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CHEQUE BOUNS CASE

The revenue sought to deduct tax at source on the interest component- Section 145(b) of the Income Tax Act has been introduced which provides that the interest component of the compensation will be the income of the year in which it is received. As such, the question of spread over will not arise and if that question does not arise, tax must necessarily be deducted at source.

THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B. LOKUR

Seal of Andhra Pradesh

Seal of Andhra Pradesh (Photo credit: Wikipedia)

AND

THE HON’BLE SHRI JUSTICE SANJAY KUMAR

W.P. No.6425 of 2012

DATED:09-03-2012

Between:

Sannapureddy Pakkeera Reddy

…  Petitioner

And

The Special Deputy Collector,

Telugu Ganga Project, Unit – I (L.A.),

Kadapa and another.

… Respondents

THE HON’BLE THE CHIEF JUSTICE SHRI MADAN B. LOKUR

AND

THE HON’BLE SHRI JUSTICE SANJAY KUMAR

Writ Petition  No.6425 of 2012

 

ORDER: (per the Hon’ble the Chief Justice Shri Madan B. Lokur)

1.         The petitioner was awarded compensation for acquisition of his land under the provisions of the Land Acquisition Act, 1894 (for short ‘the Act’).  The petitioner was also awarded interest on the compensation.

2.         The revenue sought to deduct tax at source on the interest component. This was objected to by the petitioner and it is under these circumstances that the present writ petition has been filed.

3.         Learned counsel for the petitioner relies upon a decision of the Supreme Court in BIKRAM SINGH vs. LAND ACQUISITION COLLECTOR & Others[1]

4.         In our opinion, that decision is not at all applicable to the facts of this case.

5.         That apart, we find that Parliament has since introduced Section 145-A to the Income Tax Act.  Clause(b) thereof provides that notwithstanding anything contained in Section 145 of the Income Tax Act, interest received by an assessee on compensation or on enhanced compensation, as the case may be, shall be deemed to be the income of the year in which it is received.

6.         Section 194-A of the Income Tax Act is also of some importance and this deals with interest other than interest on securities. This Section provides that when there is a credit of income to the account of the payee or payment thereof in cash or by issue of a cheque or draft or by any other mode, income tax may be deducted thereon at the rates in force.

7.         The revenue was therefore, entitled to deduct tax at source from the interest component of the compensation received by the petitioner.

8.         Paragraph-10 of the decision rendered in Bikram Singh’s case  has to be read in the light of the facts of that case and the law as it stood then.  The Supreme Court held that the interest component of compensation is exigible to tax as a revenue receipt. However, the assessee was entitled to spread over the interest income over the period for which payment came to be made so as to compute the income for assessing tax.  Under these circumstances, Section 194-A of the Income Tax Act had no application since it encompassed deduction of the tax at source.

9.         As mentioned above, Section 145(b) of the Income Tax Act has been introduced which provides that the interest component of the compensation will be the income of the year in which it is received.  As such, the question of spread over will not arise and if that question does not arise, tax must necessarily be deducted at source.

10.       We may note that a Division Bench of this Court has taken a similar view in  K. Siva Lingam Naidu vs. The Revenue Divisional Officer-cum-Land Acquisition Officer, Nandyal, Kurnool District                           (W.P. No.30333 of 2010, decided on 11.4.2011).

11.       There is no merit in the writ petition and it is accordingly dismissed.

12.       The miscellaneous application is also dismissed.

 

 

 

MADAN B. LOKUR, CJ

 

 

   SANJAY KUMAR, J

09-03-2012

pnb

 


[1]( 1997) 10 SCC 243

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