CIVIL WRIT JURISDICTION CASE No.12552 of 1996 In the matter of an application under Article 226 of the Constitution of India. 1. MD.HASSAN NOOR son of Noor Elahi, resident of village Koshakipur, Police Station Araria, District Araria 2. Mohammad Khalique son of Nasiruddin, resident of Village Doria Somepur, Police Station Forbesganj, District Araria 3. Abdur Reyan son of Md. Raza, resident of Najgama, Police Station Araria, District Araria 4. Md. Saleem Ansari son of A Rashid, resident of Araria Town, Police Station and District Araria 5. Md. Salman son of Alauddin, resident of Village Dumaria, Police Station Araria, District Araria……..Petitioners Versus 1. THE STATE OF BIHAR 2. Secretary Land Reforms, Revenue Department, Government of Bihar, Patna 3. The Collector, Araria 4. Additional Collector, Araria 5. Land Reforms Deputy Collector, Forbesganj 6. Land Reforms Deputy Collector, Araria 7. Commissioner of Income Tax, Muzaffarpur ………….Respondents For the Petitioners :M/s Bidhanesh Mishra Rajendra Kumar Jha Ms. Tanuja Mishra For the State of Bihar : Mr. Anil Kumar Singh Assistant Counsel to GP 16 For Respondent no.7 :Mr. Harshavardhan Prasad Senior Standing Counsel Mr. Rishi Raj Sinha Junior Standing Counsel ********** P R E S E N T THE HON'BLE MR. JUSTICE SUDHIR KUMAR.KATRIAR THE HON'BLE MR. JUSTICE BIRENDRA PRASAD VERMA S K Katriar, J. Five petitioners have joined this writ petition with the common prayer to issue a writ of mandamus to respondent no.3, to refund the sum of Rs.2,03,186.43p., being the amount of tax deducted at source (hereinafter referred to as TDS), within the meaning of Section 194A of the Income Tax Act 1961 (hereinafter referred to as the Central Act). The two sets of respondents, namely, respondent nos. 1 to 6, and respondent no.7, have placed on record their separate counter affidavits and have supported the impugned action. 2 2. A brief statement of facts essential for the disposal of this writ petition may be indicated. The lands held by the petitioners vested in the State of Bihar by operation of the Bihar Land Reforms Act 1950 (Bihar Act 15 of 1950)(hereinafter referred to as the `Bihar Act’). The petitioners were entitled to compensation with interest in terms of section 32 of the Bihar Act. The petitioners were paid full amount of compensation. However, in view of the difficulties in payment of interest on the compensation amount, the petitioners preferred CWJC No.5071 of 1994 (Hassan Noor & Ors. V. State of Bihar & Ors.), which was allowed by a learned single Judge of this Court by order dated 16.5.1995 (Annexure 1). The same was modified by order dated 6.7.1995 (Annexure 1/A), passed in the same writ petition. The combined effect of the two orders is that the petitioners would be entitled to statutory interest in terms of section 32 of the Bihar Act, i.e. @ 2.1/2%, from 26.1.1955 to 31.3.1973 and thereafter @ 15% per annum from the date of statutory rate of interest became payable. In due implementation of the terms of the Bihar Act, read with the combined effect of the two orders of this Court, respondent no.3 calculated the total amount of interest payable to the five petitioners which came to Rs.9,13,825.88p., out of which a sum of Rs.2,02,303.31p. was deducted as TDS, and the balance amount of Rs.7,11,523.57p. was paid to the petitioners. The petitioners raise a grievance before this Court that, in view of the legal position governing the issue, respondent no.3 was not empowered to deduct the tax at source. Hence this writ petition. 3. Learned counsel for the petitioners has in his elaborate submissions supported the writ petition. On the other hand, learned 3 counsel for respondent nos. 1 to 6, and respondent no.7, in separate sets of submissions, have opposed the writ petition. 4. We have perused the materials on record and considered the submissions of learned counsel for the parties. It appears to us that the amount of interest was paid to the petitioners in the year 1996, a date which will govern the disposal of this writ petition. 5. By the Finance Act (Act no.2) of 1967, being Indian Parliament Act No.20 of 1967, section 194A was inserted in the Central Act. The same was enforced with effect from 1.4.1967. Sub- section 1 of section 194A is reproduced hereinbelow:- “194A. Interest other than “Interest on Securities”- (1) Any person, not being an individual or a Hindu Undivided family, who is responsible for paying to a resident any income by way of interest other than income chargeable under the head “Interest on Securities”, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: Provided that no such deduction shall be made in a case where the person (not being a company or a registered firm) entitled to received such income furnishes to the person responsible for making the payment – (a) an affidavit, or (b) a statement in writing, declaring that his estimated total income assessable for the assessment year next following the financial year in which the income is credited or paid will be less than the minimum liable to income tax.” It is evident on a plain reading of sub-section (1) of section 194A occurring before the proviso thereto, that the amount of interest “at the time of credit”, shall be subject to TDS. However, the proviso thereto stated that no such deduction shall be made, inter alia, in the case of an individual entitled to receive such income if he furnishes to the person responsible for making the payment, an affidavit or a 4 statement in writing that his total income will be less than the minimum liable to income tax. The aforesaid proviso held the field till the last date May 1992. 6. The proviso was omitted by Finance Act 2002, and was substituted by the following proviso, both with effect from 1.6.1992:- “Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed the monetary limits specified under clause (a) or clause (b) of section 44AB during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.” It is evident that with effect from 1.6.1992, the benefit of non- deduction of TDS under the quondam proviso of section 194A came to an end, and the proviso as it stands today provides that TDS shall be deducted from the amount of interest with effect from 1.6.1992. 7. Applying the position of law as obtaining on the date of payment of interest, which was in 1996, the benefit of the quondam proviso was not available to the petitioners, and the amount of interest is liable to TDS. In such a situation, the impugned action cannot be faulted. 8. In the result, this writ petition is dismissed. In the circumstances of the case, there shall be no order as to costs. ( S K Katriar, J. ) Birendra Prasad Verma, J. I agree. ( Birendra Prasad Verma, J.) Patna High Court, Patna The 8th of November 2010 NAFR/ mrl. 5