KUMARAN M Vs. STATE OF KERALA

JUDGEMENT

(1.) Main question to be decided in this case is whether Land Acquisition Officer can deduct income tax at source, from the interest payable on the enhanced compensation on a reference under S.18 of the Land Acquisition Act. While depositing enhanced compensation with interest on the basis of the decree in L. A.R. No. 29 of 1988 of the Sub Court, Palakkad, income tax was deducted at source on the interest, by Exts. P-1 and P-2. Petitioners question the same and it is contended that no deduction of income tax can be made as the entire amount as per the decree should be deposited by the Land Acquisition Officer. It is further contended that the entire amount is a decree debt and as such there is no interest on any income and decree is for the compensation amount on account of the property acquired by the respondents and therefore, no income tax can be deducted.

(2.) Heard learned Government Pleader.

(3.) First of all I note that the Income Tax Department or Union of India is not made a party in the proceedings and as such the Original Petition itself is not maintainable. The questions whether the interest payable on the enhanced amount as per the land acquisition decree is liable for payment of income tax and whether income tax deduction should be made were considered by various courts. The Supreme Court in Rama Bai v. C.I.T. ((1990) 181 ITR 400) held that the interest on enhanced compensation for land compulsorily acquired under the Land Acquisition Act awarded by a Court on a reference under S.18 of the Land Acquisition Act or on further appeal is liable for payment of income tax and S.194A of the Act empowers the person who is responsible for making the payment to deduct income tax. Supreme Court also held in the above case that the interest on enhanced compensation for land compulsorily acquired under the Land Acquisition Act awarded by the court has to be taken to have accrued not on the date of the order of the court granting enhanced compensation but as having accrued year after year from the date of delivery of possession of the land till the date of such order and such interest cannot be assessed to income tax in one lump sum in the year in which the order is made.