TDS from compensation paid under any law:

We find provisions for deduction of tax at source from the amount of compensation or additional compensation by way of enhancement etc. when certain capital assets are compulsorily acquired under any law. The provisions provide circumstances and conditions for TDS. We find that S.194L (operative up to 31.05.2000) is for TDS from compensation of any capital asset (which could be movable or immovable property). Operation of this section was suspended w.e.f. 01.06.2000 and a new section that is S. 194LA was inserted w.e.f. 01.10.2004 in respect of immovable property (other than agricultural land). Thus S.194L was wider to cover any capital asset whereas S. 194LA covers only immovable properties (other than agricultural land).

We notice that after making section 194L non operational w.e.f. 01.06.2000 vide the Finance Act, 2000 new section 194LA was inserted w.e.f. 01.10.2004 vide the Finance (No.2) Act, 2004. New section is restricted to compensation etc. payable in respect of immovable property, other than agricultural land. There is no doubt or ambiguity that in case the property is any agricultural land then TDS is not required. This is clear in the language of section wherein in bracket 'other than agricultural land' is mentioned, this is also mentioned vide Explanation (ii) to the section. Any agricultural land is excluded, it is not a case that the agricultural land should not be a 'capital asset'. Whether agricultural land is capital asset or not will make no difference.

Analysis of High Court's observation as to facts of the case and arguments of parties:
(Risal Singh & Anr. v. UOI & Ors. [2010 -TMI - 75720 - PUNJAB AND HARYANA HIGH COURT])

A bare perusal of the provisions clearly shows that TDS is required in respect of compensation paid for acquisition of immovable property other than agricultural land. That is no TDS is required for compensation for agricultural land , there is no jurisdiction to deduct tax from compensation for agricultural land.

The stand of the Income-tax department that since there is remedy of getting the assessment done and to receive refund, the writ petition was not maintainable, cannot be accepted in view of (a).

Deduction of tax at source, without determining the plea of the petitioner that the land was agricultural land, was not justified.

The amount is said to have been remitted to the Income-tax Department which is illegal.

Analysis of High Court's observation as to facts of the case and arguments of parties:

The writ petition was accordingly allowed.

The Income-tax Department to refund the amount to the Collector within one month from the date of receipt of a copy of the order.

Thereafter, the Collector will determine whether compensation paid is for property other than agricultural land or otherwise and whether deduction of tax at source was permissible under any provision of law. This will be decided by the Collector within two months from the date of receipt of a copy of the order.

If deduction is found not permissible, the amount will be refunded to the petitioners not later than three months from receipt of a copy of the order.

It is made clear that this order will not affect the right of Income-tax Department to take such action as may be permissible under the law.

The finance ministry has also issued a directive to its field officials clarifying that no tax is to be deducted on compensation paid in lieu of acquisition of rural and urban agricultural land and they should not insist on authorities to deduct tax. "A circular has been issued clarifying the matter," a ministry official said.

TDS contributes more than 35% to total direct taxes collections. There has been growing on emphasis on TDS as it is a neat and efficient way of collecting taxes, which also helps in establishing an audit trail.

Tax has to be deducted whenever a payment is made above Rs 20,000. Though all agricultural land is exempt from taxations, non-agricultural lands are liable to tax. Compensation for acquisition of urban agricultural land that is exempt from tax deduction at source attracts capital gains tax.

2426Q DUE DATE 44AB 44AE 44AF 49A 49AA 54 54B 54EC 54f 80C 80CCC 80CCD 80CCE 80CCF 80E 89(1) aces agricultural land amt on llp bank BANKS bounced cheque BUDGET BUDGETING buyers agreement CA AUDIT LIMIT capital gain carry forward losses challan booked status challan correction changes in challan changes in pan application form changes in pan data CIC CII citizen charter delhi companies tax rates company pan coparcener CORRECTION IN BANK CHALLAN correction in challan correction in etds return COST INFLATION INDEX CREDIT CARD DEDUCTION DEFAULT NOTICES dividend distribution tax (DDT) documents with pan DUE DATE FOR SERVICE TAX RETURN e paymnet of excise duty e-payment of service tax e-return by Legal Heir efiling of return elss etd return rejection ETDS etds return due date etds statement correction exchange traded funds excise return fcnr FESTIVAL SEASON firm tax rates FORM 16A form 24Q DUE DATE FORM 27Q DUE DATE free software er-1 free software st-3 FVU get pan with name and dob gift gold gold etf gratuity taxabilty house HOUSE LOAN house property house purchase agreement purchase house rent calculator house sale how to calculate tds on salary hra hra calculation huf pan huf (hindu undivided family) icai toolbar identity proof income tax challan income tax help toolbar income tax rates income tax rates firms income tax rates llp income tax refund income tax return income tax slabs individual pan INFRASTRUCTURE BONDS inter head adjustment inter source adjustment INTEREST INTEREST ACCRUED ON NSC interest on late closer kvp nsc time deposit post office interest on late deposit interest rate on tds late deposit investment plans itr-v itr-v status joint account kissan vikas patra know your pan kvp late deposit of tds leave travel concession lic life insurance limited liability partnership llp loan against rent long term capital gain ltcg mandatory e filing mat(minimum alternate tax ) minor pan mutual fund statement mutual funds negotiable instrument act new pan application form nri nro nsc NSC INTEREST pan application pan data pan form pan name pan verification pan with name physical gold pio POST OFFICE RB ACCOUNT post office time deposit ppf ppf limit 100000 ppf Limit 70000 or 100000 PREPAYMENT CHARGES proof of residence public provident fund RBI registration at aces relief on gratuity repo rate return verification reverse repo rate REVISED ETDS RETURN revised return RIGHT TO INFORMATION RTI saving bank rate SBI scrutiny cases scrutiny guidlines ay 2010-11 SERVICE TAX SERVICE TAX RETURN DUE DATE NOTIFICATION SERVICE TAX RETURN set off losses SHOPPING short term capital gain stcg SUB CONTRACTOR TAN REGISTRATION tax on gratuity tax on salary income tax rate on llp. tax savings TCS RATES TDS 194 A tds certificate TDS IN COURT CASE TDS ON AGRICULTURE LAND TDS ON COMPENSATION tds on salay TDS RATES TDS RATES 10-11 TDS RATES 11-12 who can sign return WORKS CONTRACTOR
Income Tax India
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