Income-tax Appeal No.456 of 2008 -1- *** IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Income-tax Appeal No.456 of 2008 Date of decision: 23.2.2011 Land Acquisition Collector-cum-A.C.A., Punjab Urban Planning and Development Authority (PUDA), Jalandhar ...Appellant Versus The Income Tax Officer, T.D.S. Circle, Range III, Jalandhar ...Respondent CORAM: HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MR.JUSTICE AJAY KUMAR MITTAL Present: Mr. Ashish Grover, Advocate for the appellant. Mr. Vivek Sethi, Senior Standing Counsel for the respondent **** ADARSH KUMAR GOEL, J ( Oral) . 1. This order will dispose of ITAs No.456 and 457 of 2008 as it is stated that both the appeals are inter-connected. 2. ITA No.456 of 2008 has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (“the Act”) against order dated 26.10.2007 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in ITA No.87/ASR/2004, for the assessment year 2000-01, claiming following substantial questions of law:- “i). Whether the ld. ITAT Amritsar was right in law holding that the appellant came within the definition of 'person' as defined in Section 194L of the Income Tax Act? ii) Whether the ld. ITAT Amritsar was right in law in Income-tax Appeal No.456 of 2008 -2- *** holding that the land for the acquisition of which compensation was paid, was a capital asset and whether the compensation for the said land represented the income on which tax was deductible at source? iii) Whether the ld. ITAT Amritsar was right in holding that the order of the Income Tax Officer was rightly issued under Section 201(A) of the Act when the same could be ordered only under 201(2) of the Act? iv) Whether the ld. ITAT Amritsar was right in holding that the income of the appellant was not exempt under Section 10(20A) of the Act. v) Whether the ld. ITAT Amritsar was right in law in holding that the additional ground no.4 in the appeal before it, pertaining to the filing of returns by the land owners declaring loss on account of land acquired by appellant, could not be admitted in proceedings before it? 3. The assessee is an authority acting as a Collector under the provisions of the Punjab Regional and Town Planning and Development Act, 1995. Under the said Act agricultural land was acquired for setting up an urban estate at Kapurthala and compensation was paid to the land owners. However, no tax at source was deducted under Section 194LA of the Act on account of which the Assessing Officer treated the appellant as assessee in default and recovered the amount which according to it should have been deducted towards tax liability. The said order has been upheld by the CIT(A) as well as the Tribunal. The finding recorded by the Tribunal is as under:- Income-tax Appeal No.456 of 2008 -3- *** “The next contention of the assessee is that the land for the acquisition of which the compensation was paid, is not a capital asset, such land being agricultural land, and that thus, no tax liability has arisen against those farmers who had made the payment. In this regard, the learned CIT(A) has observed in the impugned order, and correctly so, that the land represented a capital asset, since PUDA had acquired it and had paid compensation for the same; that the land was acquired for setting up an urban estate at Kapurthala and that the land had to be a part of Kapurthala Town; and that accordingly, it was a capital asset and the compensation thereon represented income on which income tax was deductible. The assessee has not been able to refute these findings of fact recorded by the learned CIT(A), with which we entirely concur while rejected this contention of the assessee.” 4. We have heard learned counsel for the parties. 5. Learned counsel for the appellant submitted that agricultural land was not covered by definition of capital asset under Section 2(14) of the Act and thus compensation for acquisition thereof was not capital gain taxable under the Act. Reliance has been placed on judgment of this Court in Risal Singh and another Vs. Union of India and others [2010] 321 ITR 251 (P&H). It is submitted if there was no taxability the appellant could not be treated as assessee in default. The assessing officer, CIT(A) as well as the Tribunal have failed to go into this question and assumed the agricultural land to be capital asset only on the ground that same was acquired for the purpose of urban estate which ignores the statutory definition under Section 2(14). Income-tax Appeal No.456 of 2008 -4- *** 6. Learned counsel for the revenue has not been able to dispute the legal position that unless the acquired land falls under Section 2(14), there is no liability to deduct tax at source while disbursing compensation for acquisition of land as held by this Court in Risal Singh. 7. In view of above questions raised have to be answered in favour of the appellant. The appeal is allowed, the impugned orders are set aside and the matter is remanded to the Assessing Officer for fresh decision in accordance with law. 8. The assessee may appear before the Assessing Officer for further proceedings on 30.5.2011. (Adarsh Kumar Goel) Judge February 23, 2011 (Ajay Kumar Mittal) Pka Judge