Commissioner of Income Tax[TDS] V. M/s Greater Hyderbad Municipal Corporation

ITTA/665/2014

AI Insights

The case involves an appeal by the Commissioner of Income Tax (TDS) against the Greater Hyderabad Municipal Corporation concerning the applicability of Tax Deduction at Source (TDS) under Section 194LA of the Income Tax Act, 1961, for land acquired under Section 146 of the Hyderabad Municipal Corporation Act, 1955. The core legal question was whether the acquisition of land by the municipal corporation constituted 'Compulsory Acquisition' necessitating TDS deductions. The Tribunal had previously ruled that it did not, leading to the present appeal. The High Court, after reviewing the provisions and the nature of the acquisition, agreed with the Tribunal's decision, emphasizing that the acquisition was a voluntary transfer and not a compulsory one.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 677951 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 26-11-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Hyderabad Municipal Corporation Act, 1955
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: B SARMA
• Keywords: Assessment Year 2010-2011; Compulsory Acquisition; Immovable Property; Tax deduction at source; Voluntary Transfer
• Section: 194LA; 146

Judgement Text

"HIGH COURT OF JUDICATURE AT HYDERABAD FOR THE STATE OF TELANGANA AND THE STATE OF ANDHRA PRADESH PRESENT THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE 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. Guards Hyderabad … Appellant And M/s. Greater Hyderabad Municipal Corporation Head Office, Tank Bund, Near Liberty Hyderabad … Respondent THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE 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 and order of the learned Tribunal, dated 18.6.2014, in relation to the assessment year 2010-2011, on the following suggested questions of law: i. “In the facts and circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in holding that the acquisition of land under Section 146 of the Hyderabad Municipal Corporation Act does not fall under “Compulsory Acquisition” to be liable to TDS [Tax Deduction at Source] under Section 194LA of the Income Tax Act, 1961? ii. In the facts and circumstances of the case, whether the Hon’ble Tribunal is correct in law in holding that the acquisition made under Section 146 of the Hyderabad Municipal Corporation Act were not liable for TDS [Tax Deduction at Source] under Section 194LA of the Income Tax Act, 1961, without appreciation that the deductor itself had deducted TDS [Tax Deduction at Source] on the land component of such acquisitions, which clearly indicates that even the acquisitions so made were “Compulsory Acquisitions” only? iii. In the facts and circumstances of the case, whether the Hon’ble Tribunal is correct in law in not holding that the deductor should have deducted TDS (Tax Deduction at Source] in respect of the structural component also, having accepted the applicability of Section 194LA of the Income Tax Act, 1961 in respect of the land component of the acquisition made as per Section 146 of the Hyderabad Municipal Corporation Act?” We have heard Sri B. Narasimha Sarma, learned counsel for the appellant Revenue, who says that the learned Tribunal should have applied the provisions of Section 194LA of the Income Tax Act, 1961, as on fact it is a case of payment of compensation for acquisition of immovable property by the municipal body under Section 146 of the Hyderabad 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 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 (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 two hundred thousand rupees.” It is clear from the aforesaid Section that for making payment of compensation in the case of compulsory acquisition of immovable property the provisions of Section 194LA of the Act will be applied. On a reading of Section 146 of the HMC Act, we notice that it is a voluntary transfer by agreement. Compulsory acquisition of the property is nothing but involuntary act of transfer, whereas Section 146 of the HMC Act enables the Commissioner of the Municipal Corporation to acquire property by agreement with the owner. In other words, it is a voluntary transfer. The consideration money was paid for acquisition of the property under Section 146 of the HMC Act. The word ‘compensation’ used in compulsory acquisition is wider one and it takes care of not only market value but also other payments, namely solatium and interest and other things. Accordingly, we hold that the Tribunal has correctly not applied the aforesaid provision in the transaction and it also appears from the impugned judgment that similar issue came up earlier in the case of same 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 "