INFOPARK KERALA Vs. ASSISTANT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question that falls for decision is the scope of Section 194la of the Income Tax Act, 1961, which reads as follows:

(2.) PETITIONER is a Society established under the Travancore Cochin Societies Registration Act, 1955. It is managed by a Board nominated by the Government of Kerala and it is set up with the objective of development of Information Technology Parks. Briefly put the case of the petitioner is as follows: as and when the land is identified, which is suitable for the project, Government issues notification under Section 4 of the Land Acquisition Act, 1894 notifying the lands. A notification is also issued under Section 6 (1) of the Survey and Boundaries Act, 1961. The price of the land is determined by the District Level Purchase Committee, which consists of District Collector as Chairman. There is an assessment of the replacement value of the land and the recommendation of the District Level Purchase Committee is forwarded to the Empowered Committee for approval. The Empowered Committee consists of the Chief Secretary of the State as the Chairman. The other members are the Principal Secretary, Secretary (Finance), Secretary (PWD), Secretary (Law), Secretary (FTP) and any other member nominated by the Chief Secretary. It considers the proposal and would make necessary modifications. The title deeds are to be verified by the Land Acquisition Officer and there is a scrutiny of the title deeds by Advocates and on the basis of the opinion expressed by the counsel and the Land Acquisition Officer, recommendations are issued. It is the further case of the petitioner that the transaction entered into by the petitioner for acquisition of land falls into two categories. The first category consists of those transactions where the land owners arrive at an agreement and they execute the sale deed in favour of the petitioner. The second category consists of cases where negotiated agreement is not arrived at and acquisition is done under the Land Acquisition Act. According to the petitioner, in the first category of transaction there is a sale of property, which is covered by the provisions of Transfer of Property Act and it does not consist of acquisition of property by the Government for the project. In a case where there is acquisition of property by the Government, the procedure involves issuance of a notification under Section 4, which constitutes a preliminary notification, declaration under Section 6 and direction under Section 7. Thereafter, the property has to be marked unless it is marked under Section 4. Under Section 9, the Collector issues notice to the parties to enable the making of claims, and inquiry has to be held and finally an award is to be passed under Section 11 of the Act. Section 48 of the Land Acquisition Act permits withdrawal of the Government from the acquisition except in a case covered by Section 36 of the Act, that is where possession has not been taken. Ext. P1 is produced as the guidelines issued by the Government. Ext. P2 is produced as copy of the notification under Section 4 of the Land Acquisition Act and Section 6 of the Survey and Boundaries Act. Ext. P3 is copy of the sale deed executed by the land owner. It is while so Ext. P4 is issued. Therein, Section 194 LA of the Income Tax Act is referred to and it is inter alia stated as follows: "from the enquiries conducted by this office, I am given to understand that acquisition of land for Infopark (Smart City Project) is being done on the strength of the notification issued by the Government. The mode of execution may have been through sale deeds after reaching a negotiated agreement on the amount to be paid as compensation, but the proceedings are carried out as a consequence of notification issued under the Land Acquisition Act, 1894, to acquire the specified land area. Once a particular area has been notified by Government for acquisition for a specified purpose, there is no option for the owners but to sell. The only difference in this case is that it has been brought under Fast Track Procedure to expedite the process of land acquisition, and consideration/compensation is decided through the medium of District Level Purchase Committee and Grievance Redressal Committees. This being the case, even if sale deeds are executed, it is, in effect, compulsory acquisition of land within the meaning of Section 194la, and tax should therefore be deducted on all such payments. In respect of payments already made without deducting tax at source, proceedings under Section 201 (1)/201 (1a) are separately being initiated. " consequently advice is given to act in accordance with the statutory provisions.

(3.) A counter affidavit is filed by the first respondent inter alia stating as follows: the sale deed is being executed in pursuance of Government notification for land acquisition and Kerala Gazette Notification dated 15. 10. 2004. It is not an ordinary sale deed as it is understood in normal property transaction where land is sold by free will and agreed consideration. Here, the land owner has no choice. Either he agrees to the negotiated price, enters into a sale deed and hands over the land or urgency clause as per Section 17 of the Land Acquisition Act is further invoked and the land is taken possession of by the authorities concerned. In any case, it is stated that the end result is that he has to hand over the land to the project. The element of compulsion is always present. It is clear that this is nothing but compulsory acquisition and upto the execution of the sale deed, there is a factor of compulsion, because proceedings under the Land Acquisition Act are on going. Upon the completion of acquisition of property no proceedings are necessary under the Act and the proceedings are to be withdrawn. Withdrawal under Section 48 is stated to be a formality as the land has already been acquired and passed into the hands of the project implementing authority. It is stated that after conducting enquiries, issuing notice under Section 201 (1), hearing the petitioner and calling for details and materials on record, a letter was sent directing the petitioner to prevent future defaults in tax deduction at source on such payments yet to be made. It is stated that the letter was rather a written direction to prevent future default as already committed. Action under Section 201 (1) has to be taken on the assessee in default, that is the petitioner in this case and it is not to be construed as a threat but as a statutory proceeding as provided in Section 201 (1) and 201 (1a) of the Income Tax Act. Had there been no notification and invoking of land acquisition proceedings, the sale deed would not have been executed. The execution of sale deed expedites the process of land acquisition but since its very genesis is in the notification for acquisition, it cannot be termed a completely voluntary act on the part of the seller. The provisions of Section 194 LA apply to all cases of compulsory acquisition of immovable property regardless of the instrument used to transfer the property. There would be no hardship to the petitioner to deduct tax at source. The fact that the project is of prime importance does not absolve the concerned authorities from dispensing their duty to deduct tax at source from payments covered by Section 194 LA. Respondents have also produced an annexure to the counter affidavit.