an area not exceeding such as may be notified by the appropriate Government, the Collector of such District shall be deemed to be the appropriate Government‛ (Emphasis supplied)
It is a substantiating fact that the Assessee has undertaken the activity of land acquisition under the directions of NHAI emanating from the Notification of Ministry of Road Transport and Highways, being part and parcel of Central Government under section 3 of the said RFCTLARR Act, 2013. Consequently, the said notification corroborates that the land acquisition was carried out on the direction of appropriate government a Specified Person (as defined above) falling in the provisions of RFCTLARR Act, 2013. ITAT-Lucknow Page 6 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 10. That being the case, it is apt to mention here that the Chapter XIII (MISCELLANEOUS) of the RFCTLARR Act, 2013 straightly exempts the levy of income tax on any agreement/transaction undertaken under the section 96 of said Act which has been transcribed hereinbelow; ‚No income tax or stamp duty shall be levied on any award or agreement made under this Act, except under section 46 and no person claiming under any such award or agreement shall be liable to pay any fee for a copy of the same‛ (Emphasis supplied)
The similar facts were confronted in front of the Hon’ble High Court of Andhra Pradesh in the case of ‘C. Nanda Kumar Vs Union of India in 396 ITR 21(Andhra Pradesh)/[2017]’ wherein the Hon’ble Court had evidently given a judgment on non-applicability of TDS whenever any compensation is paid for the acquisition of land under the RFCTLARR Act, 2013.
We have also quote that Ld. co-ordinate bench in the case of ‘DCIT Vs M/s Ganga Developers [2023, 198 ITD 235] after detailed analysis of provisions of RFCTLARR Act, 2013 and elaborate discussion has adjudicate the issue in favour of the assessee exempting from the applicability of provisions of income tax on amount of compensation received for acquisition of non-agricultural land under Section 96 of the RFCTLARR Act, 2013. ITAT-Lucknow Page 7 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 13. The subject matter under dispute has been dealt in the case of ‘Sharanappa Vs Deputy Commissioner Raichur’ [Writ Petition No. 201497 OF 2023]. Wherein the Hon’ble Karnataka High Court cementingly held that payment of compensation on acquisition of land under the RFCTLARR Act, 2013 makes no difference whether paid for agricultural land or non- agricultural land because the said payment stands exempt from income tax under Sec 96. The relevant extract of Order is presented hereinbelow; ‚In the light of section 96 of the Act of 2013 read with Second proviso to section 194LA of the IT Act would categorically indicate that no such distinction could be made and that all lands which are acquired and the award passed in terms of the Act of 2013, is exempted from payment of income tax. When the compensation itself is exempted from income tax, the question of deducting tax at source on such exempted income would also not arise. Hence, looked at from any angle, as long as the award is made under the Act of 2013, the compensation paid would not be liable for any tax. It is not in dispute in the present matter that an Award has been passed under the Act of 2013. This aspect has been completely missed out by the SLAO in his letter to the court, and the court, without looking into the provisions and appreciating the import thereof, has passed the impugned order, requiring this court to intercede and correct the injustice caused.‛ (Emphasis supplied) ITAT-Lucknow Page 8 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 14. The Lordships have taken into consideration the CBDT Circular No. 36/2016 dt. 25th October, 2016 throwing light on the issue dealt with by the Bench on the taxability of Compensation received by the land owner on compulsory acquisition. The CBDT has unambiguously exempted the levy of income tax on compulsory acquisition of land. The Circular extract is self-explanatory as provided hereinbelow; ‚As no distinction has been made between compensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax-exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income- tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of Income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income- tax Act, 1961.‛ (Emphasis supplied)
ITAT-Lucknow Page 9 of 10 Addl. District Magistrate (Land Acquisition) Joint Organisation Vs JCIT(TDS) to 127/LKW/2023 AY:2017-18 to 2019-20 15. In the backdrop of the issues argued by the Parties and on appraising the distinct case laws and Circular (supra) it is needless to state that the RFCTLARR Act, 2013 clearly overrules the provisions of the Act, consequently no deduction of TDS was liable to be made against the compensation payment made by the assessee to the landowners/payee irrespective of nature of such land under compulsory acquisition. In view of aforestated discussion, we hold that the impugned orders passed by the Ld. AO u/s 201(1) and 201(1A) of the Act do not represent the correct position law, hence to be quashed. In the absence of existence of any valid orders u/s 201(1) and 201(1A) of the Act the proceedings flowing therefrom also get annulled. We, therefore, overturn the impugned orders and quash the orders of Ld. AO by which the assessee was held to be ‘assessee in default’ in terms of section 201 of the Act. The grounds of appeals stand allowed accordingly.