NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION No.2244 of 1999 (From the order dated 5.8.1999 & 8.9.99 in Ex. No.07/SC/97-98 the State Commission, Uttar Pradesh) G.D.A. Petitioner Vs Dr. N.K. Gupta Respondent
BEFORE :
HONBLE
MR. JUSTICE D.P. WADHWA, PRESIDENT
HONBLE
MR. JUSTICE J.K. MEHRA, MEMBER
MRS.
RAJYALAKSHMI RAO, MEMBER
MR.
B.K. TAIMNI, MEMBER
Taxation – Deduction of TDS by GDA on the award of interest by way of compensation. Held – Section 194A of the Income-tax Act
not applicable. Award of interest by way of
compensation not interest as
defined in Section 2(28A) of the Income-tax Act.
For the
Petitioner : Mr.
Sudhi Kulshreshtra, Advocate
For the Respondent : N
E M O
Dated the 18th
September, 2002
D.P.WADHWA, J. PRESIDENT
Ghaziabad Development Authority (G.D.A.)
is aggrieved by the order dated 5.8.1999 of the U.P. State Consumer Disputes
Redressal Commission. By this order the State Commission in effect held that it
was wrong on the part of the GDA to deduct TDS (Tax Deduction at Source) from the
amounts payable to the Respondent/Complainant. It was the case of the GDA that
while paying the interest amounting to Rs.46,711/- as ordered by the State
Commission, in a complaint filed by the Respondent, it deducted Rs.8,656/-
towards TDS which amount it deposited
in the account of the Central Government. Certificate showing deduction of tax
and the deposit to this to the account
of the Central Government, have been filed. State Commission was, however, of
the view that there
was no order
passed by it to
deduct the TDS
and when there
was no such
order, no deduction
towards TDS could have been made. State Commission,
therefore, directed that the amount which had been deducted
by the GDA towards the TDS be refunded to the Complainant with interest at the
rate of 18% p.a.
This
order of the State Commission has been challenged by the GDA on the ground that
it was a statutory duty imposed on it under Sec. 194-A of the Income Tax Act,
1961 to deduct the tax and when it has deposited the tax to the account of the
Central Government and has also given a certificate for the tax so deducted to
the Complainant, it could not be said that there was any deficiency in service
on its part or it had contravened the order of the State Commission passed in
the complaint filed by the Respondent/Complainant. Basing reliance on the case of Rama Bai and Ors. Vs. Commissioner
of Income Tax, A.P., Hyderabad & Ors., reported as 1990 (Supp) SCC 699, ‘where interest was paid on an enhanced
compensation and tax was deducted at source’, it was contended that it was
rightful on the part of the GDA to
deduct the tax. In the present case, it
may however, be noticed that Rama Bai’s case arose out of the interest paid
under Sections 28 and 34 of the Land Acquisition Act, 1894 for the enhanced
compensation as awarded in a reference made under Sec.18 of that Act, and,
further appeal to the High Court and the Supreme Court, under the provisions of
that very Act.
To
understand the controversy raised in the present case, it will be appropriate
at this stage to set out certain facts relevant of this case.
Complainant,
Dr.N.K.Gupta, applied to the GDA for allotment of the plot of land in a scheme
known as ‘Kaushambi Housing Scheme’. Dr. Gupta deposited a sum of Rs.35,010/-
through a demand draft on 2.1.1986 with the GDA. However, GDA unilaterally
changed the scheme in February, 1998 and instead of offering the plot, it
offered a self-built up house and flats to the aspirants of the plots. Dr.Gupta
says he had no option, and therefore,
he applied for a two-room flat with a plinth area of 912 sq. ft. for which he
was told the cost was Rs.3,65,000/-. Since Dr.Gupta had already applied for a
plot in the year 1985 and had paid Rs.35,010/-, he was required to pay a
further sum of Rs.3,30,000/-. This total amount was paid by him in five
instalments. He also paid Rs.2,766/- as
interest at the rate of 18% p.a. as one of the instalments was delayed. Under
the scheme, possession of the house was to be given within two years, i.e. by
the end of February, 1990. GDA, however, did not give possession of the flat to
Dr.Gupta. Rather it was on 15.11.11991 that revised price of the house in the
scheme was indicated by giving notice to all concerned. Complainant was
informed that he was to pay a further sum of Rs.37,000/-. However,
subsequently, the total cost of the flat was reduced from Rs.4,02,000/- to
Rs.3,95,000/-. Complainant states that when he visited the flat to obtain
possession on 3.6.1992, it was in the 10th floor. He found that
there was no approach road to the
building in which the flat was situated nor were any lifts installed therein
which could be used to reach his flat. Also, there was no electric connection
in the entire building, though it was advertised that ‘star infrastructural
facilities’ would be available. The scheme was to provide facilities including
the following infrastructural facilities:
–
purchase on
instalments
–
two double lifts in
each block
–
telephone line in
every flat
–
marble flooring in
bathroom/kitchen and kota stone in all public areas
–
geyser connection in
all bathroom/kitchen
–
independent water
supply system
–
24 hours electricity
supply
–
multi-channel antenna
with two close circuit TV channels
–
provision for
centralised air-conditioning in four room apartments
–
space for car
parking.
And., Star infrastructural facilities, as
–
badminton court
–
medical aid
–
swimming pool
–
club
–
health club
–
community centre
–
primary school
–
security arrangements
–
indoor games and
children play area in each block.
Admittedly, the star infrastructural
facilities were not available when the possession of the flat was offered to
Dr.Gupta and also most of other facilities.
State Commission held that representation
by the public authority like the GDA to the intending purchasers that a scheme
under which they were to purchase the flats contained a provision for certain
specific facilities which were not provided and this failure squarely amounted
to deficiency in service on its part. State Commission held that the intending
purchasers were fully justified in refusing to make the additional amounts as
demanded from them and also they were justified in refusing to take possession
of the property so allotted till all the facilities assured by the builder were
provided. In such circumstances, the Complainant demanded refund of the amounts
paid by him with interest. He also demanded compensation at the rate of Rs.5,000/- p.m. being the amount of rent he
would have earned if the possession
could have been given to him as planned. The State Commission considering the
whole aspect of the matter and after appreciation of the evidence came to the
conclusion that the complaint of Dr. Gupta was fully justified and directed the
GDA to refund of the amount paid by the Complainant with interest at the rate
of 18% p.a. from the dates of various
deposits of instalments till the date of payment. State Commission also awarded
costs amounting to Rs.2,000/-. State Commission further directed that the
payments shall be made within a month from the date of the order failing which
GDA shall be liable to pay further
interest at 18% on the entire amount due from it from the due date of payment
till the date of the actual payment to Dr.Gupta. This order of the State
Commission achieved finality and in terms thereof, the amount was to be paid to
the Complainant. From the amount as calculated by way of interest in terms of
this order, the GDA, as noticed above, deducted TDS which lead to the present
controversy.
Mr.
Sudhir Kulshreshta, learned Counsel for
the GDA referred to Section 194-A of
the Income Tax Act to contend that it was
requirement of law for GDA who is responsible for paying to the allottee
any income by way of interest shall, at the time of crediting of such income to
the account of the allottee or at the time of payment thereof in cash or by
issue of cheque or draft or by any other mode to deduct income tax thereon at
the rates in force. This Section 194-A,
in relevant part, reads as under:
“194A.
Interest other than “Interest on securities”
(1)
Any person, not being
an individual or a Hindu undivided family, who is responsible for paying to a
resident any income by way of interest other than income (by way of interest on
securities), shall, at the time of credit of such income to the account of the payee or at the time
of payment thereof in cash or by issue
of cheque or draft or by any other mode, whichever is earlier, deduct
income-tax thereon at the rates in force”.
Reference was also made to a decision of
the Supreme Court in the case of Rama Bai and Ors. Vs. Commissioner of Income
Tax, A.P., Hyderabad & Ors., 1990 (Supp) SCC 699, wherein the question before the Supreme Court was regarding
the point of time at which the interest payable under Sections 28 and 34 of the
Land Acquisition Act, 1894 accrues or arises, where such interest is payable on
enhanced compensation awarded on a reference under Section 18 of that Act or
further appeal to the High Court and/or Supreme Court. It is not clear to us as
to how this judgment has any relevance to the issue before us. Perhaps,
argument is sought to be built is that where interest is paid under the
aforesaid provisions of Land Acquisition Act, 1894, TDS has to be deducted
under Section 194A of the Income Tax Act. We do not think there can be any
dispute on this. Further, in Sections 28 and 34 of the Land Acquisition Act the
word ‘interest’ is specified. We may quote one of the Sections. Section 34
which reads as under:
“When the amount of such
compensation is not paid or deposited on or before taking possession of the
land, the Collector shall pay the amount awarded with interest thereon at the
rate of six per centum per annum from the time of so taking possession until it
shall have been so paid or deposited”.
This section was considered in a decision
of the Supreme Court in the case of Dr.Shyamlal Narula Vs. Commissioner of
Income Tax (1964) 53 ITR 151 (SC). The question before the Supreme Court was
whether interest paid under Section 34 of the Land Acquisition Act was of the
nature of capital receipt or of revenue receipt. Of course, it was a revenue
receipt. Sec.194-A of the Income Tax Act would be applicable. Supreme Court
said that Section 34 itself makes a distinction between amount awarded as
compensation and the interest payable on the amount so awarded. The interest shall be paid on the amount
awarded from the time the Collector takes possession until the amount is paid
or deposited. There are two provisions in the Land Acquisition Act
whereunder possession of the land is
taken after making of the award and in the other, even before making the award.
In either case, some time may lapse between the taking of the possession of the
acquired land by the Collector and the payment or deposit of the compensation
to a person interested in the land acquired. We may quote in extenso from the
decision Supreme Court on the question of interest as appearing in Section 34
of the Land Acquisition Act. This is how the Supreme Court proceeds in the
matter:
“As the land acquired
vests absolutely in the Government only after the Collector has taken possession of it, no interest
therein will be outstanding in the claimant after the taking of such possession
: he is divested of his title to the land and hisw right to possession thereof,
and both of them vest thereafter in the Government. Thereafter he will be
entitled only to be paid compensation that has been or will be awarded to
him. He will be entitled to
compensation, though the ascertainment thereof may be postponed, from the date
his title to the land and the right to possession thereof have been divested
and vested in the Government. It is as it were that from the date the
Government withheld the compensation amount which the claimant would be
entitled to under the provisions of the Act. Therefore, a statutory liability
has been imposed upon the Collector of the Act. Therefore, a statutory liability has been imposed upon the
Collector to pay interest on the amount awarded from the time of his taking
possession until the amount is paid or deposited. This amount is not,
therefore, compensation for the land acquired or for depriving the claimant of
his right to possession, but is that paid to the claimant for the use of his
money by the State. In this view there cannot be any difference in the legal
position between a case where possession has been taken before and that where possession has been taken after the
award, for in either case the title vests in the Government only after the
possession has been taken.
The Legislature expressly used the word
“interest” with its well known connotation under Section 34 of the
Act. It is, therefore, reasonable to give that expression the natural meaning
it bears. There is an illuminating exposition of the expression
“interest” by the House of Lords in Westminister Bank Ltd. Vs.
Riches. The question there was whether, wherein an action for recovery of any
debt or damages the court exercises its discretionary power under a statute and
orders that there shall be included in the sum for which the judgment is given
interest on the debt or damages, the sum of interest so included is taxable
under the Income Tax Acts. If the said amount was “interest of money”
within Schedule D and General Rule 21 of the All Schedules Rules of the Income
Tax Act, 1918, income tax was payable thereon.
In that context it was contended that money awarded as damages for the
detention of money was not interest and had not the quality of interest. Lord
Wright observed:
“The general idea is that he
is entitled to compensation for the deprivation. From that point of view it
would seem immaterial whether the money was due to him under a contract express
or implied, or a statute, or whether the money was due for any other reason in
law. In either case the money was due to him and was not paid or, in other
words, was withheld from him by the debtor after the time when payment should
have been made, in breach of his legal rights, and interest was a compensation,
whether the compensation was liquidated under an agreement or statute, as for instance under Section 57 of the
Bills of Exchange Act, 1882, or was unliquidated and claimable under the
Act as in the present case. The
essential quality of the claim for compensation is the same, and the
compensation is properly described as interest”.
This passage indicates that
interest, whether it is statutory or contractual, represents the profit the creditor might have made if
he had the use of the money or the loss he usffered because he had not that
use. It is something in addition to the
capital amount, though it arises out of it. Under Section 34 of the Act when the Legislature designedly used
the word “interest” in contradistinction to the amount awarded, we do
not see any reason why the expression should not be given the natural meaning
it bears.
The scheme of the Act and the
express provisions thereof establish that the statutory interest payable under
Section 34 is not compensation paid to the owner for depriving him of his right
to possession of the land acquired, but that given to him for the deprivation
of the use of the money representing the compensation for the land
acquired”. (Emphasis supplied)
Finally, the Supreme
Court observed as under:
“But in case where title
passes to the State, the statutory interest provided thereafter can only be
regarded either as representing the profit which the owner of the land might
have made if he had the use of the money or the loss suffered because he had
not that use. In no sense of the term can it be described as damages or
compensation for the owner’s right to retain possession, for he has no right to
retain possession after possession was taken under Section 16 or Section 17 of
the Act. We, therefore, hold that the statutory interest paid under Section 34
of the Act is interest paid for the delayed payment of the compensation amount
and, therefore, is a revenue receipt liable to tax under the Income-Tax
Act.”
Interest
has been defined in sub-section (28A) and interest on securities under
sub-section (28B) of the Income Tax Act. These two sub-sections are reproduced
as under:
“2(28A) “interest” means interest payable in any manner in
respect of any moneys borrowed or debt incurred (including a deposit, claim or
other similar right or obligation) and includes any service fee or other charge
in respect of the moneys borrowed or debt incurred or in respect of any credit
facility which has not been utilised”.
“2(28B) “interest on securities” means.—
(i)
interest on any
security of the Central Government or a State Government.
(ii)
Interest on
debentures or other securities for money issued by or on behalf of a local
authority or a company or a corporation established by a Central, State or
Provincial Act.”
It would, therefore, appear to us that the
provisions of the Land Acquisition Act where interest is payable under Sections
28 and 34 and tax is deducted at source
under Section 194-A of the Income Tax Act would not apply in the present case
where GDA has been asked to pay interest on the amount refunded to the Complainant
because of its failure to construct the promised flat and to provide necessary
facilities. The amounts which were paid to the GDA by the Complainant were not
paid by way of any deposit or GDA had not borrowed that money. And, as a matter
of fact, interest as defined in sub-section (28) of Section 2 of the Income Tax
Act is not that interest as was
directed to be paid to the Complainant by the GDA. Interest to the Complainant
(here Dr.Gupta) has not been awarded on the basis of any deposit made by the Complainant
or GDA being the borrower of any money of the Complainant. Here interest
payment is by way of damages. Merely describing the damages as by way of
interest do not make them as interest under the Income Tax Act.
A similar question arose before the Income
Tax Appellate Tribunal in the case of Delhi Development Authority Vs. Income
Tax Officer (1995) Vol. 53 Income Tax Tribunal Decisions, page 90 and the
Appellate Tribunal held that amounts credited in the accounts of the allottees
were not in the nature of interest within the meaning of Section 2(28A) of the Income Tax Act and the Appellate
Tribunal quashed the orders of those
authorities and directed that what is recovered by the DDA be refunded. The
Appellate Tribunal also hoped that DDA will be equally quick in paying back the
amounts if recovered from the allottees. It appears to us that the revenue
authorities did not challenge this order of the Appellant Tribunal by making
reference to the High Court under
Section 256 of the Income Tax Act. The
Appellate Tribunal held that the amounts paid/credited to allottees by the DDA
under SFS (Self Finance Scheme) did not fall under any category in Section
2(28A) of the Income Tax Act, but represented measure for quantifying
compensation for delay in construction and handing over possession of dwelling
unit which was in nature of non-taxable capital income. In coming to this
conclusion the Appellate Tribunal relied on various judgments including that of
the Supreme Court in the case of Dr.Shamlal Narula Vs. Commissioner of Income
Tax.
It will be interesting to note that DDA
filed a writ petition in the Delhi High Court arising out of the aforesaid
judgment of the Appellate Tribunal wherein it demanded interest with reference
to Sec.244(1A) and 244A of the Income Tax Act. This was on account of the
revenue authorities not refunding the amounts in terms of the order of the
Appellate Tribunal. The Division Bench of the Delhi High Court consisting of
Hon’ble Mr. Justice R.C.Lahoti (as his Lordship then was) and Hon’ble Mr.
Justice J.K.Mehra, held in favour of the DDA that Sections 244 and 244A are
applicable and directed refund of the amount with interest in view of the order
of the Appellate Tribunal.
The word interest used in the order of the
State Commission is not what interest is as defined in Section 2(28-A). There
in the order of the State Commission interest means compensation or damages for
delay in construction of the house or handing over possession of the same
causing consequential loss to the Complainant by way of escalation in the price
of the property and also on account of distress, disappointment faced by him.
Interest in the order has been used merely as a convenient method to calculate
the amount of compensation in order to standardise it. Otherwise, each case of
the allottee will have to be dealt with differently. Nomenclature does not
decide the issue.
In our
view, therefore, considering the definition
of ‘interest’ as
contained in Section
2(28-A) of the Income Tax
Act, provisions of Section 194-A were
not applicable and the GDA was clearly wrong in deducting the TDS from the
interest payable to the Complainant.
Accordingly, the order of the State Commission is upheld and this
Revision Petition is dismissed.
.J.
(
D.P. WADHWA )
PRESIDENT
.J.
(
J.K. MEHRA )
MEMBER
(
RAJYALASHMI RAO )
MEMBER
(
B.K. TAIMNI )
MEMBER