Interest on delayed receipt of compensation on land acquisition is liable to TDS

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HIGH COURT OF MADHYA PRADESH

Rameshwar

v.

Ujjain Development Authority

WRIT PETITION NO. 2153 OF 2011(O)

FEBRUARY 28, 2012

The acquisition is of the year 2001 while the compensation has been paid somewhere in the year 2009. Keeping in view the law laid down by the Apex Court in the matter of Bikram Singh v. Land Acquisition Collector [1996] 89 Taxman 119, it is to be held that interest received on delayed payment is a revenue receipt exigible to Income-tax. Since the amount has already been deposited by the respondent-authority and the deduction is in accordance with section 194A, therefore, no illegality has been committed by the Court below in upholding the action taken by respondent-authority in deducting the amount. However, since the award was passed on 7-9-2001 and the compensation was paid somewhere in the year 2009, therefore, the interest paid is on account of delayed payment of compensation for years 2001 to 2009, therefore, keeping in view the law laid down by the Apex Court in the matter of Rama Bai v. CIT [1990] 181 ITR 400 where following the earlier decisions it was held and clarified that the interest cannot be taken to have accrued on the date of order of Court granting enhanced compensation but has to be taken as having ‘accrued year after year from the delivery of possession of the land till the date of such order and in the case of K.S. Krishna Rao v. CIT [1990] 181 ITR 408 it was held that where a compensation awarded under the Land Acquisition Act or on further appeals, interest on enhanced compensation cannot be taxed all in a lump sum as having accrued on the date on which the Court passes order for enhanced compensation; the interest has to be spread over on annual basis right from the date of/delivery of possession till the date of order on a time basis. Petition filed by the petitioner is disposed of with a direction that respondent – authority shall issue form No. 16-A to the petitioners upon receipt of Permanent Account Number (PAN) from them. Income-tax Department shall while assessing the liability of tax of the individual assessee shall take into consideration the fact that the interest received is from the years 2001 to 2009. With the aforesaid observations petition stands disposed of.