Monday, 26 October 2015

Whether when there is neither quantification of sum payable nor any actual payment is made, it would still be fair to burden assessee with obligation to deduct tax at source - NO: HC


THE issue is - Whether when there is neither quantification of the sum payable in terms of money nor any actual payment is made in monetary terms, it would be fair to burden a person with the obligation of deducting TDS and exposing him to the consequence of such default. NO is the answer.
Facts of the case
The assessee is an individual. For discharging of its functions i.e., expansion of existing roads and construction of underpasses, etc. Bruhath Bengaluru Mahanagara Palike has to acquire lands. To achieve the purpose, it may resort to compulsory acquisition of lands under the provisions of Land Acquisition Act, 1894 or any such other Act relating to compulsory acquisition of land or take land under Section 14B of the Karnataka Town and Country Planning Act, 1961, where the land owner may voluntarily surrender his land free of cost and handover possession of such lands and in lieu thereof, Certificate of Development Rights are issued by the Authority, whereby, the owner would be granted CDR rights in the form of additional floor area, which shall be equal to 1½ times of area of land surrendered. In the present case, the land has been taken under Section 14B of KTCP Act and not by way of any compulsory acquisition. As such, there was no cash transaction or payment made by BBMP to the land owner. Invoking provisions of Section 194LA, AO treated BBMP as 'assessee' under default for not having deducted the tax at source (TDS) u/s 194LA and deposited the same with the Department. Consequently, after quantifying the amount of value of land so surrendered by the land owner in favour of BBMP, the AO directed that TDS at the rate of 10% u/s 194LA amounting to Rs. 2,41,91,128/- was to be deposited by the assessee. On appeal, CIT(A) dismissed the appeal filed by assessee. On further appeal, Tribunal had allowed the appeal of assessee. The Tribunal had recorded that the provisions of Section 194LA would be applicable only in case of compulsory acquisition, whereas, the lands acquired by BBMP was not by way of compulsory acquisition, but had been surrendered by the land owner u/s 14B of KTCP Act.
Having heard the matter, the Tribunal held that,
++ in the present case, neither there is compulsory acquisition of the land, nor there is any process adopted for quantification or determination of value of land acquired by BBMP which is voluntarily surrendered by the land owner, for which CDRs were given to the land owner. As such, we are in agreement with the finding recorded by the Tribunal that provisions of Section 194LA would not be attracted in the present case. Even otherwise, the Tribunal has rightly observed that the provisions of deducting tax at source and paying it over to the Government on behalf of the recipient of payment, is in the nature of vicarious liability. When there is neither quantification of the sum payable in terms of money nor any actual payment is made in monetary terms, it would not be fair to burden a person with the obligation of deducting tax at source and exposing him to the consequence of such default. The concept of TDS and depositing the same with the Revenue is where payment is made by cash, cheque, demand draft or any other similar mode. When such payment in terms of money is made, the deduction is to be made by the person responsible to pay, and is to deposit the same with the Income Tax Department, which would be adjusted and credited to the account of the person on whose behalf such amount is paid to the Income Tax Department, and in such a case, such person, who would then be an assessee before the Department, would be entitled to adjustment of the amount so deducted as TDS on behalf of the said assessee. When no payment is made by BBMP to the land owner in terms of money, such deduction is neither possible nor is conceived u/s 194LA. As such, in view of the aforesaid discussion, we are of the view that the order of the Tribunal is perfectly justified in law and no question of law arises in these appeals for determination by this Court. The appeals are accordingly dismissed.

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