IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CWP No. 1493 of 2001 Date of Decision: September 23, 2009 Bhula Ram and others …Petitioners Versus Union of India and others …Respondents CORAM: HON'BLE MR. JUSTICE M.M. KUMAR HON’BLE MR. JUSTICE JASWANT SINGH Present: Mr. Yash Paul Malik, Advocate, for the petitioners. Mr. Sunil Nehra, AAG, Haryana, for respondent Nos. 2 and 4. 1. To be referred to the Reporters or not? 2. Whether the judgment should be reported in the Digest? M.M. KUMAR, J. This petition filed under Article 226 of the Constitution challenges letter dated 2/16.5.2000 (P-9) issued by the Income-tax Officer- respondent No. 5, which, in fact, is a reply to the legal notice dated 29.1.2000 (P-7) sent by the petitioners claiming refund of the TDS amount. The claim of the petitioners has been rejected. The petitioners have also prayed that the respondents be directed to refund the TDS amount of Rs. 11,60,451/- along with interest, which was deducted at source out of the compensation awarded to them as a result of acquisition of their land prior to 1.6.1999. Brief facts of the case are that the agricultural land of the petitioners was acquired by the State of Haryana for development of Sector 29, Panipat by the Haryana Urban Development Authority. On 18.3.1985, Award C.W.P. No. 1493 of 2001 No. 9 was passed granting compensation. The regular first appeals filed by the petitioners were dismissed, however, the Letters Patent Appeals filed against the judgment of the learned Single Judge were allowed by the Letters Patent Bench and enhanced compensation was granted to the petitioners. It is claimed that the State of Haryana was directed to release the enhanced compensation in instalments from 20.3.1998 to 8.1.1999. While disbursing the enhanced compensation, the respondents have deducted a total amount of Rs. 11,60,451/- being tax at source (TDS). Form-D containing the details of the TDS and the Certificates in Form No. 16-A have been placed on record (P- 1 to P-6). It has been claimed that the TDS Certificates were issued only to petitioner Nos. 1 and 2. On 29.1.2000, the petitioners sent a legal notice for refund of the amount of TDS claiming that the same could not have been deducted under Section 194-A of the Income-tax Act, 1961 (for brevity, ‘the Act’). However, the claim of the petitioners has been rejected by respondent No. 5 vide letter/reply dated 2/16.5.2000, which is subject matter of challenge in the instant petition. In the written statement filed by the Land Acquisition Collector, Urban Estate, Haryana-respondent Nos. 2 and 4, the stand taken is that TDS amount has been deducted by the beneficiary department, namely, Haryana Urban Development Authority and deposited by it as per the provisions of Section 194A of the Act. The aforesaid provision contemplates deduction of TDS on the interest of enhanced amount of compensation in respect of land acquisition cases. Accordingly, TDS certificates have been issued to those persons who have filed their representations. The aforesaid factual position has not been controverted by the petitioners by filing any counter affidavit to the written statement. It appears to be well settled that under Section 194A of the Act, 2 C.W.P. No. 1493 of 2001 TDS could be deducted from the interest realised from enhanced compensation. A similar petition came up for our consideration in the case of Karnail Singh v. State of Haryana and others (CWP No. 21077 of 2008, decided on 13.8.2009). After discussing the relevant provision of Section 194LA of the Act and the expression of ‘agricultural land’ as defined in Section 2(14)(iii)(a) & (b) of the Act as also the notification No. 9447 (F.No. 164/3/87-IT(A-1) dated 6.1.1994, issued by the Central Government, the following question of law was framed in the said case: “Whether the interest accrued on the delayed payment of enhanced amount of compensation would partake the character of compensation taken from ‘agricultural land’ and, therefore, is assessable to deduction of TDS?” We have answered the aforementioned question in the following terms: “ The answer to the aforesaid question would depend upon as to whether interest is regarded as revenue receipt attract- ing the charging section of the Act or it could be described as damages or compensation in lieu of the owners right to retain pos- session. The controversy had erupted before Hon'ble the Supreme Court in the case of Dr. Sham Lal Narula v. CIT, AIR 1964 SC 1878. The Supreme Court after considering the concept of interest laid down by the Privy Council and many other judgments has held as under: “In a case where title passes to the State, the statutory inter- est provided thereafter can only be regarded either as repre- senting the profit which the owner of the land might have made if he had the use of the money or the loss he suffered 3 C.W.P. No. 1493 of 2001 because he had not that use. In no sense of the term can it be described as damages or compensation for the owner’s right to retain possession, for he has no right to retain pos- session after possession was taken under Section 16 or Sec- tion 17 of the Act. We, therefore, hold that the statutory in- terest paid under Section 34 of the Act is interest paid for the delayed payment of the compensation amount and, therefore, is a revenue receipt liable to tax under the Income Tax Act.” The aforesaid proposition of law has been consis- tently reiterated by Hon'ble the Supreme Court in later judgments including the cases of T.K.N. Govindaraja Chetty v. CIT, (1967) 66 ITR 465 and K.S. Krishna Rao v. CIT, (1990) 181 ITR 408. Accordingly it has been accepted to be settled law that interest received on delayed payment of compensation is revenue receipt exigable to income tax. The issue came up before Hon'ble the Supreme Court in the case of Bikram Singh v. Land Acquisition Collector, (1997) 10 SCC 243. After referring to various judgments of Hon'ble the Supreme Court it was concluded that interest on de- layed payment on the acquisition of immovable property would be revenue receipt and would thus be exigable to tax. The view of Hon'ble the Supreme Court is discernible from the perusal of para 10 of the judgment which reads thus: “10. But the question is whether the interest on delayed payment on the acquisition of the immovable property un- der the Acquisition Act would not be exigible to income 4 C.W.P. No. 1493 of 2001 tax? It is seen that this Court has consistently taken the view that it is a revenue receipt. The amended definition of “interest” was not intended to exclude the revenue receipt of interest on delayed payment of compensation from tax- ability. Once it is construed to be a revenue receipt, neces- sarily, unless there is an exemption under the appropriate provisions of the Act, the revenue receipt is exigible to tax. The amendment is only to bring within its tax net, income received from the transaction covered under the definition of interest. It would mean that the interest received as in- come on the delayed payment of the compensation deter- mined under Section 28 or 31 of the Acquisition Act is a taxable event. Therefore, we hold that it is a revenue receipt exigible to tax under Section 4 of the Income Tax Act. Sec- tion 194-A of the Act has no application for the purpose of this case as it encompasses deduction of the income at the source. However the appellants are entitled to spread over the income for the period for which payment came to be made so as to compute the income for assessing tax for the relevant accounting year.” Once interest is regarded as revenue receipt then it would fall within the mis-chief of Section 4 of the Act which is a charging section. Therefore, it follows that TDS under Section 194 A of the Act is to be paid by the petitioner in respect of the interest income on the delayed payment. The argument of the counsel for the petitioner that in- terest income would partake the character of the enhanced amount 5 C.W.P. No. 1493 of 2001 of compensation which is agricultural income has to be answered in the negative and against the assessee. As a sequel to the aforesaid discussion, the instant petition fails and the same is dismissed.” Having heard learned counsel for the parties and perusing the paper book, no doubt is left that the issues raised in the instant petition are squarely covered by our judgment rendered in the case of Karnail Singh (supra). Accordingly, the instant petition fails and the same is dismissed in terms of our judgment rendered in the case of Karnail Singh (supra). (M.M. KUMAR) JUDGE (JASWANT SINGH) September 23, 2009 JUDGE Pkapoor 6