LEELA BHAGWANSING ADVANI Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioners are aggrieved by the action on the part of the respondents in deducting tax at source while paying the amount of compensation on acquisition of the land belonging to the petitioners. The petitioners have also challenged the constitutional validity of Section 194LA of the Income Tax Act, 1961.

(2.) As regards the deduction of tax at source is concerned, the argument of the petitioners is that under Section 12(2) of the Land Acquisition Act, the compensation was payable to the petitioners immediately after the Award dated 30 th May 1995. It is contended that if the amount of compensation was paid immediately after the Award, then there would have been no question of deducting tax at source under Section 194LA of the Act, because the said Section 194LA was not on the statute book on the date of the Award i.e. 30 th May 1995 and that the said Section was inserted subsequently by Finance (No.2) Act, 2004 with effect from 1 st October 2004. There is no merit in the above contention because, the question of deducting tax at source arises at the time of making payment. In the present case, compensation was paid on 28 th April 2010 and on that day, Section 194LA was on the statute book and, therefore, tax had to be deducted while making the payment of compensation. For the delay in paying the compensation, the petitioners have been paid interest and, therefore, the fact that the compensation has been paid belatedly, cannot be a ground to hold that the compensation with interest has to be paid without deducting tax at source. Hence, the argument of the petitioners that the respondents ought not to have deducted tax at source while paying the compensation cannot be accepted.

(3.) As regards the constitutional validity of Section 194LA is concerned, the only argument advanced on behalf of the petitioners is that, under the erstwhile Section 194L, tax was to be deducted at source on the income component of the compensation whereas under Section 194LA, tax is required to be deducted at source on the entire amount of compensation which includes the cost of the land. It is contended that the cost of the land does not involve any income element and, therefore, Section 194LA which mandates deduction of tax at source on the entire amount of consideration including the cost of the land must be held to be unconstitutional.